Canadian Underwriter December 2011

C A N A D A’ S I N S U R A N C E A N D R I S K M A G A Z I N E . C A N A D I A N U N D E R W R I T E R . C A

D E CE M B E R 2 0 1 1 A Business Information Group Publication #40069240

Priming Performance 2012 PRIMARY INSURANCE MARKET OUTLOOK

Sea Change

BY VANESSA MARIGA

Property Potholes

BY JILL DALTON

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VOL. 78, NO.12, DECEMBER 2011 CANADA’S INSURANCE AND RISK MAGAZINE. PUBLISHED BY BUSINESS INFORMATION GROUP

www.canadianunderwriter.ca

COVER STORY

2012 Primary Insurance Market Outlook

32 FEATURE

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Christchurch and Canada

Property Potholes

The 2010-11 earthquakes in Christchurch, New Zealand may resonate closely with Canadians because the risks are akin to those in eastern Canada.

Large-scale catastrophes affecting the insurance industry in 2011 point to the need for companies to check the terms and conditions of their commercial property policies.

BY MAICLAIRE BOLTON

24 Mitigating Wildfire Risk Among two approaches to reducing wildfire risk, the industry is currently emphasizing individual homeowner responsibility. But landscapescale fuel modification may ignite the bioenergy sector.

BY BOB GRAY

BY JILL DALTON

54 Bullion, Bars and Baubles As gold prices rise, the number of gold thieves looking for a way to make a quick buck has increased as well. Specie coverage can help protect against these losses.

Insurers are priming their performance to face the obstacle course on which they are driving. Challenges include hairpin turns around a volatile economy, contracted interest rates, rising claims costs and increasing loss ratios.

12 Nova Scotia Auto

44 Emergency Contractors

Generally well-conceived, Nova Scotia’s recent auto insurance reform package could contain a pitfall for insurers, based on a one-year gap between increased benefits and the introduction of new treatment protocols.

TEAP III allows insurers to identify responders that meet industry-established requirements for transportation emergency response capability.

BY BILL ADAMS

20 Sea Change, Part 1 Canadian Underwriter opens a two-part series with Vanessa Mariga reporting from Churchill, Manitoba on the links between insurance, climate change and polar bears.

BY VANESSA MARIGA

BY BOB GOODFELLOW

52 Fraud Investigations Successful fraud investigations in western Canada suggest the value of the private investigator model in light of serious constraints on the resources of special investigation units.

BY DONALD W. IRELAND

59 Measuring Risk Maturity

Market consolidation carries a risk that brokers will have fewer choices to offer their clients if carriers start to disappear.

Aon and The Wharton School of the University of Pennsylvania have developed the Aon Risk Maturity Index, a type of ‘GPS’ indicating a direction your risk management program might take.

BY J.R. (BOB) TISDALE

BY GARRY McDONELL

28 Market Consolidation

BY ANTON ANTONOV

December 2011 Canadian Underwriter

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VOL. 78, NO.12, DECEMBER 2011

PROFILE

Editor David Gambrill david@canadianunderwriter.ca (416) 510-6796 Associate Editor Vanessa Mariga vanessa@canadianunderwriter.ca (416) 510-6793

10 Gold Medal Performance Glen Frederick, a risk manager for the Government of B.C., has received accolades from his peers for introducing an enterprise risk management approach to the Olympic Games.

BY DAVID GAMBRILL

SPECIAL FOCUS

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Editorial

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Marketplace

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Canadian Underwriter December 2011

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EDITORIAL

Disruption of the Supply Web

The risk management business often talks about supply “chains,” but a web is probably a more appropriate metaphor for describing how business operations are interconnected in the world today.

David Gambrill, Editor david@canadianunderwriter.ca

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Canadian Underwriter December 2011

As floodwaters continue to course through Thailand, claims costs due to business interruption are increasing, as are the complications associated with finding a safe haven for outsourcing in a globalized economy.

Property and casualty insurers around the world have learned in 2011 that there is no such thing as a “safe bet” when it comes to mitigating supply chain risk.

One interesting question presents itself based on the natural disasters occurring in Asia’s manufacturing and technology segments. How many degrees of separation are required before a risk manager can truly be comfortable that his or her enterprise’s business interruption exposures are truly mitigated?

The risk management business often talks about supply “chains,” but a web is probably a more appropriate metaphor for describing how business operations are interconnected in the world today.

A disruption in just one nodal point of a web can fracture any number of interconnected threads, which in turn puts pressure on other nodal points of the web. Tears in a web, if serious enough, can undermine the integrity of the entire web.

Why talk about webs? It’s a way to represent interconnectedness. Facebook claims that we are all even more closely connected now than the traditional six degrees of separation. That ‘six degrees’

theory says any two people on this earth are on average separated by no more than six intermediate connections.

Facebook says we’re now down to 4.74 degrees of separation, which admittedly doesn’t quite have the same cache. But the point is, we are all more closely interconnected than ever; events in one part of the world are more likely than ever to affect the integrity of business operations elsewhere.

In business terms, this means an extra layer (or two) of caution may be required when assessing the impact of natural catastrophes on local business operations. Gone are the days when a risk analysis of one country suggests building manufacturing redundancies in another country, and thus the matter is closed — problem solved.

Risks must be analyzed in a relational fashion now, not in isolation from one another.

Risks in Thailand cannot be viewed in isolation of risks in Japan.

For example, after an earthquake and tsunami rocked Tohoku, Japan in March 2011, damaging the facilities of a number of key manufacturers in the auto and electronic industries, Japanese manufacturers shifted gears and moved some of their operations to Thailand to mitigate business interruption. In any other year, that probably would have been a sound business strategy. But in 2011, global

insurers have seen a non-stop parade of catastrophic events.

And so wouldn’t you know that after Japan’s largest recorded earthquake, Thailand has been hit with its biggest flood in decades.

To date, more than $4 billion in insurance claims have already been filed as a result of the Thailand floods, A.M. Best reports, “mostly by businesses located in the submerged industrial complexes.” Thailand’s Industry Minister estimates flood damage to almost 10,000 affected factories at $25.6 billion.

Of course there isn’t a 100% foolproof place in the world to send your business operations when Fortune deals a bad hand. But this illustrates how the operative instinct should be to make sure a company’s ‘Plan B’ for mitigating risk also incorporates a ‘Plan C’ alternative (which may, in turn, require a ‘Plan D’ option, just in case).

In other words, when planning for a disaster, one should be casting one’s net a little wider, so to speak, factoring what happens when the nearest safe havens are not as safe as you might have thought. In other words, add in another layer or two of separation.

Like it or not, we are connected to one another in this world much more closely than we think. An analysis of business interruption risk should reflect these multi-layered connections.

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MARKETPLACE

Canadian Market AUTO LOSS RATIOS IMPROVE IN 2011 Q3, BUT PROPERTY LINES LOSS RATIOS DETERIORATE Automobile personal accident lines showed a huge improvement in 2011 Q3 compared to the same period last year, according to figures released by the Office of the Superintendent of Financial Institutions (OSFI).

During 2010 Q3, Canadian insurers automobile private passenger personal accident lines stood at 125.4%. Over the same period this year, after Ontario introduced its auto insurance reforms, the claims ratio had been shaved down to 75.67% Foreign insurers had a claims ratio of 220.57% in auto personal accident lines in 2010 Q3, a figure that had almost been halved (to 129.16%) in 2011 Q3.

But while claims ratios have come down in auto personal accident lines, claims ratios have increased in personal and commercial property lines, according to OSFI figures.

Claims ratios for Canadian insurers in personal property lines increased from 66.04% in 2010 Q3 to 72.86% in 2011 Q3. Claims ratios in commercial property also increased, from 63.89% in 2010 Q3 to 74.49% during the same period this year.

Foreign insurers also saw their claims ratios increase,

8 Canadian Underwriter December 2011

both in personal property lines (from 60.58% in 2010 Q3 to 65.71%) and in commercial property lines (from 70.95% in 2010 Q3 to 82.42% in 2011 Q3).

CONSOLIDATION, BANKS’ MARKET ENTRY EAT INTO BROKER SHARE IN CANADIAN P&C MARKETPLACE The brokers’ share in the distribution of personal P&C insurance in the Canadian marketplace will likely drop from 69% of the policies distributed in 2009 to a 50-50 split with their direct counterparts in the near future, said Lubo Li, senior director and practice leader at JD Power and Associates.

Li discussed the major drivers of the shifting Canadian personal P&C insurance marketplace during KPMG’s Annual Insurance Issues Conference in Toronto on Nov. 24.

The accelerated pace of insurer consolidation and the banks’ entry into the market are among the primary drivers of the shifting landscape, Li said.

“If you look at the data from 30 years ago, just about one-third of personal policies sold in Canada were by the Top 10 insurers,” he said.

“By 2009, the market share of the Top 10 insurers jumped to nearly 60%.

“So this change has shifted the bargaining power to the mega-insurers emerging at the expense of the independent agent or brokers, and [that has] allowed insurers to either build or grow their di-

rect-to-consumer channels.”

The second most important driver of change is the entrance into the personal P&C space by the major banks in Canada, Li said. Banks generally distribute their policies through the direct channel.

Regulation INSURERS VULNERABLE TO FINANCIAL CRISIS AS THEY BRANCH OUT INTO NON-INSURANCE FINANCIAL PRODUCTS The traditional insurance model has allowed property and casualty insurers to withstand the recent financial crisis, according to a paper by the International Association of Insurance Supervisors (IAIS). But as insurers branch out from this model and offer more non-insurance related products, they are more vulnerable to financial risks associated with the crisis.

The association of international insurance regulators released the paper, entitled Insurance and Financial Stability, on Nov. 15. It says the recent financial crisis demonstrated that the traditional insurance business model has allowed the majority of insurers to withstand the crisis “considerably well.”

However, the paper adds: “The financial crisis revealed that insurance groups and conglomerates operating in traditional lines of business may suffer considerable distress and become globally systemically important when

they expand significantly in non-traditional and non-insurance activities.”

The paper goes on to describe how insurance groups and conglomerates that engage in non-traditional or non-insurance activities are more vulnerable to financial market developments and thus more likely to amplify, or contribute to, systemic risk.

“Examples of such non-traditional and non-insurance activities include credit default swaps (CDS) transactions for non-hedging purposes or leveraging assets to enhance investment returns,” it says.

EUROPEAN ECONOMIC TURMOIL INCREASING UNCERTAINTY AROUND SOLVENCY II IMPLEMENTATION Recent economic turmoil in Europe has further exacerbated the delay and uncertainty of the implementation date of Solvency II, potentially creating a huge strain on companies during 2013, said Nick Dexter, a partner in KPMG’s U.K. operations.

Dexter offered a Solvency II update during KPMG’s 20th Annual Insurance Issues Conference in Toronto on Nov. 24.

The original implementation date of Jan. 31, 2012 has been pushed back to Jan. 31, 2013. And now there is talk of extending the deadline another year to Jan. 31, 2014, Dexter said.

Regulators will be required to use Solvency II from the 2013 implementation date, but firms won’t have to comply until 2014. “So, you can imagine what that means for

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MARKETPLACE

2013,” Dexter said. “It means that firms will be still developing [their Solvency II systems], but the regulators can at any time during 2013 ask them for numbers on a Solvency II basis.

“It also means companies can’t switch off their Solvency I-style calculations because they won’t be rescinded during 2013. And because of IFRS, you might have to be running Solvency I numbers for a few years yet.

“So, the overload on companies to produce all of this is huge. 2013 is going to be quite chaotic.”

Claims ALBERTA BELIEVES ARSON RESPONSIBLE FOR SLAVE LAKE FIRES Alberta officials believe arson was responsible for fires that gutted large portions of the community of Slave Lake, Alberta.

The fires on May 14 resulted in more than $700 million in insured damages, the second most costly insured loss in Canadian history. The fires destroyed 4,700 hectares, about 400 structures and forced the evacuation of 7,000 residents.

“Our investigation into the origin of that fire ruled out everything but arson as a probable cause,” Frank Oberle, Alberta’s Sustainable Resource Development minister, said in a release. “As a result, we have delivered our findings to the RCMP to de-

termine if a criminal investigation is the next step.”

The investigation into the cause of the Slave Lake wildfire took five months to complete and involved extensive onsite and offsite work to

gather evidence according to internationally accepted standards for wildfire investigations, the release says.

According to the release, about half of the 1,600 wildfires that typically ignite in

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PROFILE

Gold Medal Performance David Gambrill Editor

Glen Frederick, director of risk management client services for the Government of British Columbia, helped introduce a new, permanent event at the 2010 Olympic Games in Vancouver — enterprise risk management (ERM).

Thanks in part to the work of Phil Grewar, executive director of the Risk Management Branch and Government Security Office, Frederick and his team of risk consultants at the B.C. provincial government, the international Olympic Games from this time forward will be following an ERMbased approach to risk identification and management.

ERM is a process designed to identify potential events and causes that may affect an organization. It establishes whether these risks are within the organization’s risk appetite, or if they need to be

10 Canadian Underwriter December 2011

Photo by Rebecca Kirstein/BK Studios

Risk manager Glen Frederick has received accolades for helping to introduce an enterprise risk management approach to the Olympic Games.

treated, and further assesses how these risks might influence the achievement of the organization’s objectives. One key feature of ERM is that it analyzes the interrelationship of multiple risks across the entire organization.

For Frederick’s work at the Games and his involvement with the Risk and Insurance Management Society (RIMS) and RIMS Canada, he received the equivalent of ‘gold medal’ recognition from his peers, including the Ontario Risk and Insurance Management Society (ORIMS)’s 2011 Donald M. Stuart Memorial Award and the 2011 RIMS Harry and Dorothy Goodell Award. The Donald M. Stuart

Memorial Award acknowledges Canadians who have made outstanding contributions in the field of risk management. The Goodell Award, RIMS’ most prestigious honour, recognizes individuals who have furthered the goals of the society and the risk management discipline through outstanding service and achievement. Frederick has been a member of RIMS for 25 years Frederick’s role in preparing for the 2010 Olympic Winter Games was largely in a prominent advisory capacity. He had been with the risk management department of the B.C. government since 1993.

When B.C. decided to make a

bid for the 2010 Olympic Winter Games, the province established a Crown corporation called BidCorp. Frederick’s role with BidCorp included talking to stakeholders — the Government of B.C., Government of Canada, the host First Nations groups and representatives of the host cities of Vancouver and Whistler — to help identify strategic risks associated with bringing the games to B.C. After the International Olympic Committee (IOC) awarded the games to B.C., the provincial government established The Vancouver Organizing Committee for the 2010 Olympic and Paralympic Winter Games (VANOC), a not-

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PROFILE

for-profit organization responsible for the planning, organizing, financing and staging of the games. It also created the Games Secretariat, which provided oversight over VANOC. Frederick and his team at the branch provided risk management expertise to the Games Secretariat and helped VANOC establish its enterprise risk management program, the first introduction of ERM to games risk management planning.

What does ERM mean in the Olympic Games context?

“We were looking at strategic risk,” Frederick says. “In other words, what would stop us from delivering a successful games? So it was things like: Can we have a cooperative relationship with the host cities? How do we finance the venue construction and make sure the construction is done on time? How do we ensure cooperation with the federal government on security and other important issues during the games, and what happens if we don’t? Could we continue to deliver medical care during the games if we had a pandemic flu epidemic, because pandemic flu was rearing its ugly head at the time. It was all of those things at a very high level. We also looked at the day-to-day things, like how do we make sure the highways get cleared? It really was an

enterprise view. We looked at all of the strategic risks and most of the operational risks.”

In all, 400 risks were identified and rated on a “risk register.” Frederick did not provide specific examples of what was on the register, but did say that the highest risks associated with the games were security risks, which cost nearly $1 billion to address.

How does one narrow the risks of hosting an international event down to only 400 exposures? What about the potential of an earthquake happening during the games, or the death of an athlete, as happened when Georgian luger Nodar Kumaritashvili died after a horrific crash during a training run just hours before the opening ceremonies?

Frederick indicates these risks were considered, but may not have necessarily made the register, which evaluated the likelihood of significant risks and whether or not emergency procedures were already in place to respond to the risk.

“Some risks you consider, but they don’t necessarily make the risk register since the likelihood or consequences are too little to really worry about,” he says.

“Are there more than 400 risks [associated with the Olympic Games]? Absolutely.

But we’re pretty confident the 400 on the risk register were the significant risks you could actually do something about, and for which there weren’t already programs in place.”

