Looking Forward

Toronto Insurance Conference (TIC) president Peter McCann, a partner at HKMB International Insurance in Toronto, has mastered the art of seizing opportunities while at the same time understating his achievements.

His first big opportunity emerged 30 years ago, when he entered the world of insurance with a B.A. in Economics from the University of Toronto. “I decided on a career in insurance the way most people did — nobody else would hire me,” McCann says with his customary dry wit. “At that time, university graduates did not go into insurance. People would ask me: ‘You’ve got a degree, what are you doing working for an insurance company?'”

McCann started at MOAC, which was the marine underwriting arm of Continental, Because of his university degree, he was fast-tracked through the company and was soon an inland marine underwriter. The industry has grown up since then, McCann observes. “It has become a lot more technical,” he notes. Now most people not only have a university degree, they have furthered their education with insurance designations as well. “In our office, we have lawyers, professional engineers and chartered financial analysts, as well as your run-of-the-mill B.A. in Economics.”

McCann found inland marine underwriting to be more entrepenurial than standard property and casualty lines of business. “Underwriting was dominated by filed rates, standard forms and underwriting line guides,” he says. “Insurers were known as ‘board companies,’ having agreed to follow rates as published by the Insurer’s Advisory Board. Inland marine insurance lent itself more to manuscripted endorsements and coverages not always found in the line guides.”

In order to broaden his knowledge base from being limited to only inland marine insurance, McCann took an opportunity to work for a member company of AIG, Transatlantic Reinsurance, where he underwrote property facultative insurance. After five years, he became the Canadian property manager. “Facultative reinsurance was an eye-opener,” he noted, “You get to see how dozens of companies approach risks, not just your own.” At the time, the largest buyers of facultative reinsurance were not the board companies, but the more maverick style of insurers, doing things their own way. AIG, Commonwealth and Northumberland were changing the landscape of how companies underwrote. By being a facultative reinsurer, with these three companies as his best customers, McCann felt he was in the middle of this renaissance.

The treaty renewal season of January 1986 saw more capacity leave the system than ever before, spearheading an “insurance crisis,” especially for the casualty lines. McCann seized an opportunity to move to the front lines of underwriting early in 1986 and accepted a position at CIGNA Insurance (now ACE-INA), where he managed a portfolio of Cdn$75 million, including several of the largest companies in Canada. The hard market created by the large reduction in available capacity created opportunities for McCann at CIGNA, he notes. “At that time, in 1986, the crash hit, and everybody lost tons of capacity,” McCann says. “CIGNA was the only company outside the factory mutuals to have had some significant property capacity, or casualty for that matter, and so it was quite the place to be. People were breaking down our doors to come to see us. Eventually, we had 56 of the top 100 companies in Canada as clients.”

After nine years, the rest of the industry caught up, and by then McCann had decided to make a switch over to a brokerage. He put in 18 years on the commercial underwriting side, and in 1995 Morris & MacKenzie hired McCann as a commercial marketing manager. McCann had become the director of operations for the Toronto branch by 2005, when Morris MacKenzie’s sold its commercial insurance accounts to HKMB, where McCann is now a partner.

Twenty-one years ago, McCann had an opportunity to attend the TIC’s renowned, annual Black Tie dinner event. “When I got to CIGNA, my boss hated black tie events and he wanted me to go instead of him, so I said ‘Okay,'” McCann recalls. “And eventually, I bought myself a tuxedo.”

McCann has since attended 21 Black Tie dinners in a row without fail. One of his work colleagues asked him if he would mind becoming a TIC board member, and McCann said he was “relatively agreeable.”

“I thought it was time to give something back,” he says. “This industry has been very good to me. We should all pitch in and help. I don’t consider myself to be very political, but at the same time I wanted to give back something and this was the way to do it. And I found out that I enjoyed it. I enjoyed the networking, the whole idea of camaraderie, and just getting together with other insurance brokers.”

McCann also realized the TIC is more than just a commercial broker association that organizes annual Black Tie and golf events. “For a lot of people in this industry, the TIC was the Black Tie dinner and we met once a year on the dinner committee and that was it,” McCann says. “But I found out how much work they’d actually done and recently we have done a better job communicating what we do. Having a Web site and regular bulletins has helped immensely.”

McCann may describe himself as not “very political,” but the TIC has become more political as an organization over the past several years. It often finds itself working in tandem with the Insurance Brokers Association of Ontario to advocate at Queen’s Park and with the Insurance Brokers Association of Canada at Parliament Hill.

The TIC, for example, is currently trying to clarify exemptions to the Canada Revenue Agency (CRA)’s excise tax, which applies to purchasing capacity from foreign, unlicensed insurance markets.

Generally speaking in Canada, clients of commercial insurance brokers must pay an excise tax of anywhere between 10-50% (depending upon the province) for securing insurance capacity from foreign, unlicensed markets, McCann says.

Prior to the CRA’s recent changes, if commercial clients — such as large oil companies, for example — could prove that not enough capacity existed in the Canadian market to insure their risks, they would be able to get an exemption from the CRA’s excise tax if they could prove it was necessary to go to an unlicensed market to find the capacity.

Now, however, the CRA is “requiring five letters of declaration from insurance companies prior to the inception of the policy, whereas often things aren’t done by that date,” McCann says. “Secondly, the CRA is requiring the insurance companies, which really don’t have a vested interest, to write a letter within a certain time frame… This is a rule that the TIC has brought up with CRA as being somewhat unfair. This is an example of how the TIC acts as an advocate for our member’s clients.”

TIC is also representing its members and their clients on the issue of pandemic coverage. “We’re working with the Insurance Bureau of Canada and insurance companies to accept a policy wording that would address issues faced in a pandemic situation,” McCann says.

“We worked on an endorsement that we wanted added to a certain policy that basically said: ‘In the event of a pandemic, insurance companies would not cancel for non-payment of premium for a period of 90 days, and they would automatically extend the policy for 90 days, so people would have a chance to respond.”

In recent years, in addition to its work in the areas of taxes and pandemics, the TIC, working with the IBAO, tackled several issues including the Bank Act, profit commissions and disclosure, and, more recently, privacy legislation.

Discretion with personal information has never been an issue in the insurance industry, to the best of McCann’s knowledge. Indeed, the director of research at the Office of the Privacy Commissioner of Canada recently told the IBC that the number of complaints against insurers has gone down over the past three years from 50 down to seven. But McCann says TIC’s members do need to be aware that the new privacy regime is tighter than it has bee n in years past.

“It’s not just getting permission for things that we never had to do before,” says McCann. “It’s little things. For example, I might say: ‘I would recommend this insurance company to you. That’s where we placed your brother’s business.’ We can’t say that anymore, because it’s giving out personal information about another client. We wouldn’t go out and publish your information here or there [before the new privacy legislation], but now to discuss it or to get an MVR, we need our clients to consent.”