Definity approved for rate cap to prevent post-merger market dislocation

Definity is applying a Travelers-specific renewal premium cap on its commercial auto policies in Nova Scotia, taking effect during the renewal of Travelers policies in July 2026.

The province’s regulator has approved the cap specifically for when Travelers Canada policies renew into Definity policies, starting July 1, 2026.

Definity says goal of the cap is to prevent market dislocation after it closed its acquisition with Travelers Canada two weeks ago.

“Because the rates and risk-classification system for Travelers differ from those used by Definity, a straight renewal of the Travelers’ policies into Definity policies without any mitigating factors would result in many customers seeing large premium changes,” the Nova Scotia Regulatory and Appeals Board states in a Jan. 15 decision approving the cap.

“To reduce that dislocation, Definity proposed a renewal premium dislocation capping mechanism that will apply only to Travelers’ policies renewing into Definity. Currently, Definity does not apply such a mechanism to its own renewing policies.”

The rate filing in Nova Scotia is part of the administrative work involved in transitioning the Travelers Canada business over to Definity. Rate filing processes vary by province, so what appears publicly in the Nova Scotia decision isn’t always consistent with filing processes in other provinces.

Regional variation is expected for any integration with a national scope, industry sources tell CU.

On Feb. 1, 2026, Definity will stop writing new business through Travelers.

Also in the news: Westland, SIB’s first acquisitions of 2026

Before July 1, 2026, Travelers’ policies will renew within Travelers and will be subject to the approved Travelers’ rates, which were effective for renewals on Mar. 15, 2025.

To help retain Travelers business during the July 1, 2026, renewals, Definity is capping renewal rate increases at 15% for Travelers commercial auto policies that do not have new chargeable claims or convictions on the books. The cap on increases would extend to 25% if there are chargeable claims or convictions.  

Also, premium decreases for renewing Travelers commercial auto insurance policies would be limited to no more than 5%.

Definity told the province’s insurance regulator renewing the Travelers’ policies into Definity without the capping mechanism would see the Travelers’ portfolio rate increase by 4.2%. By applying the cap on increases and the limit on decreases, Definity would ensure this overall increase would remain at 4.2% — essentially meaning the limit on deceases and the cap on increases would balance each other out.

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That was a requirement for the regulator to agree to limiting premium decreases, as the regulator pointed out in its decision.

By the end of June 30, 2027, all Travelers’ policies will have renewed into Definity, the regulator’s decision notes.

The premium cap mechanism will only apply on the first renewal of a Travelers policy into a Definity policy. After that, Definity will apply its own business rating to the account.

David Gambrill

David has twice served as Canadian Underwriter’s senior editor, both from 2005 to 2012, and again from 2017 to the present.