Risk management was not a new concept for Frederick, who gained experience in the approach during his sevenyear tenure at Canada Post between 1985 and 1993. He

We were looking at strategic risk. In other words, what would stop us from delivering a successful Olympics? left Canada Post as its manager of insurance and risk, having worked his way up the ranks to reach that position.

He said a great deal of his grounding in risk management came courtesy of Canada Post.

“One thing I learned was to become involved in self-insurance as well as insurance, and to understand where self-insured retention was practical and economical,” he said, noting that this experience with self-insurance came in handy later in B.C., where he helped put together a self-insurance program for the province’s midwives. “I

learned how to do risk analysis, how to look at the operations of the corporation and identify the various risks the corporation was open to. I learned how to sell risk management to executives.”

Frederick said he got involved in risk management in the first place because it offered an opportunity to combine his insurance background in underwriting with initiatives in loss control, risk identification and risk mitigation.

Frederick joined Canada Post in October 1985, after working for Royal Insurance in Winnipeg for eight years, primarily as an underwriter. Frederick was born and raised in small logging town to the northeast of Winnipeg, and he ended up at Royal after his initial career choice as a computer analyst didn’t pan out as planned.

“While I was working for [Royal], a couple of my friends got into the risk management business,” he said.

“And I kept talking to them about what risk management was about, and it really interested me because it covered off more than just insurance, although insurance was a large interest of mine. I got into more things around risk control, risk mitigation, risk identification, I thought it all sounded really neat.”

December 2011 Canadian Underwriter

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Watch for the

G ap Bill Adams

Vice President, Atlantic, Insurance Bureau of Canada

Nova Scotia’s auto insurance reforms appropriately focus on making sure collision victims get the timely treatment they need. One pitfall for insurers is a one-year gap between increased benefits and the introduction of new treatment protocols.

When the Nova Scotia government introduced its latest round of auto insurance reforms in November 2011, it did so after thorough consultation with the industry and careful research into what’s working well in other provinces.

The province’s reform package includes doubling mandatory no-fault accident benefits for medical and rehabilitation treatments to a $50,000 maximum and adopting minor injury diagnostic and treatment protocols, emulating those used successfully in Alberta. However, against the advice of industry, the government also chose to introduce an optional full-tort product.

These reforms comprise the second and final phase of auto insurance reforms in the province.

The Nova Scotia government amended the definition of “minor injury” in 2010 to mean strains, sprains and whiplash-associated disorders, mirroring the Alberta definition, which

12 Canadian Underwriter December 2011

had already been tested and proven workable in that province’s judicial system. It also tripled the pain and suffering award allowed under the minor injury cap to $7,500 and indexed it to inflation.

The recently announced reforms are appropriately focused on making sure collision victims get the treatments they need in a timely and efficient way.

But — and in the complex world of insurance, there is always a “but” — how these reforms are implemented will make the difference between a stable, healthy auto insurance industry and an industry in danger of slipping backward to the days of bloated claims and escalating premiums.

During this crucial implementation stage, Insurance Bureau of Canada (IBC) will work closely with the Nova Scotia government to identify where the pitfalls lie.

POTENTIAL PITFALLS Here are some of the concerns we will share with the government.There are others, but these are the most significant.

First of all, doubling the accident benefits maximum just a year after tripling the minor injury cap will inevitably add costs to the auto insurance system.Without implementing safeguards, these new costs could put upward pressure on premiums.

Insurers are also concerned about the time gap between the implementation of the new maximum benefits and the implementation of the

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new diagnostic and treatment protocols. While the accident benefits will double to $50,000 in 2012, the diagnostic and treatment protocols will not be ready for adoption until 2013.

Experience from Alberta and Ontario shows the mere existence of protocols isn’t enough to balance higher costs related to enhanced benefits. It’s also crucial to engage and educate health care providers and their regulatory colleges

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on the efficacy of the protocols as necessary to improving health outcomes. As well, there needs to be an ongoing and proactive monitoring system in place to measure the effect of the protocols on health outcomes and costs.

IBC is therefore concerned that the implementation time gap between increased benefits and new treatment protocols could result in higher claims costs and another major strain on the system.

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WORKING WITH GOVERNMENT Fortunately, in Nova Scotia, the industry and government now have a productive working relationship that we anticipate will allow us to deal effectively with these implementation issues.

When I read through the Hansard record of the debate in the Nova Scotia legislature ahead of the vote on these most recent reforms, I was struck by how well informed both government and opposition party members were, particularly compared to the lack of such awareness during the 2003 reforms. I was also struck by how many MLAs spoke knowledgeably about the importance of a vibrant and competitive insurance industry in the province. In some instances, MLAs referred to IBC’s

Doubling the accident benefits maximum just a year after tripling the minor injury cap will inevitably add costs to the auto insurance system. Without implementing safeguards, these new costs could put upward pressure on premiums.

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InsurEconomy, a report released in 2010 that measures the economic footprint of the Nova Scotia property and casualty insurance industry.

The relationship between Nova Scotia legislators and the P&C industry has come a long way since the days when, while in opposition, the now-governing NDP proposed nationalizing auto insurance. We believe a concerted government and community relations strategy, conducted by IBC over several years, has resulted in a much more productive environment in which to reform the province’s auto insurance system.

However, as anyone who works in insurance knows, the devil is in the details. Much still needs to be done to ensure the public policy objectives of government are realized, but not at the expense of a stable auto insurance system.

1 This report and a similar report recently released for Ontario are available at www.insureconomy.ca

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From Christchurch 2010-11 earthquakes to Canada The in Christchurch, New Zealand may resonate closely with Canadians because the risks are similar to those in eastern Canada.

Manger, Earthquake Model Product Management, Risk Management Solutions

EARTHQUAKE RISK IN CANADA Some may be surprised to learn more earthquakes were felt in Ontario and Quebec in October 2011 than in British Columbia.1 The recent U.S. earthquakes in Virginia (Magnitude 5.8 on Aug. 23, 2011) and Oklahoma (Magnitude 5.6 on Nov. 5, 2011) serve as reminders that earthquakes do still occur in areas of lower seismic activity.

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Although large earthquakes are more frequent in B.C. than in Quebec and Ontario, that doesn’t mean the eastern provinces are safe. Earthquakes occur in all regions of Canada, but certain areas are more likely to experience damaging events.

Regional differences in geography cause earthquakes to affect larger areas in the East than in the West. Furthermore, the potential for an earthquake to cause damage depends on how the ground moves during the event and local building construction. On average, buildings are better constructed to withstand earthquake ground motions in B.C. than in Ontario and Quebec.

Earthquakes may occur less often in eastern Canada, but the damage arising from a given event will be much larger.

LEARNING FROM CHRISTCHURCH Canada hasn’t experienced a damaging earthquake in several decades, but we can gain insight into what to expect by looking at recent worldwide events. In the past 15 months, a series of strong earthquakes struck the Canterbury region of New Zealand’s South Island. The most devastating of these, the Feb. 22, 2011 Lyttelton Earthquake (Magnitude-6.3), is a good example of the types of damage different regions of Canada

Illustration by Greg Stevenson/www.i2iart.com

Maiclaire Bolton

A recent string of disastrous earthquakes around the globe — including Haiti and Chile in 2010, New Zealand in 2010 and 2011, and Japan in 2011 — have served as stark reminders that catastrophic earthquakes are a reality. The earthquakes in Christchurch, New Zealand, in particular, may resonate closely with Canadians, since they occurred in a fellow Commonwealth country with similar building stock and design codes.

Reactions vary when the topic of the probability of damaging earthquakes in Canada is broached. Some believe there is a serious risk, while others think the risk is so low that there’s no chance of an event occurring in their lifetime.

Many who recognize the risk in Canada believe it is limited to the West Coast. Truth be told, the risk is real and it’s not only British Columbia that has to worry.

Two words a broker should hear more.

Thank You.

Thank you for making sure your customers get the coverage they really need.

Thank you for doing whatever it takes to get your customers back on track.

Thank you for supporting the community where you live.

Thank you for pushing us and asking what’s next.

Thank you for recommending a Canadian company.

Certain conditions, exclusions and restrictions may apply. The BIP logo is a registered trademark of the Insurance Brokers Association of Canada (IBAC) used with permission. All other trademarks are properties of Intact Financial Corporation used under license. © 2011 Intact Insurance Company. All rights reserved.”

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can expect from a similar-sized event.

Victoria, B.C. and Christchurch are comparable in size with similar building stocks. Modern buildings dominate their landscapes, but each of these cities is famous for its heritage buildings. During the Lyttlelton earthquake, the heritage buildings in Christchurch (the Christchurch Cathedral, for example) sustained extensive damage, which is to be expected given their pre-seismic design and materials. However, some of the most devastating damage was to modern construction — the Canterbury Television (CTV) building, for example, and the Grand Chancellor Hotel.

When it comes to different types of construction and how they hold up in earthquakes, we know some things for certain. Unreinforced masonry structures (URM) perform poorly. By comparison, wood-frame residential structures tend to perform well, but chimney damage is common. Façades and decorative features on buildings also frequently fail. All of these common types of earthquake damage were observed in Christchurch, and they can be expected to result from a similar-sized earthquake in Victoria. However, Victoria is not the only city that has this type of building stock: parts of Vancouver, Ontario and Quebec have building stocks comparable to that of Christchurch.

Several factors contributed to the level of damage sustained in the Lyttelton earthquake. At a Magnitude of 7.1, the September 2010 Darfield earthquake was the largest of a sequence of earthquakes to hit New Zealand in 2010-11, but the epicenter of the Darfield quake was approximately 45 km west of the city of Christchurch. The Magnitude6.3 Lyttelton event, on the other hand, occurred much closer to the city — approximately 10 km to the southeast. Because of the location of the Lyttelton earthquake, the strong ground shaking had a direct impact on the buildings and infrastructure.

Additionally, the ground motion recorded in this earthquake was uncharacteristically high for its magnitude.

In some ways, the ground motion experienced in Christchurch is comparable

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to what may occur in Ontario or Quebec. This may seem counterintuitive, since central and eastern Canada is considered to be stable continental crust rather than the active plate boundary of New Zealand. Earthquakes in stable crust tend to exhibit slower attenuation of ground motion — i.e. they decay in amplitude and frequency with distance — than in active areas of seismicity.

Also, they tend to release more energy over a given fault area (scientifically referred to as stress drop).

The Magnitude-5.9 earthquake in Saguenay, Quebec in 1988 exhibited one of the highest stress drops ever

recorded. It generated high epicentral ground motions from a relatively small magnitude event, similar to what occurred in Christchurch.The local geological conditions in Christchurch may not be common in tectonically active areas like the west coast of Canada, but high ground motions combined with a similar building inventory make the Lyttelton Earthquake a potential example of what we could see from an earthquake in Quebec.

Liquefaction, which describes a situation in which the ground loses strength and behaves like liquid, continues to be a hot topic following the New Zealand earthquakes. Prior to these events, it was expected that liquefaction could occur.

But parts of the Christchurch metropolitan area experienced ground failure and flooding to an unprecedented degree. When we survey Canada for areas that could potentially experience extreme levels of liquefaction, Richmond, B.C. is of great concern. The British Columbia Geological Survey has mapped much of the City of Richmond

and rates its susceptibility2 to liquefaction to be ‘High’ to ‘Very High.’ The question remains: “How bad will it be?”

LESSONS FOR RISK MANAGEMENT When we reflect on the state of earthquake awareness across Canada, the events in Christchurch should open the eyes of the country. Recently British Columbia has come a long way in terms of promoting earthquake awareness, with campaigns like The Great British Columbia ShakeOut. This was the largest earthquake drill in Canadian history — more than 500,000 people participated in the Oct. 20, 2011 drill3 — but so much more can still be done.

Earthquake insurance, for example, has a long way to go. Take-up rates for residential properties in the Lower Mainland of B.C. are approximately 60 to 65%. But province-wide, they are less than 40%.These rates decrease substantially in Ontario and Quebec, where less than 5% of residential homeowners have earthquake insurance.

A better understanding of earthquake risk is necessary, in addition to a clear understanding of tools available to help manage the risk — including earthquake insurance and how it works. Catastrophe risk models are an essential piece to the puzzle.

While catastrophic earthquakes are rare events, many continue to believe they won’t happen.The Lyttelton Earthquake was a 1-in-10,000 year event for Christchurch. This is just one example of how rare catastrophic events can happen at any time. Few people in Christchurch believed this would actually happen in their lifetime, but their perspectives have changed.We can learn from this and prepare.

1 This is according to Natural Resources Canada’s Earthquakes Canada Web site, which provides an overview of earthquake hazard across Canada and detailed information on recent and historic events across the country. See http://earthquakescanada.ca 2 http://www.em.gov.bc.ca/Mining/Geoscience/PublicationsCatalogue/Maps/GeoscienceMaps/Documents/GM2010-3.pdf 3 http://shakeoutbc.ca/

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Insurance and Climate Change, Part 1: A Special Report from Churchill, Manitoba

Vanessa Mariga Associate Editor

This is the first of a two-part series chronicling Vanessa Mariga’s week-long trip to the Canadian North to trace the connections between climate change, ice thaws, polar bears and insurance. Part 2 will appear in January 2012.

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Sea

Change Churchill, perched on the shores of Hudson Bay in Northern Manitoba, seems like an awfully long way to go to see firsthand the effects of climate change.To the north of the community is tundra and the Canadian Arctic. To the south are Wapusk National Park and the northern edge of the Borealis Forest. More famously, the town is known as the Polar Bear Capital of the World. Built on the ancient migratory path of a population of the world’s largest land carnivores, the city is also a hub of sorts for research focused on climate change.

I travelled to Churchill with RSA as part of its ‘Seeing is Believing Tour.’ The insurer recently held a competition for its staff members in its branches around the world, seeking ‘green’ ideas that fell in line with RSA’s corporate social responsibility efforts. As a reward, the 12 winners, from Oman, India and the United Kingdom, travelled to Canada’s subarctic, hosted by World Wildlife

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Photo: Gerald Allain

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Fund (WWF), to see firsthand the polar bears that occupy the area and the impact climate change is having on the survival of these beasts. I got to tag along, one of four journalists from around the world invited to join the expedition.

When I told people about the trip, I was always met with confusion. ‘What does an insurance company have to do with climate change, polar bears and WWF?’ RSA and WWF formed a partnership two years ago; the onset of global warming provided the motivation. Weather patterns upon which insurers rely to underwrite residential and commercial property risks are shifting. Storms causing insured property damage are more severe, more frequent and — worst of all from an insurer’s point of view — increasingly unpredictable. Insurers price their products based on an ability to predict what they will have to pay out in claims.The more unpredictable the claims damage, the harder it is for an insurer to fix a stable price for the coverage. Insurers thrive on any information or data enabling them to detect potential patterns in claims costs. And so partnering with an organization that approaches the issue of climate change from a scientific, measured approach makes good business sense for an insurance company, explained David Weymouth, RSA’s Group Operations and Risk director and a host of the event.

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Photos: Juan Montalvo

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An 880-pound polar bear is airlifted north of the community to a more remote area.

How is climate change affecting the business of property and casualty (P&C) insurers? Quebec’s financial services regulator released the results of a survey in October 2011 that found severe weather and climate change are calling into question insurers’ pricing assumptions and creating case overloads when responding to large catastrophic events (claims totalling more than $25 million). The survey heard back from nine insurers representing 61% of the Quebec property and casualty market. The reaction of the industry to climate change and the risks it poses runs the gamut, the study said. “Most insurers have integrated climate change into their risk management plan and have taken it into account when formulating their strategy,” the report says. “From among those who are the most proactive and forward-thinking in this group, the emerging risk of climate change has a formal place within their governance structure. However, and this is the case for the majority of them, climate change is perceived and addressed first and foremost in a traditional manner as an event of a catastrophic and repetitive nature. For a minority however, the matter is quickly dismissed, as they rely on reinsurance coverage already considered sufficient.”

SETTING OUT The first leg of the journey involved staying over in Winnipeg, in preparation for a flight out to Churchill early the next morning. Chatter in four different accents fills the Lakeview Room at the Winnipeg Four Points Sheraton. We’ve piled in for our orientation dinner.

Shawn DeSantis, executive vice president of RSA Insurance in Canada and the co-host of the trip, offers words of welcome and some good-natured advice to his international guests. “It’s not so much a case of whether or not you’ll be able to outrun a polar bear, but whether or not

you’ll be able to outrun your teammates if we encounter a polar bear,” he jokes.

