A P&C MGA takes a gamble on life and health insurance

To become a Canada-wide wholesaler, Gary Hirst, president of CHES Special Risk Inc., believes he needs a strong presence in Quebec. Following a life and health insurance campaign launched in the fall, his company will not only be able to meet many of the needs of P&C brokers, but also open new doors for them. 

“The market sorely needs products and capacity following several acquisitions between insurers. This is particularly evident in Quebec, where the disappearances of AXA, Jevco and RSA have reduced brokers' capabilities and their choices," Hirst told Insurance Journal. 

The onus is now on wholesalers to provide brokers with a choice, Hirst says, be it access to different products, capacity or prices. "The need is greatest among independent brokers, especially those who have problems meeting their regulatory commitments. Wholesalers’ appetite is allowing new businesses to emerge,” he explains. 

As for his Quebec focus, Hirst says he was particularly surprised when he started his business to see that Lloyd's underwriters tend to overlook La Belle Province. "As a wholesaler, we can educate them. We deal with a wide range of insurers, some based in Europe or the Middle East, in different risk segments. So there aren't problems that we don’t offer a solution for," he says. 

The importance of broker independence  

Hirst has not set a financial milestone for his Quebec objectives. His main goal: To be a long-term provider for brokers. 

“We value their independence very highly. Independence of ownership of brokers is viscerally important. The situation in Quebec is a real shame. It takes capacity out of the market. Buying a competitor does not double your capacity to take risks. You end up with the same capacity. Even getting financing from a bank is not a healthy solution for an independent broker. Because who really owns it in that environment?” he asks. 

To promote independence, Hirst focuses on recruitment. "We hire a lot of people in their 20s and 30s. They will be our future underwriters, will take over businesses and ensure their sustainability,” he says. 

Offering a variety of options will be very important, Hirst adds. The construction and cyber markets are hot, but a wholesaler that wants to be successful in the long run cannot stick to niches only, he says. CHES is counting on this strategy continuing to serve it well once the market tightness abates. 

All the same, brokers should not expect a quick return to normalcy, Hirst says. Some predict a market upswing by 2022, but he says current market conditions could last another two to three years. 

Hirst gave the example of a hard market he views as much worse than this one. From 1984 to 1986, conditions were much the same as they are today, with one important difference. Interest rates were very high then, at unprecedented levels, he points out. 

“Insurers want to make a profit from underwriting risks. They had been losing money for a long time before this tightening. The pandemic will have a lasting effect on the market. We are seeing the effects globally. Insurers are still having to pay large claims in the U.S. and Europe, for example. Storms are getting more severe. All of this will extend the hard market because premiums will have to be written at a certain level to be sustainable for insurers," he says. 

The life insurance gamble 

Why launch a life and health insurance subsidiary, CHES Life, in this context? “Our original idea was to give brokers who are not licensed in this area access to this market. We are thus a direct sales arm for them. We provide them with additional capabilities. Brokers are losing a lot of business to other brokers because they cannot offer this coverage,” Hirst explains. 

This move is aligned with CHES' strategy of offering maximal options. "When examining the insurance needs of entrepreneurial clients, obviously at some point we will have to look at whether they are well covered in personal insurance to deal with life's unexpected events. Are they well protected in the event of an illness causing a prolonged absence? What about their financial commitments? What happens to their bank loan if they die? Will the bank try to sell their business? What will happen to the entrepreneur’s  spouse? Or employees? Brokers have to be attuned to entrepreneurs’ stress factors,” he says. 

This is why CHES Life is going beyond affinity sales. It will offer access to a range of individual life insurance, group insurance, investment and critical illness coverage. “When you buy life insurance, it becomes a product related to P&C insurance coverage. Banks require this level of commitment from their customers,” Hirst says.