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Insurers must continually evaluate risk given COVID-19 and its impact

By The IJ Staff | September 09 2020 10:50AM

Photo: Freepik

The first three months of this year saw an acceleration of the risk and insurance market shift that took hold in 2019, continuing to increase pricing, tighten terms and make the underwriting process even more rigorous, while withdrawing capacity in several key lines of business, says the 2020 Canadian Insurance Market Report by Aon.

"It is vital that clients, brokers and insurers alike properly evaluate risk exposures to confirm that coverage and limits remain sufficient. With the breadth and depth of our global expertise, spanning both the insurance and reinsurance marketplace, we continue to be well positioned to challenge the marketplace and develop industry-leading solutions in collaboration with our insurer/reinsurer partners," said Russell Quilley, chief broking officer at Aon.

Canada remains attractive

However, the report said the Canadian insurance industry continues to be an attractive location for capital deployment due to profitability and stability. The Canadian industry operates profitably with a 98.3 per cent cumulative net combined ratio, compared to 98.6 percent in the United States and 99.7 percent in the United Kingdom.

The COVID-19 pandemic has affected every sector of the Canadian economy and insurers continue to adapt to a hardening market.

The top risks for insurers identified in the report include cyberattacks and data breaches, damage to reputation/brand, business interruption, regulatory changes, weather/natural disasters and an economic slowdown.

Commercial property owners looking for increases

Most commercial property carriers have indicated they will be looking for rate increases and, in most cases, reducing capacity. Increased retentions will also be targeted, especially for clients that have a frequency or severity issue or undesirable risk quality.

More insurers are looking to bolster core systems, add capability and enhance customer experience through artificial intelligence, digitization and other innovations. Many are beginning to finance innovations, facilitating more fundamental business model changes.

The directors' and officers' (D&O) market is hardening monthly, with publicly listed companies experiencing the highest rate increases.

Higher rates for professionals

Professional liability insurers are pulling back capacity and looking for rate increases for professions that are in perceived higher risk classes, such as architects, structural engineers, and geotechnical engineers.

Property capacity is tightening in the energy sector and rates are pushing higher. Capacity is shrinking due to poor industry results, more conservative underwriting, and a withdrawal from the oil sands sector. Continued large loss activity in downstream property is driving the largest rate push overall.

 
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