A closer look at how Canadian insurance is performing in 2023



A closer look at how Canadian insurance is performing in 2023 | Insurance Business Canada















Property continues to prove challenging

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Gallagher has released its 2023 mid-year report for the Canadian market and has described the situation as a “tale of two markets”.

The property side is experiencing slight reductions for certain accounts, while casualty and liability classes are experiencing fewer challenging conditions.

“Rates are still pretty healthy, but they are going down on better risks with low exposure,” said Kevin Neiles, Gallagher’s chief markets officer and regional president, Western Canada.

He pointed to large commercial properties and even certain residential buildings that are fire resistant to certain construction classes, although inflation is still affecting the costs of building and rebuilding.

In an interview with Insurance Business, Neiles spoke about how certain accounts are experiencing modest but welcome reductions, why the hardened reinsurance market is shrinking capacity and what are some emerging threats to take note of.

Gradually bouncing back from the pandemic and hard market

Within the report, a challenging property market is expected to continue for some time as inflation, valuation adjustments and rising loss costs persist, while other risks see flat or minimal increases.

For very large accounts with high limits of insurance that were largely affected by these tough conditions, they are beginning to experience some modest reductions.

“Premiums more than doubled during the pandemic and during the hard market, and now we’re seeing some reductions of 10 to 15 percent on those [clients],” Neiles said.

Carriers are also making sure that they have adequate insurance to value, where an increase in total insured values is offsetting some of the rate decreases.

“We might see a lot of accounts, where even though the rates gone down, the premium has remained fairly constant,” Neiles said.

On the casualty and liability side, described as facing fewer challenges, those accounts have moved past the exclusions inherent in all policies that were brought forth by COVID-19.

“With those in play, [insurers] can be a little bit more aggressive in some of the casualty lines,” Neiles said.

Premiums in excess and umbrella liability are coming down, while there is a softening in overall rate and premium on the casualty side of the market.

Neiles also noted how there are pockets of business that are still going up, where the effects of American nuclear verdicts have begun to trickle down into Canada.

Canadian insurers with American parent companies, as well as national clients with US exposure, particularly the trucking industry, are experiencing the impacts of these settlements firsthand.

“Reinsurance renewals for carriers have been pretty aggressive”

As extreme weather events pick up in severity and frequency, the reinsurance market adjusted.

“Reinsurance renewals for carriers have been pretty aggressive,” Neiles said.

He pointed out how an uptick in earthquakes, hurricanes, flooding and other CAT-related disasters are affecting both carriers and investors in reinsurance.

As a result, premiums have increased, and insurers have had to keep more of its risk internally.

“I’ve heard of insurers that previously would have had a $50 million deductible on their reinsurance where their rate went up, and the retention quadrupled,” Neiles said.

“Insurers then have to look at what kind of risks they’re writing, what kind of exposure they have that is based on that increased retention, and they have to price accordingly.”

Neiles has heard some talk of the reinsurance market returning to some form of “normalcy”, but he is not sure what point in time the current market will optimistically mimic.

“I think the current levels of higher retentions and higher premiums will remain, but we may not see another uptick because of the reinsurance renewals,” he said.

This is all contingent on whether or not global catastrophes proceed with a vengeance and further complicate matters.

What are some risks to keep an eye on

Neiles believes that ESG initiatives and requirements are creating challenges as to what carriers can deem insurable, while the scientific advancements that are prompting this shift in accountability and responsibility are also creating an ever-evolving risk profile.

While not exacting an emerging threat, Neiles stated how earthquakes in the West, particularly BC, are causing insurers to re-evaluate their presence in these hotspot areas and are wanting to scale back exposure and vulnerability.

Elsewhere, while cyber-related incidents continue to wreak havoc across industries and companies large and small, Neiles is witnessing a refinement of risk management requirements to qualify for cyber coverage.

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