He introduces us to Derek Kyostia, our guide from Frontiers North Adventures, to give us a true sense of exactly what we can expect.

The town of Churchill, Derek explains, is built on an ancient migratory path of polar bears. In the spring, when the sea ice in Hudson Bay melts, these bears are forced ashore, where they spend the summer in a sort of walking hibernation living off of their fat stores. In November, they gather along the shores of the bay, waiting for the sea ice to return. The freezing of the bay is crucial to getting the bears back out to their hunting grounds — slabs of ice on the sea, where ringed seals are plentiful, so they can rebuild the fat stores that sustain them through the summer months.

The fact that the bears appear to be smaller physically now, and also the reality that they are onshore for longer periods of time, suggest the bears are not able to build up their fat stores that they rely on over the summer months.The lack of sea ice in itself suggests evidence of global warming.

Polar bears, in this respect, may be our proverbial canaries in a coal mine.

The town of Churchill has 900 people, Derek says.At this time of the year, the polar bear population in the area is 1,200.

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1) Signs mark the safety perimeter around the town.

2) A conservation officer marks the bear after being dropped so Inuit hunters know the bear has recently been drugged.

“When you’re out walking, take the corners wide,” he advises. “Avoid the fume vents from restaurants. Avoid alleys. No one locks their vehicles or their houses so if you see a polar bear, get inside the closest building or vehicle possible. Don’t worry about it, the locals will understand why you’re in their house. At 10 p.m., you’ll hear an air raid siren.That’s curfew for anyone under 16. At night, if you hear the sound of shots or firecrackers, don’t go running out with your camera to see what the commotion is about. It means that there’s a bear that’s gotten too close to the perimeter of the town, and the Polar Bear Alert patrol is attempting to scare it away. Remember these rules, and you’ll have an amazing time.”

TOUCHING DOWN I step off the airplane onto the snowy tarmac at Churchill’s airport. The wind whips my face and stings my cheeks.

The grey sky fuses with the flat brown, grey and white land. Old-growth trees stand in small clusters no higher than four or five feet high. The prevailing northeast winds have decimated any branches or growth along one side of their spindly trunks.They’re called ‘flag trees’ because the branches that do grow

22 Canadian Underwriter December 2011

reach to one side, like a triangular swath of fabric on a flagpole. In a landscape like the tundra, with no obvious landmarks, these trees would serve as a compass.

We’re ushered into the small terminal, where the host team from WWF greets us. Pete Ewins, WWF-Canada’s senior species officer, and Geoff York, WWF’s Arctic Program’s senior program officer for polar bear conservation, will be with us for the duration of the trip.We board an old school bus retrofitted with Greyhound seats and our tour begins. Our driver, dressed in camouflage, says that since we’re running late, we’ll take the back roads into town. He keeps revving the engine to keep it from stalling. We pass by a grey building with what looks like rusty patches on its walls.

“This building on the left, that’s our waste transfer station, which is a fancy word for an indoor garbage dump,” he shouts over the sputtering engine. “The bears kept breaking through the structure, so the town took some old tanks from when it was a military base and crushed ‘em down and used them as reinforcements to keep the bears out.

That’s recycling for ya.”

We pass several green ‘Polar Bear Alert’ signs.These signs mark the perimeter of the ‘control zone.’The town of Churchill

has partnered with Manitoba Conservation, Polar Bears International and WWF to create what Geoff describes as “the gold standard” in programs to minimize “human-polar bear conflicts.” Officers patrol the perimeter of the community 24/7, keeping an eye out for a bear that’s wandering a bit too close to town. If they see one, the first level of response is to use the sound of flare guns, firecrackers or starter pistols to scare it off. The second level of response is to capture the bear and place it in a holding facility, dubbed ‘Polar Bear Jail’ by the locals.

We round a corner and stretching out before us is an expanse of grey, choppy water — The Bay. By now it should be a thick layer of ice, Pete says. Apparently, the formation of ice has occurred later each year and the ice has broken up sooner, forcing bears stranded ashore to push the fat stores they live off over the summer to the extreme.

THE BEAR DROP That afternoon, we go on what’s called a bear drop. Persistent bears that don’t heed the conservation officers’ warning shots are brought to ‘Polar Bear Jail,’ an airplane hanger-like structure on the edge of town. Inside, the bears are kept

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Photos: 1, 3 Gerald Allain

Photos: 2, 4 Juan Montalvo

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A beautiful sunset in Churchill The Ma bear drop provided an opportunity to get very close to an 880lb bear.

3

4

3) By late November, Hudson Bay should be frozen over, but signs of ice are scarce.

4) An 880-pound bear slowly regains consciousness after being relocated 70 kilometres north of Churchill.

in isolation with minimal human contact. They are given water to drink but not food, so the bears don’t develop a positive association with captivity. Once the holding facility reaches its maximum capacity, or if a bear has been held for a while (on average, they lose two to four kilograms of body mass a day while being held), Manitoba Conservation move the bear by helicopter 70 kilometres north to Seal River, located on the Manitoba-Nunavut border.

At the Hudson Bay Helicopter headquarters, we’re prepped by Steven Amstrup of Polar Bears International. He points to a map of the Hudson Bay area.

“The bears are working their way along the north-south coastline, until they get to here,” he says, pointing to the notch of land on which Churchill sits. “And then there’s this bite in the coast. That kind of stalls them out, and it’s an obvious loitering area.” A combination of salt and fresh water draining into the area results in sea ice formation, giving the bears a place to get out on the sea ice and start to hunt.

We pile into the helicopter. Chuck, our pilot, shows us how to work the safety belts, the location of the emergency beacon and where the gun is kept. Suddenly, it all feels very real. The

helicopter blades whir, we lift off and my stomach drops. Our first stop is Polar Bear Jail. We stand to the side, and a garage door opens. An ATV pulls an 880-pound bear, fast asleep on a piece of plywood, into the yard. Five officers, some armed, lift the edge of the board and the bear slumps off onto a net laid out on the ground. They slide a black headband over its eyes to protect it from the wind. A helicopter lowers, a tow rope attached to the net is hooked up to the chopper and up goes the bear. One of the officers reaches up and pats the bear on the face as it’s being swooped away. We pile back in to our helicopter, and Chuck gives chase to the chopper towing the bear. We glide along the bay and ice patches dot the shore. As we approach the drop point, ‘The Node,’ Chuck swings the helicopter into a corkscrew motion over the area. “This is just to check and scare off any wolves or bears in the area. If they sense a vulnerable bear, they’ll attack it,” his voice crackles over the headset.

We land. The wind whips across the tundra. Underfoot, a moss-like cover and snow soften each step. The bear is lowered into position. Once the conservation officers ensure he is sufficiently groggy, we’re waved over. Bob Windsor, a Mani-

toba Conservation officer, has dragged a circle in the snow with his boot roughly three feet from the bear. By now, the bear is awake, but doesn’t have the energy to get up. He raises his head, licks the snow with his thick black tongue and looks right at me. I shuffle to the right, and his head and eyes follow. I’m reminded that he hasn’t eaten since June.

More bears have been relocated recently, Steve says. Normally, they don’t bother humans and just hunker down for the summer and conserve energy.

But lately, given the prolonged periods of time they’ve been stranded onshore, they are coming into contact with communities like Churchill along the coast or industrial sites like mines. In cashand-resource strapped locales, the only option is to slay the bear.

Juan Montalvo, a freelance photographer hired by RSA, lies on his stomach on the edge of the ‘safety circle.’ Typically with wildlife photography, a long telephoto lens is required to get a good close-up. Laying nose-to-nose with the bear, Juan relies on his 17 mm wide angle lens to fit the bear’s head in the frame. He admits that he’s “pretty nervous taking the shot.” The bear begins to shuffle his back legs, and Bob suggests it’s time to re-board our helicopters.

December 2011 Canadian Underwriter

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Bob Gray

Fire Ecologist, R.W. Gray Consulting Ltd.

There are two approaches to reducing wildfire risk. The industry right now is focused on the one emphasizing individual homeowner responsibility. The other sees landscape-scale fuel modification igniting the bioenergy sector.

Structural losses due to wildfire numbered in the thousands in 2011, making it an expensive year for the insurance industry. Fire science researchers and climatologists predict extreme fire behaviour will become more common, with correlated increases in home losses as the climate changes and warms. So how should the insurance industry respond?

Two strategies are available to the industry for reducing claims (losses). One focuses on increasing the survivability of homes and structures in the interface between wildland and urban areas.

The second focuses on reducing the intensity and severity of fires approaching the interface.

INDIVIDUAL HOMEOWNER’S RESPONSIBILITY Regarding the first strategy, the insurance industry has actively promoted policies that improve home survivability.The second strategy provides opportunity for the insurance industry to take a

24 Canadian Underwriter December 2011

more aggressive role in advocating actions and policies to reduce claims.

Homes are lost to wildfire because of direct flame or ember contact on a flammable surface.

Strategies to prevent this process focus on reducing the flammability of the vegetation surrounding the home and reducing the flammability of structural materials. Post-wildfire forensic audits often support the success of these remediation activities. Many homes surviving fire are constructed using inflammable building materials and design features that make the home impermeable to embers, while adjacent landscaping is treated so as not to support combustion or fire spread.

Programs such as Partners in Protection, FireSmart and Firewise presume that fire protection in the wildland-urban-interface (WUI) is first and foremost the responsibility of homeowners.

If a person wishes to live in the interface and follows these program guidelines, the chances of his or her home and property surviving a wildfire will be greatly improved.

The reliance on placing sole responsibility for fire protection on the homeowner will not be successful in the long run. The success of these programs relies on participants buying into the concept, paying for the necessary improvements to their homes and property and, more importantly, maintaining their homes and property over time. A number of key economic and social factors are likely to confound this strategy.

Illustration by Greg Stevenson/www.i2iart.com

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After major interface fires involving significant home losses, ensuing forensic studies typically reveal additional vulnerabilities associated with home design or materials. Most recently, the National Institute of Standards and Technology dispelled a number of key myths involving building materials once thought to be fireproof, such as the influence of ember size, the size of wire mesh on external vent covers and the ignitability of ceramic tile.1 Unfortunately, building and maintaining a truly fireproof home is an ongoing process that likely involves costs exceeding what the average homeowner can afford to pay.

At a British Columbia Fire Chiefs convention in 2007, participants were asked to predict the long-term success rate of home and property fire remediation efforts.They predicted 10%. Now that we are enmeshed in a long and painful economic downturn, success of these remediation programs is placed further in doubt.

In addition, by focusing on the efforts of individual homeowners, we ignore and discount the value of the landscape surrounding our communities. For example, we ought to be giving thought to the importance of domestic watersheds, energy infrastructure, public investments in resources (forest plantations), etc.A truly impoverished community is one that survives a large wildfire, but is surrounded by a charred landscape and faced with the loss of its domestic water supply. This situation would result in substantial long-term environmental, economic and social upheaval.

LANDSCAPE-SCALE FUEL MODIFICATION By relying too heavily on homeowner initiative, we miss an opportunity to make greater gains in home protection through more aggressive and widespread landscape fuel modifications.

These modifications involve thinning of trees and removal of surface fuels, starting from the homes at the edge of the community and working outward.

Recent analysis of two 2011 wildfires — the Wallow Fire in Arizona and the Fourmile Canyon Fire in Colorado —

26 Canadian Underwriter December 2011

suggest that fuel treatments, assuming they are properly designed, carried out and maintained, result in a significant reduction of home losses.

This is achieved in large measure by reducing fire intensity and providing a safer and ultimately more successful work environment for firefighters.

However, fuel modification at the scale necessary for North America has languished, mostly due to cost. When fuel modification has been applied and subsequently put to the test in a wildfire, experts generally agree the treatments were too small in scale. Why? The answer is quite simple: the forests surrounding our communities in fire-

prone ecosystems contain large numbers of low-value trees. In British Columbia, there have been efforts to treat more than 1.8-million hectares of these forests since the highly destructive 2003 fire season. The efforts have stalled, in part due to treatment costs that range between $1,500 and $20,000 per hectare.The cost is a significant factor in the landscape-scale fuel modification strategy. As with the home protection strategy, the long-term success of the approach is tied to maintenance of a low-hazard state after the initial hazard abatement work has been completed.

Landscape-scale fuel modification, even when it involves large numbers of low-value trees, can be economical if the material removed is directed toward the emerging bioenergy sector. In a recent report, the U.S. Department of Energy estimated that U.S. federal lands within the WUI — typically defined as between half a mile and 1 mile from

settlement — contain more than 9 billion tons of material that could be used to produce a number of bioenergy products. Examples of such products include bio-coal, bio-diesel and even wood pellets. Markets for such materials are emerging rapidly as countries try to wean themselves off fossil fuels and nuclear energy.

British Columbia’s forest policies stand in the way of making this material more readily available for market. But instead of amending the impeding policy, the province has chosen instead to take the path of least resistance. This means advocating for personal responsibility and providing an inadequate and inconsistent amount of public funds to subsidize fuel treatment.

Reducing insurance losses related to wildfire will ultimately depend on a combination of two strategies — homeowner participation in home structure protection programs and landscapescale fuel modification. During difficult economic times, relying too heavily on homeowners to solve the problem is likely to be unsuccessful. Large-scale fuel modification and maintenance has proven to be a successful strategy and can occur even during an economic downturn.

In Australia, the 2009 Victorian Bushfire Royal Commission, which investigated the wildfires around Melborne that resulted in 179 fatalities, strongly endorsed landscape-scale fuel treatments in order to reduce the likelihood of a repeated disaster. Other post-wildfire government-commissioned reports have come up with similar conclusions.

Here in Canada, exploitation of an entirely new industrial sector such as bioenergy can help to promote and sustain fire hazard abatement around communities.This in turn can ultimately reduce losses in the insurance industry. Better combining home protection programs with landscape-scale fuel modification and maintenance will lower the claims for structural damage, which translates into lower premiums for the homeowner. In short, it’s a two-edged strategy that ensures everyone will win.

1 www.newswise.com/articles/view/

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Opinion/Analysis

Market consolidation carries a risk that brokers will have fewer choices to offer their clients when carriers disappear.

J.R. (Bob) Tisdale President, Chief Operating Officer, Pembridge Insurance Company

During a recent visit to a broker’s office, I enjoyed a brief trip down memory lane. Displayed on the walls of the broker’s boardroom were plaques of companies that have ceased to exist during my 30-plus-year career. I recalled how each of these companies brought distinct features to the marketplace.This is particularly important to independent brokers and the customers who count on them for choice and options. Given several markets from which to choose, brokers can meet the individual and specific needs of their customers through a wide array of products at competitive rates.

The primary relationship in the broker channel is between the customer and the broker.

While it is true the company underwriting the risk and paying claims stands behind the promise, customers are loyal first and foremost to

28 Canadian Underwriter December 2011

their brokers. The broker channel and the way brokers do business have necessarily changed over the years, but choice remains steadfast as the fundamental differentiator and key advantage. Independent brokers purchase insurance from a selection of markets on behalf of their clients. It is this unwavering commitment to putting the needs of their customers first that makes independent brokers a critical component of the insurance landscape in Canada.

Over the past decade, this simple, but fundamental premise has been challenged by the complexity that market forces demand of strategic planners in large companies. Such planners are challenged to find new ways to deliver on growth and profitability goals for their businesses. But in our industry, we run the risk of losing sight of what our customers have always relied upon brokers for — namely, choice. In short, we cannibalize our own value proposition as a provider to the broker channel.

CONSOLIDATION AND CHOICE How could this happen? Over the past few years, we have witnessed significant market consolidation in our industry. In some instances, the

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merger of two small- to mid-size companies can benefit both consumers and the industry: it may, for example, provide enhanced risk management or an improved claims experience. Conversely, consolidation involving larger entities can also make it much more difficult for brokers to provide the wide range of choice their customers have come to expect. In addition, some insurers have entered the broker channel by purchas-

Dominant markets dictate the products to which a broker has access, effectively eroding the broker’s ability to offer choice.

With one large acquisition, a broker can go from having three or four primary but balanced markets to being overly reliant on one. ing independent brokerages. In effect, this turns the acquired brokerages into direct markets, meaning there are fewer viable broker options for those clients who count on variety and choice as their fundamental value proposition for their insurance purchase.

Today Canadian consumers have many choices when it comes to making an insurance purchase. We often make the case in our industry that removing barriers to competition encourages companies to invest and innovate, which ultimately benefits consumers. Most people generally agree that an industry dominated by a few players is much less beneficial for consumers.

