Where economic volatility is hitting your clients hardest

Construction and manufacturing remain among the sectors seeing the most volatility in the current economic environment, Markel Canada president Dave Crozier tells Canadian Underwriter in an interview.

Both sectors have seen cost volatility, supply chain issues, and the impact of tariffs. But manufacturing is also weathering the storm and showing resilience in the face of these pressures.

Advanced materials such as electric vehicle components and others that are “aligned with technological changes” are creating opportunities for manufacturers, Crozier adds. “You’ve seen manufacturing in Canada have conversations like it hasn’t had in years about, ‘Should we diversify our markets? Should we diversify our products?’

“You have the whole ‘Buy Canadian’ thing,” he adds. “How do we restructure our North American supply chain to account for what’s going on? So, what we see there is manufacturing clients are building steady demand through diversifying their markets.”

Other sectors are facing challenges, including municipalities and public entities (which are grappling with rising liability exposures), and energy and resources industries. The latter is under scrutiny from climate transition plans and even environmental, social and governance (ESG) principles.

“There’s ESG considerations that continue and are now a little different,” Crozier says. “You know, the U.S. market is looking at ESG differently; that puts a different pressure on boards of directors than some other places that are taking a continued, kind of cautious look, at ESG.”

Risk convergence

Professional liability, directors and officers (D&O) and cyber exposures are converging, Crozier says.

“Cyber is now a board-level risk,” he says. “You’ve got [directors and officers] more consistently being brought in for their acts or failures to act as it affects climate change, their liabilities and definitely cyber. Boards have to keep an eye on ESG obligations, regulatory scrutiny and social inflation…and how it impacts their business.”

In particular, clients with exposure to the U.S. market are likely seeing more volatility because the casualty and D&O markets are “a bit of a different beast,” due to factors such as nuclear verdicts (awards exceeding US$10 million), Crozier says.

From a cyber perspective, cyberattacks persist and ransomware remains a concern. But there is also an evolution in geopolitical strategy, Crozier says. “We’re seeing more and more talk of and potential for threats that are based on sabotage and an attempt to disrupt whomever they’re going after, because then it disrupts their economy and causes political instability.”

Artificial intelligence-driven attacks “generate concern,” but there still very few actual use cases outside of it being used for sophisticated phishing attacks. That said, last August, researchers discovered PromptLock, the first known proof-of-concept for an AI-powered ransomware attack developed as a research project.

“And then almost immediately, in September, there was the first confirmed operational use of AI in a broader cyberattack campaign,” Crozier says. “It was a large-scale espionage operation, and AI was heavy involved.”

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AI is also being used for good in the Canadian P&C insurance industry, of course. Crozier notes AI is moving from experimentation to full-scale integration in underwriting, claims and distribution.

“It’s redefining the customer experience and frankly also operational efficiency, which should eventually lead to a better customer experience,” he says. “So, people would be happier engaging with insurance and ideally lower costs, which should lower or at least mitigate pricing.

“We’ll see how that happens.”

Jason Contant

Jason has been an award-winning journalist with Canadian Underwriter for more than a decade, including the past three years as associate editor and, before that, as digital editor for seven years.