MarketPlace (January 01, 2011)

Canadian Market

Proposed changes to capital test would decrease P&C insurers’ MCT scores by 14%

Proposed changes to the 2012 Minimum Capital Test (MCT) would decrease federally regulated Canadian property and casualty insurers’ aggregate MCT ratio by 14%, to 212.6%, according to the Office of the Superintendent of Financial Institutions (OSFI).When applied to the Branches Adequacy of Assets Test (BAAT), foreign property and casualty branches would see their aggregate BAAT ratio drop by 31.9% to 284.5%.OSFI is initiating industry consultations regarding the results of its impact study during the remainder of 2010 and early 2011. By spring 2011, it hopes to issue a formal draft guidance regarding the proposed changes.A final guideline and annual return documents will be released in September 2011 for a Jan. 1, 2012 implementation date.

Broker channel losing 0.43% market share annually: PwC report

The independent broker channel is losing market share to the direct channel at a rate of roughly 0.43% per year, according to PwC’s Insurance Review: A Canadian Perspective.At that rate, the independent channel’s market share of 64% in 2009 will drop to about 60% by 2019.This is based on data obtained by applying linear regression to net premiums written in Canada over the last 11 years, PwC reports.When breaking down the data by line of business, the independent broker channel is gaining market share in some lines of business, while losing market share in others. For example:•    Independent brokers are losing approximately 0.81% market share per year in automobile insurance lines.•    Independent brokers are losing roughly 1.27% market share per year in personal property lines.•    Brokers are gaining approximately 0.13% market share in commercial property insurance lines.•    Brokers are gaining roughly 0.82% market share in liability insurance lines.

Tripling Nova Scotia’s auto cap would increase BI liability claims costs by 17%: province 

The Nova Scotia Utility and Review Board says the province’s decision to triple its minor auto injury cap from $2,500 to $7,500 will result in a 17% increase in third party liability-bodily injury claims costs.IT also found the province’s industry-wide rates are adequate to absorb the costs.The board held a hearing on the effects of the cap, the final submissions of which were heard on Oct. 28, 2010.The board’s numbers were in marked contrast to those submitted to the board by an actuary contracted by the Insurance Bureau of Canada. Ron Miller of Exactor Insurance Services estimated the impact of the province’s higher cap would increase claims costs in the third party-bodily injury area by 49.3%.The board did note it was premature in 2010 to determine the effects of the cap reform on loss costs and loss trends. It therefore concluded it will “hold a formal paper hearing in the fall of 2012 to examine any impact of the minor injury reforms.”

Risk Management

Joint and several liability has Ontario municipalities paying more

Ontario municipalities are seeing substantial premium increases in their 2011 municipal insurance renewals, a fact linked to the joint and several liability (or 1%) rule.The tort principle of joint and several liability essentially exposes a municipality to pay up to 100% of any damage award in a civil liability case involving multiple defendants — even if the municipality itself is found to be only 1% liable for the damage — if the other defendants cannot pay their share of the damages.Municipal risk managers in 2010 identified joint-and-several liability as a pressing issue.Essex County noted many other counties in Ontario have witnessed premium increases in their 2010 renewals, including Lakeshore (a 40% increase), Kingsville (35%), Amherstberg (28%), Leamington (20%), Lasalle (12%) and Tecumseh (5%). Also, Perth County Council approved a 54% increase to its 2011 municipal insurance premium, which rose to $445,056.

Claims

Severe weather events in Canada caused more than $700 million in damage in 2010

Damage estimates related to severe weather events and one earthquake in Canada likely topped $700 million in 2010, extrapolating from information contained in Aon Benfield’s November 2010 Monthly Cat Recap report.The report lists damage estimates, both insured and uninsured, related to 10 specific severe storm events and one earthquake in Canada in 2010.When known damage estimates for the above events are added together, all of these events caused at least $700 million in damages.  However, the total is likely much higher, and may have even approached $1 billion.For example, for four events contained in the Aon Benfield report — including Hurricane Igor’s landfall in Newfoundland, as well as Hurricane Earl’s impact on Nova Scotia — the report simply says damage estimates are “unknown.” These estimates are not included in the $700-million figure cited above.Aon Benfield estimated the Magnitude 5.0-earthquake that hit near Ottawa and Quebec in June caused more than $16.3 million in damages.

Ontarians don’t know insurers are using credit scores: IBAO

About 75% of Ontario consumers do not know their credit scores are used to determine how much the pay for their home insurance, according to a survey commissioned by the Insurance Brokers Association of Ontario (IBAO).  IBAO commissioned MRP Market Research Professionals Inc. to poll more than 802 Ontarians during the first week of November.

An ATV in B.C. is not an “automobile” in Ontario law

An all-terrain vehicle (ATV) driven in B.C. does not count as an “automobile” under Ontario law, the Financial Services Commission of Ontario (FSCO) has determined.In Alana Bray and ING Insurance Company of Canada, Alana Bray was injured in June 2001 as a result of falling from an ATV she was operating in British Columbia, near the Whistler Ski Resort.As a dependent of her mother, Bray applied for accident benefits from her mother’s insurer, ING Insurance Company of Canada.ING denied benefits, saying the ATV in B.C. did not fall under the definition of an “automobile” under Ontario’s statutory accident benefits scheme.A FSCO arbitrator found the relevant part of the Statutory Accident Benefits Schedule (SABS), Section 224(1), has a two-part test for defining an “automobile.”One part says a vehicle counts as an automobile if it is required under “any” act to be insured. Bray argued the ATV is an automobile because the B.C. Motor Vehicle (All Terrain) Act requires ATVs to be insured.But FSCO found the “any act” refers only to Ontario legislation, which does not require ATVs to be insured; hence, an ATV is not an automobile.