Some believe further market consolidation in our industry is inevitable and perhaps a good thing. But this emerging trend towards consolidation and corresponding loss of market access is a cautionary tale. It should be troubling to consumers, independent brokers and companies. Further consolidation means a smaller number of ever-expanding companies will control a disproportionate share of the market in an

30 Canadian Underwriter December 2011

industry that thrives on choice and options as a founding premise.

If you think of a broker’s office as a retail mini-market, it becomes easier to see how consolidation can quickly lead to one or two markets dominating the brokers’ office. Dominant markets dictate the products to which a broker has access, effectively eroding the broker’s ability to offer choice. With one large acquisition, a broker can go from having three or four primary but balanced markets to being overly reliant on one.

Brokers using one or two insurers will quickly realize they have lost a degree of control over their business and their future as they find themselves responding to the dominant company or companies. The loss of a market for whatever reason — be it a change in risk appetite, adverse experience, new strategy, sale or withdrawal — jeopardizes each broker’s ability to operate independently. This is an undesirable position for both independent brokers and Canadian consumers.

DEVISING DEFENSIVE STRATEGIES The good news is that brokers have considerable autonomy, allowing them to make decisions to ensure that market choice remains fundamental in their office. In order to succeed, brokers need to devise defensive strategies to ensure that they do not become overly reliant on a few markets. We live and work in a globally competitive world that demands innovation and creativity. In addition to partnering with insurers that provide a wide range of mainstream products, brokers can also offer some niche products from other markets in order to meet the diverse needs of their customers.

I know first-hand from meeting brokers across Canada that they value independence and their ability to meet customer needs. They value their broker associations and ability to network with other like-minded entrepreneurial professionals. Many do not want to work for or represent one insurance company. They prefer to be in control of

their own destiny. Brokers are proud of the unique value they bring to their customers through their ability to represent multiple companies. A majority of consumers still choose to buy insurance from brokers despite increasing competition from other distribution channels. Consumers should ask their broker about the different markets they represent to determine the level of choice that is actually available to them.

My trip down memory lane reminded me how much this industry has changed and about the companies that have disappeared over the years. Further consolidation seems all but certain.

Based on recent history, consolidation may prove to be even more disruptive to brokers’ ability to operate independently. For this reason, it is critical for

The good news is that brokers have considerable autonomy, allowing them to make decisions to ensure that market choice remains fundamental in their office. To succeed, brokers need to devise defensive strategies to ensure they do not become overly reliant on a few markets. brokers to decrease their reliance on a few markets and to look for additional partners that will help them provide real choice.

The strategic planning departments of our industry should continue to consider the cost to long-term viability of undertaking aggressive growth through acquisition. Accessibility, fairness, capacity and competitiveness lead to the best experience for customers of insurance. It is what Canadian consumers expect of us as an industry. It is what our regulators expect of us. And most importantly, it is what Canadians look for when they choose to buy from a broker.

It is our privilege to be a partner in that promise.

Appointment Notice RSA’s Private Client Insurance Team RSA is pleased to announce the appointment of a dedicated team of underwriting, claims and appraisal experts to support its new Private Client Insurance proposition for high net worth personal lines clients. The team of experienced professionals brings an in-depth understanding of high value assets and unique lifestyles of this client base to RSA’s broker partners. The team will work closely with brokers to understand and service the distinct needs of this customer segment. RSA Private Client Insurance will be rolled out in 2012 following a pilot launch in Ontario and Alberta in November 2011 and in BC in January 2012. Congratulations to the following appointees of the dedicated RSA Private Client Insurance team.

Veronique Simard, National Underwriting Lead Veronique Simard has nearly 14 years of industry experience, having worked with Chartis, TD Meloche and Wawanesa. This includes seven years of high-value underwriting, an expertise that she brings to her role as Underwriting Lead of Private Client Insurance at RSA. Veronique is working toward her CIP designation.

Magda Jurczak, Senior Underwriter Magda Jurczak brings 10 years of experience to her role at RSA as a Senior Underwriter of Private Client Insurance.

She has worked for Dominion, Kingsway and The Guarantee, where she honed her high-value home and auto underwriting skills. Magda holds a Bachelor of Commerce degree, a CRM certificate from the Global Risk Management Institute and is a designated FCIP. Christopher McCaughey, National Residential Appraisal Lead Christopher McCaughey brings 25 years of insurance industry experience to RSA Private Client, including 12 years with Chubb and The Guarantee. Christopher’s experience includes positions in underwriting, claims, commercial loss control and high value residential appraisals. Christopher holds a Bachelor of Commerce degree and his CIP designation.

Alex Walker, Claims Relationship Manager Alex is RSA’s Claims Relationship Manager. In this role he is the dedicated leader who collaborates with broker partners and key internal stakeholders to ensure that clients’ Claims needs are tailored and met. He will lead and oversee the Claims handling for Private Client. Alex has worked with RSA for over 10 years and brings more than 18 years experience in the Canadian Claims industry. He previously worked for Chubb Insurance and Zurich Canada. He is a past President of Blue Goose Ontario and currently sits as Vice-president of the Ontario CICMA (Canadian Insurance Claims Managers Association). Alex holds his CIP designation.

Scott White, Property Claims Team Leader Scott White has held many positions over the course of his 18-year insurance career – including a post as commercial underwriter at Gore Mutual Insurance Company. He is currently the Property Claims Team Leader at RSA, where he oversees the Ontario Property Claims Examining Team. He also serves as the Ontario Ombudsman representative for Ontario regional Property Claims.

Gisèle Kupsch, Claims Examiner Gisèle Kupsh, a bilingual Claims Examiner with RSA, handles automobile and property claims for both personal and commercial lines. Her 12-plus years of claims experience (all lines) include a position as Claims Adjuster with Chubb Insurance Company in Toronto. She holds her full Québec Adjuster’s license and is currently working toward her CIP designation.

Barb Bolduc, Senior Claims Representative Barb Bolduc, Senior Claims Representative for RSA, handles commercial and personal lines property claims, in addition to specialized accounts. Barb has extensive claims handling expertise and has been with RSA for more than 30 years. She is actively involved in various insurance associations and is an executive member of the Central Ontario Chapter of the Ontario Insurance Adjusters Association.

About RSA RSA Canada includes Roins Financial Services Limited, Royal & Sun Alliance Insurance Company of Canada, Quebec Assurance Company, Johnson Inc., GCAN Insurance Company, Western Assurance Company, Ascentus Insurance Ltd., Canadian Northern Shield Insurance Company, RSA Travel Insurance Inc./Assurance Voyage RSA inc., and is part of the RSA group of companies headed by RSA Insurance Group plc. RSA Canada employs approximately 3,700 people and is represented by a large network of brokers across the country. In 2010, the Canadian Group wrote $2.1bn in direct premiums with assets exceeding $5.8 billion. Internationally, RSA Insurance Group plc employs about 22,000 people and has the capability to write business in 130 countries and in 2010 its net written premiums were £7.5bn. RSA is a trade name of Royal & Sun Alliance Insurance Company of Canada.

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Priming Performance Canadian property and casualty insurers are racing through an obstacle course in 2012. Many insurance company executives are responding by priming their performance — including the development of new products, services and technology to help see consumers and brokers through turbulent times.

32 Canadian Underwriter December 2011

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espite reasons for optimism in some specific business segments, the general economic outlook for the property and casualty industry in 2012 appears troubling. Investment income is down based on ongoing volatility in global financial markets; claims frequency and severity continue to be an issue in home insurance lines, particularly in light of water damage and the fire in Slave Lake, Alberta; and in the auto product, fraud continues to be an area of concern. Conditions are such that some see the dawn of a hardening insurance market.

Given all of these potential obstacles and more, Canadian Underwriter approached executives of Canada’s primary insurance companies and asked them where their focus should lie in 2012. “What is at the top of your to-do list in 2012?” we asked.

Some chose to interpret the question as what the individual company’s focus will be. Others talked more generally about the Canadian P&C industry’s focus.

Either way, the answers suggest a certain narrative. That is, in spite of the various economic obstacles facing insurers (or maybe because of them), insurers are now paying close attention to priming their performance. That would include delivering quality service to consumers; helping brokers better serve their clients; and streamlining and/or developing new products, technology and/or services to retain customers in what are challenging economic times for them, too.

Here is how executives answered our question, presented in alphabetic order by last name.

December 2011 Canadian Underwriter 33

COVER STORY

Priming Performance

1

Barbara Bellissimo Senior Vice President, Chief Agent, State Farm Canada

State Farm’s success is based on its people. Investing in their capabilities to better serve the evolving needs of our customers is a priority in 2012.

We will build on our capacity to satisfy our customers’ insurance and financial services needs by supporting our agents with technologies that provide a simple, responsive and seamless experience.‪ Our customers expect us to provide insurance at an affordable price. This requires us to monitor Ontario auto product reform trends and partner with stakeholders to realize the opportunities available for stable and affordable auto insurance. ‪ Aggressively combating insurance fraud will continue to be a priority.

Additional resources are needed to deter this criminal activity successfully, and we will work closely with the government and law enforcement to ensure this issue receives the necessary attention. This sends a clear message that criminal activity will not be tolerated.‪ Ultimately, matching price to risk is the fairest approach for consumers. We will advocate for the use of sophisticated, evidence-driven pricing models. Achieving strong underwriting results in an uncertain economy and during periods of low interest rates will be a priority. ‪ As an industry, we must continue to champion the cause of infrastructure renewal and promote loss prevention solutions, since all of us benefit from safer communities. With severe weather events increasing, we have witnessed increasing infrastructure failure and property damage.‪ Our philosophy has always been our customers’ needs will determine our path, and operating on this philosophy in 2012 will be our focus.

2

Charles Brindamour CEO, Intact Financial Corporation

Providing an outstanding experience to customers and high-quality service to brokers is at the top of our ‘to do’ list 34 Canadian Underwriter December 2011

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in the coming year. In 2012, we will continue to build upon our customer value proposition and to demonstrate our unwavering commitment to brokers who wish to expand their activities. We will remain focused on delivering an experience that goes beyond our customers’ expectations while making it easier for brokers to do business with us.

As an industry, we should continue promoting customer confidence.

This is not the typical environment for a hardening market.

Instead of too little capacity chasing too many risks, we have the opposite — too much capacity chasing too few risks.

Individually, as brokers or insurers, we should put customers at the centre of everything we do. We must uphold a strong customer-driven mindset to improve our relationships and earn the trust and respect of our customers. As consumer needs, demands and preferences evolve due to demographic changes and the prominent role of technology in our lives, adjusting our service delivery becomes increasingly important. These factors will continue to shape our initiatives. Technologically, we will leverage our Web strategy and

roll out our buy online tool for brokers, which will not only help connect brokers with new customers but also allow them to better compete in a rapidly evolving marketplace.

As we have in the past, we will support brokers by offering best-in-class products, accelerating our technological enhancements and providing financial solutions to ensure brokers have a means to succeed and flourish in this new environment. This support is above and beyond the high-quality and experienced team to which brokers have access and with whom they work in close proximity. We are also intensifying our publicity, marketing and community involvement to promote brand awareness and drive business to brokers. This, along with investing in technology, is fundamental to the future growth and success of brokerages and its entrepreneurs.

3

David Brosnan President, CEO, ACE INA Insurance

Similar to my peers, much of the calendar is consumed by the administrative responsibilities of running a complex business like insurance. While I have much to accomplish in this regard, I am most passionate about the human aspect of our business and telling the ACE story.

These pursuits marry up nicely, as we have spent the better part of 2011 engaged in a dialogue with our clients and our key trading partners.

Emerging from these discussions is a mandate to tailor our specialty suite of products in 2012 by industry segment, since specific sectors are often faced with a unique set of challenges. This effort encompasses scaling our specialty product suite for the small to medium market. This segment is often referred to as the driving force of the Canadian economy, and therefore it is imperative that we continue to refine and roll out this capability in 2012.

One of my greatest objectivities is to leverage ACE’s global capabilities, financial strength, technology and its network encompassing 53 countries. For

The forces of nature can strike at any time.

Let’s discuss how to plug our defenses.

As the Earth’s climate is changing, so are the frequency and intensity of floods and storms. What’s the answer: retreat from the most hazardous locations? Protect vulnerable areas with sea walls, drainage systems and better building codes? Or take measures to transfer the financial risk and rebuild? All we know at Swiss Re is that, as our climate changes, we must adapt apace. Which is why we’re helping countries and communities develop strategies to protect themselves against the forces of nature. Risk is the raw material we work with; what we create for our clients is opportunity.

Plug into www.swissre.com

Size 8.125”X 10.875” - + .125” bleed set up as 4 color - file: 11_Plug_Property_Canadian_Und_Can_August8

COVER STORY

Priming Performance Canadian multinationals operating in today’s ever-changing regulatory environment, it is critical that global placements are compliant. ACE has invested considerable capital in thought leadership in this area, particularly as it pertains to helping our clients understand and interpret the various regulations where they do business. ACE’s latest white paper on Canada clearly demonstrates this. Supporting these efforts is ACE WorldviewSM, a Web-based portal developed specifically for multinational risk managers and a recent winner of the 2011 Innovation Award from Business Insurance magazine.

4

Alister Campbell President, CEO, Zurich Canada

It’s lucky we’re an industry that specializes in managing risk in a world of uncertainty. Because uncertainty appears to be the only sure thing we can plan for with confidence heading into 2012!

Looking back on comments I have made over the past year, I’m not feeling too bad about Zurich’s “predictions.”

Remembering to “do the boring things well” — focusing on customers and broker service in a challenging economic environment — remains wise.

And reminding people last year about the impact of sustained low interest rates on the P&C industry balance sheet is clearly turning out to be prescient.

Last year, “95 was the new 100” when it came to acceptable combined ratio levels. Even that lower target might need to shift downwards if investment yields continue to deteriorate.

What new insight can Zurich offer?

Maybe the need to think more deeply about “interconnectedness.” The financial crisis of 2008 made all of us face the nature of systemic risk in our financial infrastructure. Trouble in a handful of financial institutions could threaten our entire financial system. Now we are learning that fiscal trouble in one or two mismanaged countries could jeopardize global economic prosperity. And, we have learned from the Japan quake/ 36 Canadian Underwriter December 2011

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tsunami that globalization is making the impact of domestic natural catastrophes less localized than ever before. As I write this, floods in Thailand are once again having material supply chain impacts and forcing all of us think about contingent business interruption exposure in a new light.

This is not the typical environment for a hardening market.

Instead of too little capacity chasing too many risks, we have the opposite — too much capacity chasing too few risks.

Interconnectedness might be a good theme to keep in mind in 2012. Our customers, their brokers and the insurers who serve them are symbiotically linked — another way to say “we’re all in this together!”

5

George Cooke President, CEO, The Dominion

The Dominion heard a clear message from brokers in 2011. In feedback sessions and through direct conversations, brokers are talking about the way we do business together. Improving our brokers’ experience in 2012 continues to be one of The Dominion’s top priorities. We are listening and delivering.

Brokers consistently express frustration about what is currently required

to meet service expectations. We agree we have work to do, as a company and as an industry, to attract and keep customers in our channel. Historically technology has not enabled these efforts, but in very recent years open technology and opportunistic integrators (vendors) have become available to our industry.

Our systems can now “talk” to each other to better align with the consumer’s view of the transaction.

The Dominion in 2012 will see significant progress in our systems transformation, which aligns with CSIO standards and our full support of the IBAC vision. Our transition is being done in deliberate phases, such that brokers will see incremental efficiencies along the way. In all areas of our business, we are investing in process efficiencies and improved service from the “outside-in” perspective of the consumer.

Our commercial lines team has been strengthened significantly to make The Dominion a market to which brokers can look for their commercial clients.

Our approach to the full spectrum of broker communications — from the detailed policy/claim level to broader marketing of our products and services — will also see a meaningful transformation.

Our vision is to bolster the value of the channel. We are working with our brokers to streamline interactions and increase efficiencies to allow more time for them to focus on developing and nurturing client relationships through the provision of valued advice and service, using whatever process or medium they choose.

Brokers must also be certain of their priorities in 2012. With consumer demands evolving, business models must follow suit so that clients realize the full value of the independent broker.

For the broker channel, a strong brand definition is key; the business strategies of all those within the channel should reinforce that brand. An evaluation of all business relationships based on support of the broker brand should top the independent broker’s list of priorities in 2012.

Best best

/ adjective / of the highest quality

Integrated Solution

in•te•grat•ed suh•loo•shuh n / noun / a flexible suite of P&C software for insurers of all sizes, with independent but interoperable modules to configure products, transact lines of business and process claims

see: Accenture Duck Creek Software

Accenture Duck Creek Software ak•sent•sur duhk kreek sawft•wair

/ noun / an integrated P&C software suite delivering full-featured solutions for the three essential operations required by P&C insurance carriers – policy administration, claims and billing – along with rating, rules, product definition and configuration, product templates and sales enablement tools. Based on a Microsoft .NET platform; with multiple delivery models, Accenture Duck Creek enables insurers to reduce their implementation time and risk

synonym: best Accenture Duck Creek Policy Administration™ • Accenture Duck Creek Rating™ Accenture Duck Creek Billing™ • Accenture Claim Components

duckcreektech.com duckcreekdictionary.com

COVER STORY

Priming Performance

6

Karen Gavan President, CEO, Economical Mutual Insurance Company

The P&C industry will continue to operate in challenging circumstances in 2012. The sustained low interest rate environment, combined with low equity returns, underlines the necessity of focused, well-analyzed underwriting decisions.

At Economical, we’ll be focused on leveraging our data assets to support sound decision-making in underwriting and claims, while providing ongoing support to broker partners. A key differentiator for our company, even in times of structural economic constraints, is our excellence in claims service. We’ll be leveraging that reputation and skill set to continue adding value to our stakeholders, especially policyholders and brokers.

Managing fraud and mitigating its impact will be an ongoing priority as the Ontario auto reforms continue to take hold and the conditions for fraud change as a result. We’re seeing heightened awareness within and even beyond the industry in terms of the true costs — and prevalence — of fraud to Canadian policyholders. We will continue to build on that awareness and maintain the industry’s momentum in countering fraudulent claims activity. In terms of Ontario auto more generally, Economical joins many industry watchers and operators in a cautiously positive assessment of the reforms on controlling claims costs.

Enhancing ease of doing business will also be a defining feature of our business plan. This will be done across the entire spectrum of operations — including product development, process improvements and technological integration with brokers’ business management systems.

Finally, Economical will maintain our ongoing commitment to prudent capital and expense management, as we continue striding toward the goal of demutualization in 2012.

38 Canadian Underwriter December 2011

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Kevin McNeil President, CEO, Gore Mutual Insurance Company

The same thing has been at the top of our to-do list for many years. It is something we never grow tired of tackling: finding ways for Gore Mutual to better serve our most important customer, our broker partners.

At Gore Mutual, we enjoy a unique and healthy dynamic. On one hand,

Our industry is still without a common solution for brokers and insurers to work more efficiently together. It’s the elusive and muchdesired “silver bullet.” we are a stable, conservative mutual company that honours traditions built over 172 years. On the other hand, we are a progressive company embracing innovation to find new and better ways to serve our brokers.

Despite time and commitment dedicated to this issue, our industry is still without a common solution for brokers and insurers to work more efficiently together. It’s the elusive and much-desired “silver bullet.”

The challenge is not only to integrate multiple management systems, but also to map multiple workflows. Each brokerage wants a solution built for their specific workflows. However, there can be multiple requirements even within a single brokerage, since each employee customizes how he or she does business.

We have discussed specific options at numerous industry forums. At best, only half the hands go up when voting for any one solution — and it’s never the same half! This tells us that each broker is unique. This uniqueness has made brokers who they are and reflects their entrepreneurial nature.

Gore Mutual would like nothing more than to find and support an industrywide technology solution. We will continue to invest in this challenge and we’ll be the first to the party that celebrates an industry-wide solution. In the meantime, we will do our best to offer customizable solutions to make it easier for brokers to serve their clients. We have looked at leading-edge technology in other industries to show us the way forward and are very excited about what we’ve discovered.

8

Ellen Moore President, CEO, Chubb Insurance Company of Canada

Chubb anticipates the beginning of a turn in the Canadian market as we enter 2012.

In our view, seven years of soft commercial pricing is not sustainable given today’s investment portfolios and climatic activity. Rate strengthening may begin in more problematic lines like long tail casualty and catastrophe exposed property, hit hard by year-over-year price reductions.

The appropriate anxiety over profit deterioration and balance sheet stability is beginning to wear on the theory that excess capital will continue forever. We believe this will likely bring firmer pricing to both commercial and personal lines. Focus is needed on making an underwriting profit in our industry, so that the industry can provide a consistent and sustainable product to the consumer.

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CdnUnderwriterCrawford-HealthWorksAdvantage.indd 1

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COVER STORY

Priming Performance The industry has the responsibility to execute well in the underwriting of our clients, since we have limited influence over other market dynamics. We believe continuing consolidation among insurers and brokers will affect the market, affecting the ability to grow top line.

Regulatory pressures are still on the rise. Certainly the impact of the global economy in which we operate is a challenge. Although Canada remains a stable environment, influences around the world challenge our industry’s ability to grow and stay financially strong.

Success in 2012 will require more diligence than ever. Chubb has been more fortunate than some of its industry peers with catastrophe events and severe weather this year. Our strategy remains unchanged: stay focused on underwriting discipline; price to exposure; be innovative in the client segments in which we excel; and provide outstanding service to our brokers and customers. Managing our balance sheet and our underwriting profit remains our top priority. Managing distribution relationships, as always, will be critical.

We remain committed to our network of strong, independent brokers.

9

John O’Donnell President, CEO, Allstate Insurance Company of Canada

As the Canadian P&C industry becomes increasingly competitive, the experience we provide our customers will continue to play a central role in how we run our business. Economic conditions in recent years have created a heightened awareness around price, leading many consumers to shop for the best rate available, but the experience they have is relevant to the choices they make.

As an industry, we thrive in a regulatory environment that fosters competition and encourages investment and innovation. This is more important than ever as we focus on delivering the right balance between profitability and accessibility, while maintaining strong retention and avoiding significant rate increases. This is a difficult challenge to 40 Canadian Underwriter December 2011

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meet, especially with Ontario auto, and will require us to be nimble both in terms of product and pricing and customer experience in order to succeed.

At Allstate, we survey our customers in order to identify individual preferences and help us better respond to their needs. As a result, we are developing more sophisticated products, strengthening our online presence and becoming more active in social media, since we recognize this is how more of our customers prefer to do aspects of their business with us. Addressing our customers’ product, shopping and service preferences will be critical in the years ahead.

10

Gary Owcar President, Chief Operating Officer, CNA Canada

There has certainly been a lot of chatter south of the border about increasing rates and establishing a bottom to the soft market. CEOs have not missed an opportunity to talk about their positive rate increases and the market outlook.

One thing is for sure: this is not the typical environment for a hardening market. Instead of too little capacity chasing too many risks, we have the opposite — too much capacity chasing too few risks. The problem is anemic rates of return on equity, investments and assets. For boards and shareholders, current income in today’s marketplace is very much at issue.

At CNA, we have taken the position that we will provide distinctive insur-

ance solutions regardless of market cycles. In Canada, we have implemented a strategy focusing on a strong point-ofsale capability, coupled with deep expertise in chosen industry and product segments.

In 2012, our key priorities will be: • Improving data integrity and access to maximize our predictability models and sharpen underwriting and pricing skills.

Training and developing our people • to increase sales competency, while providing new tools to mine business with our distribution partners.

Improving productivity by central• ization and automation of business processes that are not core to the underwriting and claim functions.

Continuing to raise performance ex• pectations, while upgrading and developing our talent wherever possible.

Overall, I believe 2012 will see the leaders in our industry moving ahead based on execution and performance.

And, I fully expect CNA to be counted among them.

11

Sylvie Paquette

President, Chief Operating

Officer, Desjardins General Insurance Group (DGIG)

I have three items on the top of my todo list. First is to renew our focus on the customer experience. As a direct insurer, we’ve always prided ourselves on the quality of service provided to customers at all points in the relationship, from the initial quote right through to service and claims. However, we’ve grown so quickly over the past couple of years that our service quality has slipped. This is a big concern for us, and it is an issue we will be addressing right across our organization in 2012.

The second item is more complex – the continuing challenge in the Ontario auto insurance market. Don’t get me wrong: the market has improved as a result of the reforms. But it is still extremely difficult, particularly for direct companies.

The take-all-comers rule, the restrictions on rating variables and the expensive and

COVER STORY

Priming Performance time-consuming rate approval process all have a negative impact on industry profitability. The market is especially challenging for direct companies that are expanding (such as DGIG): our promotional efforts, availability and competitive pricing tend to attract more than our fair share of less-desirable risks.

The other top item on my list is industry consolidation. It’s no secret that our industry is very fragmented and is ripe for consolidation. The Intact purchase of AXA Canada will likely accelerate that restructuring. We are looking at all the options very carefully, as we plan to be participant — not a wallflower — in reshaping the industry.

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Finally, the upcoming move of our Toronto head office to a greener, more collaborative space in 2012 Q1 signifies our ongoing drive to remain an innovative and dynamic industry leader.

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Aviva Canada

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Rowan Saunders

President, CEO, RSA Canada

George Petropoulos

President, CEO, Travelers Canada

We can expect 2012 will be another year of global economic uncertainty coupled with an election year in the United States. Fortunately, Canada has a relatively stable economy and the Canadian property and casualty insurance industry remains well capitalized.

On the surface, this seems positive for Canada. However, when you talk to average Canadians, they will tell you in most cases that they are struggling. People are worried about growing personal debt levels, the sluggish economy and the employment outlook.

So what does this mean for commercial lines customers? If their own clients are having difficulty, then we can only assume that our customers are having difficulty as well.

As a result, it makes sense that everyone is more conscious of how much they are spending. As insurers, we need to help our brokers by delivering a clearer value proposition to them. We need to remain focused and disciplined, and clearly communicate our business appetite.

At Travelers, we believe it is important to deliver greater value to our brokers and customers by continuing to invest in our organization, whether it is product development, risk control or claims handling, and to focus on providing exceptional service.

42 Canadian Underwriter December 2011

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Maurice Tulloch

President, CEO,

In order to mitigate the impact of a slow economic recovery combined with the challenges of severe weather events, RSA will continue to focus heavily on disciplined underwriting. This means a more in-depth review of potential risks and existing portfolios to ensure our appetite reflects increased pressures faced by the industry at large. Our acquisition strategy remains a priority given that an ongoing divergence in industry performance will lead to further consolidation. We continue to seek out acquisition opportunities that will complement our growth strategy.

Our focus on growing in niche markets enables us to build and enhance our product offerings. For our commercial business, this means an increased appetite in large commercial and specialty lines and a greater emphasis on leveraging our capabilities as a global insurer. In personal lines, this includes more customer segmentation and highly targeted, specialized offerings such as private client insurance for high net worth clients.

We strongly believe people are at the heart of everything we achieve. As such, talent acquisition, retention and development are also key priorities.

Our broker partners are equally vital to our success and we will continue to invest heavily in this channel through education, technology and strategic partnerships.

As global economic turmoil continues, we at Aviva are heading into 2012 with the same priorities with which we started 2011 — being a great underwriting company committed to the broker channel. With those solid guideposts, our focus is on: • Making our commercial lines business just as competitive as our highly successful, post-transformation personal lines. With a focus on people, process and technology, we will enable our underwriters to do what they do best. We are consulting with our broker partners every step of the way to build a no-surprises process and responsive solution for them and their clients.

• Improving ease of doing business for our broker partners at every touch point. Central to this is greater broker connectivity, and we’re already implementing system improvements such as an upgrade to our broker integration hub.

Combating fraud to protect our • customers and our business. With our industry and the government aligned, and public awareness growing, progress is being made.

However, as insurers, we will need to be more proactive and collaborative than we have ever been to win the fight against fraud. Our customers deserve this from us and governments expect it.

All of us at Aviva Canada expect the New Year to be full and challenging, and we’re ready. Encouraged by muchimproved satisfaction scores across the country — a report card on our efforts so far — we are excited to build an even better experience for both our brokers and customers.

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Clyde & Co in Canada At the frontiers of business, grounded in pragmatism - a unique perspective on the Canadian marketplace On September 1, 2011 Clyde & Co merged with top-rated firm Nicholl Paskell-Mede LLP adding two new offices in Toronto and Montreal to create an international network of 25 offices across 5 continents. From this platform of innovation, professionalism and excellence the team offers a wide range of legal services, including:

• Advocacy • • • • • •

Alternative dispute resolution Insurance Professional liability Civil and commercial litigation Class-action (complex) litigation Risk management

For more information please refer to our website.

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Montreal Clyde & Cie Canada s.e.n.c.r.l./Clyde & Co Canada LLP 630 René-Lévesque Blvd. West Suite 1700 Montreal, Quebec H3B 1S6 Toronto Clyde & Co Canada LLP 390 Bay Street Suite 800 Toronto, Ontario M5H 2Y2

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In Case of

Emergencies….

Bob Goodfellow

Director of Dangerous Goods Emergency Response, Itech Environmental Services

TEAP III enables risk managers and insurers to pre-assess response contractors’ on-scene transportation emergency response capabilities.

For years, insurers and risk managers have relied on preferred vendor programs to fill their general property restoration and response needs. These programs have been effective at fulfilling those needs, but many insurers and risk managers still struggle to find the appropriate highly technical responder to overcome their risk exposures to chemical- and transportation-related claims. Transportation Emergency Assistance Program,Version Three (TEAP III) registration enables the risk manager and insurer to pre-approve the appropriate response contractor to fill their transportation, industrial and large commercial exposure risks.

44 Canadian Underwriter December 2011

WHAT IS TEAP III? TEAP III registration is recognition of having met industry-established requirements for transportation emergency response capability in Canada.

The TEAP III Transportation Emergency Response Service Provider (TERSP) Standard is in place to pre-assess the on-scene capabilities of a responder, be it an in-house, mutual aid or a third-party response contractor (as is often the case). A significant part of the TEAP III system involves a bi-annual site visit by a three-person, third-party assessment team and an annual self-report on the capabilities of each individual response contractor’s location. When a response contractor (TERSP) is TEAP III registered, it means the responder has undergone a complete records and location assessment against specific criteria in the TEAP III TERSP Standard.

These include: • interview of registered response personnel; • training records and competency checks; • inspection and maintenance of

ciaa conf ad 2011 mag size

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Canadian Insurance Claims Managers’ Association / Canadian Independent Adjusters’ Association United & Committed Leadership through - Education • Professionalism • Communication

CICMA/CIAA Ontario Chapters’ 45th Annual Joint Conference

Tuesday, February 7, 2012 Metro Toronto Convention Centre, Toronto, Ontario Registration 8:00 a.m. • Seminar 9:00 a.m.

Reception and Lunch 12:30 p.m.

Key Note Speakers: Kirk Quinn & Kathy Metzger, IBC Investigative Services.

Luncheon Speaker: Scott Burton, Motivational Keynote blended with an empowering message.

AUTO REFORM… DID IT PERFORM?

A panel of guest speakers will discuss recent auto reforms and results across Canada with particular focus on AB/BI. Open forum format will accommodate interaction between the audience and panellists.

Becky Cameron, Aviva Canada; Tammie Norn, Proformance Group Inc.; Fred Plant, Plant Hope Adjusters Ltd.; Philippa Samworth, Dutton Brock LLP; Sandra Corbett, Field Law; Dennis Giesbrecht, LifeMark Health and Eric Grossman, Zarek Taylor, Grossman, Hanrahan LLP as moderator.

Price: $195.00 — CICMA/CIAA Members Price: $245.00 — Non-Members

NAME: _____________________________________________________

CICMA

ADDRESS: __________________________________________________

Register early - Space is limited Tickets will not be sold at the door.

Please send registration to: Ray Schostak Global Reinsurance Company, 1016B Sutton Drive, Suite 204, Burlington, ON L7L 6B8 RETURN WITH CHEQUE PAYABLE TO: CICMA/CIAA JOINT CONFERENCE

COMPANY: __________________________________________________

CITY: _____________________________POSTAL CODE:_____________ EMAIL: _____________________________________________________ PHONE: (_________) _________________________________________ FAX: (_________) ____________________________________________

Please Indicate affiliation: CICMA ❏ CIAA ❏ Other ❏

Contractors (December2011)_DG_VM

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response equipment; and • identification of response capability for all of the above.

TEAP has evolved over the past 40 years under the auspices of the Chemistry Industry Association of Canada (CIAC), formerly the Canadian Chemical Producers Association (CCPA). Current industry TEAP III stakeholders include the CIAC, Canadian Association of Chemical Distributors (CACD), the Railway Association of Canada (RAC), the Canadian National Railway (CNR), Canadian Pacific Railway (CPR) and the Canadian Emergency Response Contractors Alliance (CERCA). It appears the insurance industry is unaware of TEAP and is missing from this collective effort. However, insurers and risk managers would surely be interested in the success and growth of a program that addresses training and experience required for such high-risk and high-exposure activities.

The maturity and partnership of the TEAP organization substantiates its ability to transition from providing a reactive service years ago to the current proactive assessment and registration program it is today.

TEAP I started in the early 1970s. It pre-dated many of the acts and regulations we use today, including the Transportation of Dangerous Goods Act (1980), CCPA’s Responsible Care (1985), Workplace Hazardous Materials Information System–WHMIS (1985) and even the Canadian Environmental Protection Act—CEPA (1990). Initially a 24-hour national call centre, the TEAP I system linked knowledgeable industry personnel to people needing information on how to respond to incidents involving dangerous goods.

A number of changes to the system followed the 1981 release of the Grange Report, which addressed the Mississauga railway incident that resulted in the evacuation of 250,000 residents in Mississauga. Among the changes was a resolution that all shippers of dangerous goods must have a plan to respond to incidents that is approved by the Federal Minister of Transport. This recommendation and others formed the basis of the Emergency Response Assistance Plan

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(ERAP), as regulated under the Transportation of Dangerous Goods Act. In 1983, TEAP II represented the evolution of the program from a national telephone system that provides technical support to an on-scene mutual aid response network with trained personnel and state-of-the-art equipment.

Eleven Regional Response Centres (RRCs) were established across the country in locations that would allow on-site response within six hours to anywhere in Canada. This system of operation continued throughout the 1980s, driven primarily by industry personnel responding to their own

An insurer’s involvement in pre-loss risk management through the development of quality relationships with the appropriate, response-capable contractors is essential to managing the risk and potential exposure of large loss, transportation and chemical risks. incidents. As the program continued, third-party contractors with equipment and training began to get established, often employing former chemistry industry personnel.

By 1992,TEAP II led to the formation of the Emergency Response Contractor Task Force, which included the cooperation of other organizations including Transport Canada, Environment Canada, the Railway Association of Canada (RAC), the Canadian Petroleum Products Institute (CPPI) and the Canadian Fertilizer Institute (CFI). That TEAP II contractor task force eventually developed into a trade association now known as the Canadian Emergency Response Contractors Alliance (CERCA).

THE EMERGENCE OF TEAP III TEAP III emerged in 2006 under the guidance of the CCPA board of directors, which mandated membership of

all CCPA member companies. Member companies had to maintain 24/7 technical advisors, home coordinators, media spokespeople and on-scene response capability for ERAP dangerous goods, non-ERAP dangerous goods and even non-regulated commodities.To enhance onsite emergency event capabilities, other key stakeholders were invited to attend, including the Responsible Care transportation partners and other trade associations.

Of particular interest to insurers and risk managers is the transparency of the organization, which makes it possible to confirm and pre-approve qualified responders according to their risk. The TERSP Standard Assessment Reports are publicly available, enabling simple access to pre-qualified TEAP III responders. Qualified response contractors can be pre-screened to ensure their capabilities are brought into the mainstream emergency response to industrial and large loss events. Insurers can easily secure contractors appropriately qualified to respond to specific loss events, and even manage their risk through already established regulated ERAP programs.

Insurers can now easily and accessibly pre-screen qualified contractors according to their chemical risk exposures by commodity, region and capabilities.

An insurer’s involvement in pre-loss risk management through the development of quality relationships with the appropriate, response-capable contractors is essential to managing the risk and potential exposure of large loss, transportation and chemical risks. An established pre-loss relationship with dangerous goods contractors is essential to controlling costs and understanding the role of a true emergency responder.

Some assessed emergency responders are former members of chemical industry response teams, capable of providing a wealth of knowledge and expertise when examining risks and exposure to pre-loss events. During the insurers’ and risk managers’ assessment of a potential exposure, the TEAP III responder can be a value-added resource to understanding and limiting your risk.

Claims 2012 CU ad_Layout 1 11-12-06 3:19 PM Page 1

ONTARIO INSURANCE ADJUSTERS ASSOCIATION PRESENTS

2012 PROFESSIONAL DEVELOPMENT & CLAIMS CONFERENCE CANADA’S LARGEST CLAIMS EVENT !

Wednesday, February 8, 2012 METRO TORONTO CONVENTION CENTRE CONSTITUTION HALL

A day filled with education.

Over 150 exhibits.

Seminars will be presented throughout the day.

A MUST FOR CLAIMS ADJUSTERS OF ALL LINES. Luncheon Key Note Speaker: Mark Tewksbury Olympic and Humanitarian Champion

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to insurance professionals.

Visit our website for details

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www.oiaa.com Don’t miss this one day event!

All seminars are complimentary!

Register Early! Register On-line!

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Property Potholes

Jill Dalton

Partner, Dempsey Partners

The large number of natural catastrophes that have affected companies in all parts of the world in recent months demonstrates the need for businesses to double-check their property insurance policies and make sure they will respond as expected should a claim arise. Many firms don’t realize their property insurance programs might have gaps or potholes that can leave an insured with unanticipated and significant out-of-pocket costs in the event of a loss.

Uninsured or underinsured property exposures can result from a number of things, including policy exclusions, coverage definitions, misalignment of multiple policies and a lack of clarity related to deductibles and waiting periods. Taking some time to identify and address these “potholes” can shore up property insur-

48 Canadian Underwriter December 2011

ance coverage and help companies avoid problems in the future should they need to file a claim. Here are some of the more significant potholes that businesses headquartered or operating in Canada should work to address.

VALUATION ISSUES A number of coverage issues can arise based on how assets are valued in insurance policies, particularly with respect to inventory and real property. For example, typical wording will cover finished goods manufactured by an insured at the insured’s selling price. But the wording may be silent about finished goods manufactured by third parties. If that is the case, valuation will likely revert to either actual cash value or replacement cash value. Actual cash value, unlike replacement cash value, includes a deduction for depreciation.

It is especially important to understand your operations along the entire supply chain, including their related exposures and relevant insurance coverages.

If your organization uses third parties — many organizations today rely on such contractor manufacturing to produce their goods — a signifi-

Illustration by Greg Stevenson/www.i2iart.com

The large-scale catastrophes occurring in 2011 point to the need for companies to check the terms and conditions of their commercial property policies.

cant loss could be underinsured based on the valuation specified under the coverage. Pay attention to this valuation.

If third parties are used, the wording should be amended to refer to “… finished goods, whether or not manufactured by the insured …”

If the inventory is not valued at the selling price, make sure the exclusion in the “Business Interruption” section of the policy relating to inventory is deleted. This is a typical exclusion; it can often be overlooked if the valuation of finished stock is at replacement cost.

Regarding buildings and facilities, your property coverage should provide replacement cost if the building needs to be replaced, or it will likely specify actual cash value in other instances.You may choose to add the following wording to the policy to prevent an unintended “actual cash value” approach to valuation: “However, limitations imposed by federal, state, municipal or other governmental building codes shall

If the inventory is not valued at the selling price, make sure the exclusion in the “Business Interruption” section of the policy relating to inventory is deleted. This is a typical exclusion; it can often be overlooked if stock valuation is at replacement cost. not result in actual cash valuation.”

The following example highlights the need for this wording. A fivestorey building is destroyed. Revised building codes state new buildings cannot exceed four storeys. In the absence of the wording suggested above, if the building is replaced, insurers may only reimburse the policy-

holder for replacement cost for four storeys and then actual cash value for the fifth story — hence the unintended “actual cash value.”

Insurance for buildings with historic landmark status also needs to be reviewed carefully. If properties have landmark status, the replacement cost value wording may not be adequate to replace the structure in a way that will maintain its landmark status. Local historic preservation or heritage foundation committees can be very strict regarding adherence to requirements. If an organization wishes to maintain landmark status for its building, the time to rebuild can be longer; thus, the costs to meet the requirements will likely far exceed traditional replacement cost.

TRANSIT COVERAGE, EXCLUSION Under most property insurance policies, “business interruption” is often excluded with respect to property in

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To learn more about our comprehensive portfolio of insurance products and services, and the industries we serve, visit www.cnacanada.ca.

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9/30/11 2:13 PM 49 December 2011 Canadian Underwriter

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transit.This is because most inventory is valued at selling price; the profit component of the damaged inventory will be accounted for in that valuation when damage is exclusively to inventory.

A potentially serious coverage gap exists when business interruption applies to property in transit, such as machinery and equipment. Indeed, damage to machinery and equipment in transit may cause a disruption or delay in operations and result in a business interruption.To shore up this potential exposure, you should work to amend the relevant transit exclusion under the business interruption section to refer only to inventory. If the exclusion cannot be eliminated, specific “trip transit” policies may need to be arranged if and when key pieces of machinery and equipment are shipped.

In evaluating potential exposures related to the transit of inventory and other contents, firms also need to check any applicable coverage under their marine, inland marine and stock throughput policies. Having multiple policies covering similar property at different stages of the process can be beneficial, but it can also create overlaps and/ or gaps.

CONTROL OF DAMAGED MERCHANDISE Similar to the treatment of the valuation of inventory, a number of potential coverage issues and gaps typically arise under property insurance policies with respect to the control of damaged merchandise. As with inventory, the wording can be limited only to goods “manufactured” by the insured. Of course, this is a potentially significant uninsured exposure for retailers, distributors and a wide variety of other firms that sell products made by third parties.

Businesses also need to make sure coverage for damaged goods applies to raw materials and work in process, all important considerations with respect to the wide range of hazards that can damage a company’s manufacturing and warehousing facilities and their con-

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By taking time to evaluate and address potential coverage gaps and issues in your property insurance and other applicable policies, you can eliminate or reduce a number of potential potholes that could result in serious uninsured or underinsured exposures. tents. Firms also need to check their policies for any language specifying who shall determine whether goods are fit for sale or consumption.The insured should always be the one to make that determination. In reviewing their coverage, firms should work to eliminate any restrictive wording or communicate the potential issues to relevant stakeholders.

RESTRICTIONS ON DEBRIS REMOVAL As has been the case repeatedly in recent months across North America and in other parts of the world, hurricanes, tornadoes, severe storms, earthquakes, explosions and other disasters can cause widespread damage to facilities and infrastructure, uproot trees and leave extensive debris strewn across commercial properties. Clean-up costs alone can be substantial, especially if excessive debris prevents access to a facility and extends

the length of a related business outage.

Therefore, it is worth taking a close look at policy language associated with post-event clean-ups. The wording in many property policies may state coverage is for removal of “covered property.” Many policies specifically exclude trees, as well as property of others. To help expedite a company’s recovery and transfer significant clean-up costs, you’ll want the debris removal to include coverage for the cost to remove these trees or property of others.Thus, you should seek to amend the coverage to eliminate the restriction for “covered property.”

Consider the following example, which occurred during Hurricane Katrina in 2005. A barge washed up onto the parking lot/entrance gate of a manufacturing facility. The policy for the manufacturer excluded “watercraft” and the debris removal wording specifically stated “removal of covered property.”

The policy did not cover the (significant) cost to remove the barge.

POLICY CHECKING When you receive your insurance policies, take the time to review them carefully. Compare the coverage, terms and conditions to what appeared in the binders, specifications and proposals.

Check your coverage against that of your expiring policies.

Make sure all the endorsements and forms listed are attached and in order.

Pay special attention to time-sensitive reporting requirements and any nonconcurrencies that may occur with respect to multiple policies, especially those providing various layers of coverage that might apply to a single loss event.

By taking time to evaluate and address potential coverage gaps and issues in your property insurance and other applicable policies, you can eliminate or reduce a number of potential potholes that could result in serious uninsured or underinsured exposures. These efforts can add up to big savings for your company in the event of an insured loss affecting the organization’s property.

WICC Announces a New National Sponsor at the Platinum Level

www.wicc.ca

WICC is delighted to announce a recent addition at the Platinum Level to its National Sponsorship Program.

Medisys is honoured to be able to support the Women in Insurance Cancer Crusade (WICC) as a newly appointed National Platinum Sponsor. Medisys has enjoyed a close working relationship with WICC for several years now and traditionally our support has been provided at a regional level. With an overwhelming consensus, as a health care based organization, we believe that elevating our level of support and contribution to that of a National Platinum Sponsorship status will be a very rewarding opportunity and invaluable initiative. “We have always believed that it is important to give back to an industry that has shown Medisys so much support over the past several years and this is one very important way of doing so” says Medisys IMA Vice President, Donald A.J. Kunkel.

With a highly qualified and experienced roster of dedicated physicians and allied health professionals, providing medical assessment services on a truly national platform, Medisys’ Independent Medical Assessment Division (IMA) conducts over 30,000 assessments annually for a variety of referral sources. While servicing the P&C auto insurance markets across Canada, Medisys provides objective, credible and defensible Insurer’s Examinations, Independent Medical Examinations and Medical Legal reports. The Medisys IMA head

office in Toronto is supported by regional offices located in Vancouver, Edmonton & Montreal.

The Medisys family of professionals is fully committed to investing all the required time, effort and necessary financial resources needed to support this most dedicated of charitable organizations. Tremendous gains have been made over the years to fight this terrible life threatening condition and continued support for organizations like WICC will one day lead to a cure for even the most devastating forms of this disease.

At Medisys, as in many large organizations, several members of our family have been adversely affected by cancer. Our Assistant Vice President of the IMA Division, Erica Enstrom is one of those individuals – however her’s is a story of success as she is the proud mother of a vibrant young boy who is a cancer survivor. Knowing very intimately the great benefits achieved by organizations like WICC, Erica has stepped forward and has recently been nominated to the WICC Board of Directors in British Colombia. Based on her high level of perseverance and overall dedication to our own organization, we know she will be a very welcomed and significant asset to the WICCBC team.

Medisys is now a part of a very special group of WICC National Sponsors at the Platinum Level.

WICC is extremely thankful to this group of organizations which share the vision and desire to put an end to cancer!

WICC National Sponsors at the Platinum Level also include:

Design compliments of

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Hiring the Private Eyes

Opinion/Analysis

Successful fraud investigations in Western Canada point to the value of falling back on the private investigator model to root out fraud in the Donald W. Ireland face of serious constraints Investigator, on resources and special CKR Global investigation units.

Insurance fraud has not changed over the past few decades, but the sophistication of the crime has. Fraudsters have become bolder and more demanding of the insurance industry, bordering on the edge of arrogance. Fraudsters seem to think it is there given right to defraud insurance companies, which in turn defrauds all of us who pay insurance premiums. I believe it is our duty to combat these fraudsters and bring them back to reality.

I have been involved with criminal investigations and fraudulent insurance claim investigations for 24 years with the RCMP and 18 years with the Insurance Bureau of Canada. Most recently, I joined CKR Global in Calgary, Alberta as a private investigator specializing in insurance claims. Drawing on my experience, I would like to illustrate the increasing sophistication of insurance fraud. I am going to discuss two such cases that were both investigated mainly in Alberta.

Both of these cases demonstrate the value of private investigation when dedicated special fraud investigation units face resource constraints.

PROJECT SARGE The first case takes us back 10 years, when I first became involved with accident benefit and bodily injury claims. I was working auto theft at the time but was seconded to this investigation, to which I refer

52 Canadian Underwriter December 2011

as Project Sarge. It involved numerous segments of a fraud ring, including interpreters, clinics, doctors and lawyers.

The first process was to gather information from the insurance companies. This amounted to communicating with 25 companies regarding 550 separate claims involving thousands of claimants.At the outset, it became abundantly clear that this investigation would become a massive undertaking. In the beginning, I was working the file alone, so I had to prioritize. I targeted a certain group that clearly used many of the same doctors and lawyers involved in these claims. Once the targets were known, a new database helped trace relationships between them; this database produced charts of the various relationships, assisting with the investigation. From this database, we learned that 70% of all claimants attended the same doctor and 67% the same lawyer.

We used this information to commence an undercover operation with the RCMP.This operation involved setting up a “paper accident” so the trail would be real. Insurance documents for the undercover operator (to whom I will refer as ‘U.C.’) assisted when U.C. attended at the interpreter’s office. Within 10

I believe the private sector can designate an anti-fraud unit as an “investigative body,” which covers PI firms. minutes of meeting the interpreter, U.C. was taken to a law firm, where he was introduced to ‘Mr. Lawyer.’

Mr. Lawyer advised he could get significant amounts of money for U.C. and the process commenced.

U.C. was then recommended to a Calgary doctor, who was also a target in our investigation. Prior to U.C. attending the doctor’s office,ABC news aired a documentary about staged accidents in Los Angeles and how “runners” would then take the persons involved in the accidents to law firms. The targets of the Calgary investigation became fearful; they de-

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cided to cease operations for a period of time.The interpreter told U.C. that the documentary was a reason for shutting down.

In the interim, the doctor involved closed his practice and left the country for six months. Mr. Lawyer became involved in other illegal activities — using trust funds for illegal purposes, for example — and became the subject of a Law Society of Alberta investigation. The province’s legal regulator ultimately closed the lawyer’s practice down and barred him for life from practicing law in Alberta. I did see a document from the doctor’s office indicating the lawyer owed the doctor one month of referral fees, amounting to $38,000.This was for one month: one can only imagine how much money was involved in total.

After the doctor returned from abroad, U.C. was sent to the doctor’s office as a patient. U.C. was wired and initiated a conversation with the doctor. He said the interpreter had referred him and asked the doctor how he might benefit from the car accident. The doctor immediately asked U.C. to leave, saying the interpreter did not know what he was talking about.The undercover agent only used the interpreter’s first name, and yet the doctor did not even ask U.C. about whom he was talking.

The doctor just immediately asked U.C.to leave.

This 3-1/2 year investigation ended up with the disbarment of a lawyer, the sixthmonth closure of a doctor’s practice, the closure of two rehab clinics and the release of one interpreter. No criminal charges were ever laid, yet the savings to the insurance companies were phenomenal. At the beginning of Project Sarge, 25 insurance companies were asked to fund the cost of this operation to the tune of $3,000 each.

Only 11 companies participated in the funding At the end of the operation, they all received their money back.

PROJECT NINE Within the past five years, Project Nine was established to investigate the activities of a physiotherapist (PT) in the City of Calgary.

The PT was suspected of upgrading her minor injury patients from WAD I and WAD II to WAD III.A WAD I injury calls for 11 treatments and a settlement of under $4,000, which is the cap on minor injuries in Alberta. WAD II allows for 21

treatments and a settlement also under the cap of $4,000. A WAD III injury, on the other hand, allows for unlimited treatments for recovery and opens the chequebooks for lawsuits. In this case, the majority (99%) of the patients were being sent to the same lawyer for litigation against the insurance companies.The lawyer was also found to be sending his clients to the PT for re-assessment to WAD III. Once again, I was looking at a lengthy investigation. The insurance information was gathered over a period of one year. It involved seven insurance companies and the file count was capped at 75 files. The first investigation taught me big is not

The investigation ended up with the disbarment of a lawyer, the sixth-month closure of a doctor’s practice, the closure of two rehab clinics and the release of an interpreter. No criminal charges were ever laid, yet savings to the insurers were phenomenal. necessarily better or most efficient. If we could show a pattern from these 75 files, then that is all I would need.

None of the patients/claimants would speak to me when interviews were requested. Nevertheless, I still had to go through that process.We approached Calgary police, but they advised us that they would not investigate the matter since they felt it was a matter of professional interpretation regarding the upgrading of the injuries. The insurance industry — and in particular, the accident benefit and bodily injury adjusters — were becoming increasingly frustrated and concerned about the pattern of behaviour they thought the physiotherapist was exhibiting.

Finally, I approached the College of Physical Therapists in Alberta. I felt that if no other investigative agency could help me, then perhaps the regulatory body for physiotherapists in Alberta would be interested.

I received a warm, but cautious welcome.

One year later, the college decided to initiate an investigation.

To comply with the college’s internal procedure, the investigator assumed the role of the complainant representing the insurance companies.At the time, this was a groundbreaking decision since, as a rule, the college required a complaint from the patient or a claimant prior to entering into an investigation. I was able to show this would not happen, since the patients and clients in this scenario were suing for hundreds of thousands of dollars.

The college hired two investigators. I shared my file information with them so they could conduct their inquiry.This took place over several months. After that, the college took over the investigation. Over the next two years, the college faced lawyers representing the physiotherapist in her bid to defend herself against the college’s efforts. Finally, a hearing was scheduled to take place close to three years after commencing this process.

A decision has been made with a favorable result.A suspension has been imposed with financial paybacks. However, the decision is currently under appeal, with the appeal hearing scheduled in November 2011. Out of respect for the appeal process, I have refrained from identifying the physiotherapist or clinic.

I learned many years ago as an RCMP officer that it is my job to get the person to court (or in this case, to a hearing). After that, the final decision is out of my hands.

Seeing this case through to its conclusion has proven to be very fulfilling, even though at the beginning it was looking to be very challenging with several obstacles in my way.

CONCLUSION Since these experiences, I have learned that the Insurance Bureau of Canada (IBC) does not have an AB/BI Rings Unit in Alberta.

I believe the private sector can fill in the gap by designating a similar anti-fraud unit as an “investigative body,” which covers PI firms.To my knowledge, nothing can stop a private investigator from approaching the police, regulatory bodies or any other governing body to peruse fraudulent insurance claims.The Privacy Act in Alberta (PIPA) certainly covers this for investigation purposes, either for criminal or civil proceedings.

December 2011 Canadian Underwriter 53

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Insuring Bullion, Bars and Baubles

Anton Antonov

Underwriter, Fine Art & Specie (FAS) Insurance Unit, XL Group plc.

With its price hovering around $1,665 per ounce (and even having crossed the $1,800 per ounce barrier recently), gold is a hot investment. Historically, it’s been deemed a safe investment, a good hedge against market downturns.

But although gold is a very durable metal, it still needs protection. Recent spikes in global precious metals prices, in addition to increased theft of anything gold, have resulted in strong interest and demand for gold insurance.

According to the World Gold Council, gold demand totalled 919.8 tonnes in 2011 Q2, down 17% year-on-year. Improved levels of demand in the jewellery and technology sectors were more than offset by weaker investment demand, which was due primarily to a decline in exchange-traded funds (ETF) demand from the very strong levels seen in Q2 2010. On the other

54 Canadian Underwriter December 2011

hand, the physical demand for bars and coins witnessed growth of 9%. The geographical distribution of this demand was widespread: a number of countries from all regions generated decent growth. Turkey and India were the two strongest markets, chalking up growth rates of 90% and 78%, respectively. China also accounted for a significant portion of the growth in global demand.

TANGIBLE INVESTMENT For investors, gold itself is considered a kind of insurance for their investment portfolio. In a financial crisis, many people desire to have gold close at hand. Its liquidity is appealing during a financial crisis, when other investments’ values take a nosedive or financial institutions are forced to close for a period of time. Unlike many investments, gold is tangible. People can touch it, trade it, store it or ship it. They can also steal it.

Although a piece of jewellery might not be considered a part of one’s investment portfolio, the high price of gold has increased the valuation of jewellery, coins and other gold trinkets found everywhere from retail stores and individual homes to museum collections and displays. Statistics show theft claims on home insurance have

Illustration by Greg Stevenson/www.i2iart.com

As gold prices rise, the number of thieves looking for a way to make a quick buck has increased as well. Specie coverage can help protect against gold theft losses.

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risen during the first half of 2011 and jewellery theft now makes up a third of all such claims. Gold jewellery appeals to criminals not only for its value, but also because of the quick turnaround time to change the stolen goods into cash. It’s easy to steal, carry and melt down from its original form, making it harder to trace than precious stones.

Thieves not only target jewellery stores or homes: those looking for quick cash are brazen enough to steal directly from individuals. College campuses everywhere are cautioning students about wearing gold based on an increase in gold necklace snatchings, with thieves grabbing jewellery directly from students’ necks.

Gold bars offer thieves an even bigger payout, which is prompting more brazen robberies like last summer’s gold bar theft at the Mel Fisher Maritime Museum in Key West, Florida. For 25 years, museum visitors had the opportunity to lift the glittery piece of treas-

Gold jewellery appeals to criminals not only for its value, but also because of the quick turnaround time to change the stolen goods into cash. It’s easy to steal, carry and melt down from its original form, making it harder to trace. ure in a special display case. That came to an end last summer, when thieves stole an ancient bar of gold worth well over $1 million.The artifact had been in a partially open display case and patrons were allowed put their hands inside and touch the gold bar.The thieves picked it up and walked out with it.

Last February, a fraudulently obtained Toronto bank draft worth about $1.9million was allegedly used to purchase 96 gold bars in Montreal. The haul in-

cluded 75 highly distinctive, 10-ounce gold bars bearing the Australia Perth Mint symbol on the front and jumping kangaroos on the back. Only one of the bars was recovered. Also stolen were 19 one-kilogram gold bars and two 100gram bars. In another recent incident, five Toronto-area men face fraud and conspiracy charges and at least one other person is wanted by police after $1.4-million was stolen from a major bank last month. Some of the funds were used to buy $528,000 worth of gold bars. Police were able to stop an additional attempt to use the stolen money to purchase more gold from a second precious-metals dealer. None of the stolen gold has been recovered.

With gold prices at an all-time high, businesses and individuals vested in the shiny metal are more vigilant in protecting it. Police advise the best way to protect jewellery and homes from thieves is to keep valuables out of sight, preferably locked away; fit homes with a burglar

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For mining companies and others that transport or store the precious metal, coverage options are available to cover employee theft. Given the high value of gold in any form, employees can be tempted to swipe even a relatively small amount during the mining, transportation or refining process.

alarm and quality locks; and check home insurance policies to make sure jewellery and valuables are covered.

INSURING GOLD From mining companies and bullion dealers to private investors, more businesses are pushing the demand for insurance coverage to protect gold from physical loss or damage. As the price of gold goes up, these companies have to buy more insurance to cover the higher values beginning at the mine and carrying through to the safety deposit box.

Also, due to the financial market and sovereign debt crisis, many private investors have accumulated substantial amounts of gold as a seemingly safer investment, but they risk being underinsured if their insurance coverage has not kept pace with their gold values.

Fortunately, the current property market — and more directly, the specialized specie market — offers the necessary capacity and the valuation and risk management guidance to go along with it.

Available with policy limits of up to $150 million, specie coverage is tailored to the needs of financial institutions, metals and mining companies, metals traders, refineries, transporters, storage facilities or individual investors.

The ‘all risk’ coverage provides physical loss or damage protection, with options to include coverage against employee theft, transit and marine cargo risks associated with the transport of gold and other precious cargo such as ore, silver, platinum and diamonds. Such precious metal coverage meets the needs of those companies that mine, refine or trade in metals. Insurers will typically cover

56 Canadian Underwriter December 2011

product as soon as bullion bar is formed and a few global insurers can provide coverage in almost all countries in the world.

For mining companies and others that transport or store the precious metal, coverage options are available to cover employee theft. Again, given the high value of gold in any form, employees can be tempted to swipe even a relatively small amount during the mining, transportation or refining process.

ical stockpile at the plant on Sussex Drive in Ottawa.The estimated value of the missing gold was said to be near $15 million.

However, the results of a review released on Dec. 21, 2009 fully accounted for all of the misplaced gold. A discrepancy of 9,350 ounces was attributed to estimation errors, and a further 1,500 ounces were recovered through an extensive refining of slag within the Mint.

Nonetheless, two reported gold thefts have occurred during the Mint’s 101year history. In 1996, a Mint employee somehow slipped eight gold bars past security. According to the Toronto Sun, the gold — worth about $85,000 in today’s prices — was discovered missing when, after being sold and resold, the final buyer tried to sell it back to the Mint. Theft charges against the man were dropped, and he ended up performing 50 hours of community service.The second theft was in 1988 when a janitor stole at least $30,000 in gold.

ADDED PROTECTION In a recent incident in Australia, two Kalgoorlie-Boulder mining company employees will be in court on charges of stealing gold worth up to $1 million.

When management became suspicious, police were contacted and followed the employees to a local hiding spot. Police allege the men took the gold from the mine and hid it in nearby bushland.

Closer to home, in June 2009, Canada’s auditor general reported finding a discrepancy between the Royal Canadian Mint's 2008 financial accounting of its precious metals holdings and the phys-

Financial protection against loss is the key benefit of purchasing an all-risk specie policy, but it is not the only benefit.Today’s insurance market recognizes the value of minimizing losses with upfront loss prevention. Many carriers will work with their clients to review transportation contracts to lessen contingent risks, advise on safety, security and storage issues and provide guidance on valuation issues. Should a loss occur, carriers will ensure claims are handled by managers and adjusters experienced in preserving the value or recovery of gold and other precious metals.

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Putting the pieces together.

Events and Seminars Calendar You work hard to protect your clients’ property. Now, it’s time to ensure that you apply the same kind of energy and commitment to your own success. CIP Society Events and Seminars give you the opportunity to learn, to network, to catch up on industry developments and to think about your career.

CIP Society Events:

Convocations:

Toronto – GTA Annual Fellows’Reception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . February 9 London – Annual Indoor Volleyball Tournament . . . . . . . . . . . . . . . . . . . . . . February 17 Ottawa – CIP Society Gourmet Chefs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . February 29 Toronto – GTA Annual Curling Bonspiel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . February 29 Toronto – CIP Society Symposium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . April 26

CIP Society members are encouraged to welcome our new grads to the Society at convocations and awards functions across the country: Québec City . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .January 7 IIO – Toronto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .January 26 IIO – Kawartha . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .February 3 IIO – Hamilton/Niagara . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .February 16 II0 – Conestoga . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .February 23 Montréal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .March 28

CIP Society PROedge Seminars: Toronto – Industry Trends Breakfast 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . January 12 London – Advanced Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . January 18 Hamilton/Niagara – Leading Liability Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . January 25 Calgary – Influence with Ease with Jeff Mowatt . . . . . . . . . . . . . . . . . . . . . . . January 26 Ottawa – Luncheon Seminar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . February 2

Keeping you at the forefront of the P&C industry.

The CIP Society. MEMBERS BENEFIT. www.insuranceinstitute.ca/cipsociety

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Measuring Risk Maturity

Garry McDonell National Director, Aon Global Risk Consulting, Aon Risk Services

Aon and The Wharton School of the University of Pennsylvania have developed the Aon Risk Maturity Index, a type of ‘GPS’ indicating a direction your risk management program might take.

If you’ve ever used a GPS device while driving, you know how helpful they can be — if you know your ultimate destination. But when you have only a vague idea of where you need to go, a GPS won’t save you time or fuel. It’s the same with planning an enterprise risk management (ERM) program. It’s important to ask where your organization is now and what you have that supports ERM.What steps can your organization implement right now? What about further down the road? It’s a daunting process, which can be difficult to get started and maintain.

Earlier this year, Aon and The Wharton School of the University of Pennsylvania launched the Aon Risk Maturity Index. The index is a proprietary online tool helping risk and finance leaders assess the development level of their organi-

zation’s risk management structure and implementation. The index gives participants both a glimpse of their current location and a road map to risk maturity.

MEASURING RISK MATURITY Index questions focus on corporate governance, management decision processes and risk management processes, all key checkpoints on the road map. Aon and Wharton analyze responses to identify activities associated with improved financial performance. Upon completion of the index questions, participants receive a risk maturity rating and an outline for improving their rating. In addition, they gain insight into the levels of risk maturity globally.The index focuses on 10 characteristics of risk maturity: • board understanding and commitment to risk management; • executive-level risk management stewardship; • risk communication; • risk culture (engagement and accountability); • risk identification approaches; • stakeholder participation in risk management; • risk information and decision-making processes; • integrating risk management and human capital processes;

December 2011 Canadian Underwriter

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INSURANCE INTERNET DIRECTORY ASSOCIATIONS Canadian Independent Adjusters' Association (CIAA) "The voice of Independent Adjusters in Canada" www.ciaa-adjusters.ca Honourable Order of the Blue Goose—Ontario Pond Our fraternal organization has been dedicated to fellowship and charity since 1908. www.bluegooseontario.org The Insurance Institute of Canada The professional educational arm of the industry. www.insuranceinstitute.ca Risk & Insurance Management Society Inc. Dedicated to advancing the practice of effective risk management. www.rims.org

CLAIMS ADJUSTING FIRMS ClaimsPro Inc. Committed to providing leading-edge claims management services. www.scm.ca Crawford & Company (Canada) Inc. Enhancing the customer experience, every day. www.crawfordandcompany.com CRU Adjusters Calm in the face of a storm. www.cruadjusters.com Cunningham Lindsey International independent claims services. www.cunninghamlindsey.com Kernaghan Adjusters Doing What Is Right®. www.kernaghan.com McLarens Canada International Loss Adjusters and Surveyors. www.mclarens.ca

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PCA Adjusters Limited Adjusting to Meet your needs™ www.pca-adj.com Quelmec Loss Adjusters Identifying, Investigating, Resolving...for over a quarter century! www.quelmec.ca

CONSULTING FIRMS Cameron & Associates Insurance Consultants Ltd. Claims consultants to the insurance and reinsurance community. www.cameronassociates.com Keal Technologies Complete technology solutions for insurance brokers. www.keal.com

CONSTRUCTION CONSULTANTS MKA Canada, Inc. Providing creative solutions to the Construction, Legal and Insurance Industries. www.mkainc.ca

Walters Forensic Engineering Inc. Providing scientific answers to complex engineering incidents. www.waltersforensic.com

EMPLOYMENT ONLINE I-HIRE.CA Canada's Insurance Career Destination. www.i-hire.ca

ENGINEERING SERVICES Giffin Koerth Forensic Engineering and Science Investigate Understand Communicate www.giffinkoerth.com Rochon Engineering Inc. Forensic Consulting Engineers & Code Consultants. www.rochons.com

Canadian Underwriter December 2011

The ARC Group Canada Inc. Your Partner in Insurance Law & Risk Management. www.thearcgroup.ca

GRAPHIC COMMUNICATIONS Informco Inc. Integrated Graphic Communications Specialists. www.informco.com

INSURANCE COMPANIES Aviva Canada Inc. Home Auto and Business Assurance. www.avivacanada.com Catlin Canada Underwriting Ambition. www.catlincanada.com Chartis Insurance Company of Canada Your world, insured. www.chartisinsurance.com FM Global The leader in property loss prevention. www.fmglobal.com

DAMAGE COST CONSULTANTS SPECS Ltd. (Specialized Property Evaluation Control Services) Providing Innovative Solutions to Control Property Claim Costs www.specs.ca

INSURANCE LAW

Grain Insurance and Guarantee Company Commercial Lines Underwriters www.graininsurance.com RSA Leading car, home and business insurer. www.rsagroup.ca Sovereign General Insurance Company of Canada Since 1953 www.sovereigngeneral.com

INSURANCE SOFTWARE APPLICATIONS Keal Technologies Complete technology solutions for insurance brokers. www.keal.com

REINSURANCE Guy Carpenter & Company The world’s leading reinsurance intermediary. www.guycarp.com Munich Reinsurance Company of Canada Complete reinsurance coverage from Canada’s largest reinsurer. www.mroc.com Swiss Reinsurance Company Canada The leading P&C reinsurer in Canada. www.swissre.com Transatlantic Reinsurance Company For all your reinsurance needs. www.transre.com

RESTORATION SERVICES Winmar Property Restoration Specialists Coming Through For You! www.winmar.on.ca

RISK MANAGEMENT The Guarantee Company of North America “Specialized insurance products...professional service” www.gcna.com

The ARC Group Canada Inc. Your Partner in Insurance Law and Risk Management. www.thearcgroup.ca

SPECIALTY INSURANCE Wawanesa Insurance Earning your trust since 1896. www.wawanesa.com

William J. Sutton & Co. Ltd. Insuring Special Risks since 1978 www.wjsutton.com

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• risk analysis and quantification to understand risk and demonstrate value; and • risk management focus on value creation.

The Risk Maturity Index also gives insight into big-picture issues in risk management development globally, by providing participants with a distribution of Risk Maturity Rating results.

Participants’ results are kept completely confidential, and Aon and Wharton use aggregate data to identify patterns. One pattern often early exposed is the general lack of risk portfolio analysis within programs. In other words, although organizations are identifying individual risks, they’re not looking for simultaneous risks or potential domino effect risks. They may be missing the forest for the trees, for example, by not seeing beyond their own individual risks to the system in which they are contained. Or to put it yet another way, they might not see where their organization “fits” in the global chain, or where individual risks “fit” within their portfolio. Reflecting on recent events in Japan and the ongoing European debt crisis, we see why this is important.

Sources of business interruption aren’t neatly contained within your organization’s apparent structure: they come from far and wide.

We have also discovered a lack of formality and inconsistent expectations of risk management performance — including a disparity between the risks the organization wants to take and why.

We’ve seen many organizations do not regularly outline and update their policies. Consistent structures and processes are a key foundation of ERM, so it is essential for organizations to start defining risk and their risk management activities more formally.

Another preliminary finding points to the relationship between risk maturity and overall financial performance. Early results reflect a correlation between higher risk maturity ratings and improved return on assets and stock performance for most firms. More importantly, the components of maturity associated with these performance differences are likely to vary by industry.

Such a broad and important issue requires further study, but it’s an exciting correlation and it points to the fact that businesses and industries face different risks and need to take different risk management approaches.

What does this mean for a chief financial officer or risk manager? Given ongoing — and often increasing — time and budget pressures, it may not be possible to implement every recommendation or

follow every best practice. The good news is, it’s now possible to pick and choose wisely, using the lessons learned from organizations that have been there before. With a greater understanding of risk maturity, it is possible to determine immediate priorities and what’s realistic to implement in the short term.

You’ll know where you need to go in the long run, but you’ll also know which turn you need to make next.

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MOVES & VIEWS UPCOMING EVENTS: FOR A COMPLETE LIST VISIT

www.canadianunderwriter.ca

AND CLICK ‘MY EVENTS CALENDAR” ON THE HOME PAGE

1

FirstOnSite Restoration has opened a permanent branch in Edmonton, Alberta, after working there for the past few months following the Slave Lake fires.

The restoration firm also opened a branch in Medicine Hat, Alberta earlier this year to continue to meet the needs in the province. Dan Hislop will head the Edmonton branch.

He has been with the company for more than 18 years and has managed the Edmonton-based team since the spring. He was recently promoted to district manager for Northern Alberta and is overseeing FirstOnSite's operations in the Edmonton, Grande Prairie and Fort St. John branches. Prior to this role, Hislop was an operations manager at the Grand Prairie branch.

2

Insurance Bureau of Canada (IBC) and Groupement des assureurs automobiles (GAA) have completely redesigned the infoinsurance.ca Web site to answer consumers’ most frequently asked questions more effectively. IBC shares the site with the GAA, which performs a wide range of activities related to the auto insurance industry, both on behalf of its members and as an authorized agent of the Autorité des marchés financiers (AMF). “We built the new Web site to inform and, above all, to demystify insurance for

62

consumers,” explained Jack Chadirdjian, IBC’s director of public affairs in Quebec. The new site contains information about policy limitations and exclusions, the claims settlement process and the consequences of fraud, whether committed by making a false declaration, or by embellishing a claim. In addition to information about the claims process, there is also content on preventing water damage, automobile theft, fire and break-and-enters.

important performance bond safeguards that have proven to be so valuable to owners throughout North America for over 100 years.”

3

4

Zurich has launched a new surety bond intended to help contractors deliver Public Private Partnership (PPP) projects.

Zurich says its Public Private Partnership Performance Bond enables large construction projects to benefit from favourable financing treatment while maintaining the public policy, project completion and subcontractor payment benefits of traditional surety bonds.

“One important aspect of this surety bond is it provides liquidity that is critically important to project lenders and financiers,” explained head of contract surety Geoff Delisio, who led the team that developed the bond language.

“Another important aspect is the built-in dispute resolution procedure, which will help resolve project disputes within pre-determined timeframes.

“Additionally, the bond provides the traditionally

Canadian Underwriter December 2011

1

York Fire & Casualty Insurance Company has become Unica Insurance Incorporated and will operate under the Unica brand name, the company announced on Nov. 14. The re-branding of York represents a milestone in the reinvention of the company since its acquisition in 2008 by La Capitale General Insurance, one of Quebec’s largest P&C insurers, the company said. The insurer also reiterated what it called its “steadfast commitment to the broker distribution channel.” Martin Delage [4], president and chief operating officer of Unica, said: “We do things a little differently than other insurance companies and this translates into big value for our customers. Our new name, Unica, reflects the unique nature of our company and our continued commitment as a dependable, Canadian company.”

4

5

Granite Claims Solutions has purchased Vancouver-based Advance Claims Service Ltd. This is the company’s fifth acquisition in the past 12 months. Advance Claims is an independent adjusting firm in British Columbia, with offices in Vancouver, Abbotsford, Chilliwack, Kelowna, Penticton, Vancouver Island and Squamish/Whistler. Advance Claims will continue to operate under the Advance name as a division of Granite Claims Solutions. The founder of Advance Claims, David Porter, will assume the role of vice president, Western Region for Granite Claims Solutions.

6

InsurEye Inc. has launched an online service for Canadian consumers allowing them to compare their insurance spending with their peers. InsurEye collects, validates and analyzes thousands of auto, home and life insurance experiences from people across the country. In order to collect initial data, InsurEye worked

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MOVES & VIEWS

7 with market research and consumer data collection company Research Now. Insurance Peer Comparison covers spending information for insurance products available online and the services offered directly by insurance companies, brokers and agents. “Insurance quotes can vary not just by 20%, but by 200% or more,” an InsurEye release says. “Knowing what peers pay allows consumers to make informed buying decisions and discover providers with the best prices for their segment.

By using the Insurance Peer Comparison buying tool, consumers can become aware of potential savings through aggregated social knowledge.”

InsurEye’s Insurance Peer Comparison tool can be found at: https://insureye.com/insurance_toolkit/insureye-peercomparison.

7

Paul Davis Systems Canada has appointed Bill Dietz as director of franchise and field operations. Dietz’s most recent professional experience was with The Franchise Company

9 (TFC), a consumer home services franchising company, including California Closets, Paul Davis Restoration, Pillar to Post, Floor Coverings International, CertaPro Painters, College Pro and Handyman Connection.

Until recently, TFC also operated two contractor networks in the property preservation industry: Field Asset Services and TenantAccess. Dietz spent 13 years with TFC in different capacities. He coached and worked alongside franchisees and corporate staff across North America.

8

CARSTAR Automotive Canada has launched the Unhappen My Accident iPhone application. The free app is now available for download from the Apple iTunes App store or at www.carstar.ca/eng/iphone_ap p.aspx. It works by storing critical driver and accident information such as insurance, vehicle, and emergency contact details. One press of a button displays the necessary steps to take following a collision, including recording acci-

dent details, taking a photo of the damage and locating the nearest CARSTAR location for repairs. The app also provides 24/7 access to a live experienced operator who can guide drivers through the process and answer any questions. It also prompts users to enter the critical details required to generate an interactive accident report, which can instantly be saved and emailed to the insurance provider. For each download of the application, CARSTAR has committed to donate $1.00 (up to $10,000) to Cystic Fibrosis Canada, a long time charitable partner for the past 10 years.

To date, CARSTAR has raised more than $1.9 million to help find a cure for cystic fibrosis.

9

RSA has announced changes to its operating structure that will see RSA Canada president and CEO Rowan Saunders [9] appointed to the company’s Global Group executive team.

Effective Jan.1, 2012, RSA Group will be organized into four regions: UK & Western Europe, Scandinavia, Canada and Emerging Markets. As a member of the Global Group executive team, Saunders will report directly to RSA's Group CEO Simon Lee. RSA’s business grew by 20% in Canada in 2011. “The change in structure reflects the increasing size of the Canadian business and the growing contribution the Canadian

company makes to the Group's overall performance,” an RSA statement said. “The new structure is in line with RSA’s move toward becoming a more globally focused organization, with plans to grow its international businesses.”

10

Insurance Brokers Association of Ontario (IBAO) launched a mobile service for its members to assist with productivity and keep brokers organized while on the go.The new service, called hereiam, allows brokers to: • Listen and compose emails while driving. The hereiam app will read email messages back to the subscriber. It also records voice notes, converts them into composed memos and emails, and delivers them to the intended receiver.

• Dials numbers in the contact list hands-free.

• Follow me/find me feature allows clients to reach their brokers no matter where their brokers are.

• Multi-conferencing.

• Toll-free calling. Clients can call them directly through a toll free number and avoid long distance charges.

• Out-of-town calling. While out of their local calling area, brokers can call anyone in North America for $0.05 per minute.

• Eliminate roaming outside Canada.

• A mobile app for smartphones is included.

December 2011 Canadian Underwriter

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GALLERY

The national directorate of the Canadian Insurance Claims Managers Association (CICMA) held its annual general meeting in Niagara on the Lake on Sept. 17 and 18. The CICMA executive for 2011-12 is as follows: Lyndon Friesen, past president, Red River Mutual (Manitoba); Robert Hertner, president, Allstate Insurance (Ottawa); Lynn Ross, vice president, Aviva (Nova Scotia); John Russell, treasurer, Aviva (British Columbia); Sharon Clark, secretary, CAA, (Toronto).

Announcing a new member of the team Jon Schubert, president and CEO of the Insurance Corporation of British Columbia, is pleased to announce the appointment of Steve Crombie as vice president of corporate communications and stakeholder engagement.

STEVE CROMBIE VICE PRESIDENT, CORPORATE COMMUNICATIONS AND STAKEHOLDER ENGAGEMENT

Steve Crombie’s extensive experience in communications includes more than 25 years in public affairs, government relations, community consultation, media relations and issues management in the private and public sectors. He most recently served as vice president of communications (transportation division) with SNC-Lavalin Inc., where he was responsible for the public consultation and communications programs for the construction of the Canada Line rapid transit project. Mr. Crombie also held communications leadership roles with a major Canadian forest products company, Vancouver International Airport Authority, University of British Columbia and progressively senior roles in major media outlets across Canada.

Mr. Crombie’s accomplishments have been recognized by local, national and international awards, including an IABC Gold Quill award for International Business Issues. He has volunteered as a member and director for many community and industry-based associations.

Mr. Crombie is a past chair and current board member of the Jack Webster Foundation and serves on Langara College’s journalism program advisory committee. icbc.com

ADVERTISERS’ INDEX Accenture Duck Creek Technolgies

7

Aviva Canada Inc.

71, 76 (OBC)

CICMA/CIAA Ontario Joint Conference

45

Clyde & Co.

43

CNA Canada

49

Crawford & Company (Canada) Inc.

39

Cunningham Lindsey Canada Ecoinsurances c/o Chesterfield Group, Lloyds Brokers

14

HSB BI&I

29

Insurance Bureau of Canada (IBC)

73

ICBC

64

Impact Auto Auctions Insurance Institute of Canada

60

Intact Insurance

17

Munich Reinsurance Company of Canada

65

OIAA Claims Conference

47

Ontario Insurance Directory RSA – Royal & Sun Alliance Insurance Company of Canada Ship Owner’s Protection Ltd. The Sovereign General Insurance Company

Swiss Reinsurance Company Canada

67 2, 31 55 13 75 (IBC) 35

TIWA

70

WICC

51, 57

WINMAR

61

Xactware

19

Zurich Canada

Canadian Underwriter December 2011

15 41, 58

Insurance Internet Directory

XL Group

64

9 27

The Guarantee Company of North America

SUM – Strategic Underwriting Managers Inc

We’re driven to ensure the well-being of drivers. We’re committed to providing our customers with the best coverage at the lowest possible price and hassle-free service, while proactively partnering to reduce crashes and loss.

37

ACE INA Insurance

5 25

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APPOINTMENT

GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

ACE Canada held its Ladies Forum Tea at the Château Laurier on Sept. 20 during the RIMS Canada Conference in Ottawa. Ladies from across the industry donned fascinators and engaged in conversation while enjoying a cup of tea and finger-sized sandwiches. Vanessa Mariga, Canadian Underwriter’s associate editor, presented a speech on the progress of women in Canada’s insurance industry.

Victor Brandonisio B.Adm., FCIP, CRM

Kenneth B. Irvin, President and Chief Executive Officer of Munich Reinsurance Company of Canada (Munich Re) is pleased to announce the appointment of Victor Brandonisio as Vice President, Casualty Department.

Victor has extensive experience as a casualty underwriter in both the insurance and reinsurance markets.

He started his insurance career with The Sovereign General Insurance Company in 1991. In 1995 he moved to General Reinsurance Corporation as a Senior Underwriting Specialist in the Casualty Facultative department.

Just prior to joining Munich Re, he served as Director, Reinsurance at The Co-operators Group. As Vice President, Casualty Department, Victor is responsible for the management of treaty and facultative business for Munich Re’s Canadian clients.

Victor is a Fellow of the Insurance Institute of Canada, where he also obtained his CRM designation.

Munich Re is Canada’s leading nonlife reinsurer, with offices in Toronto, Montreal and Vancouver. It is a member of the Munich Re Group, one of the world’s leading risk carriers. Munich Re has more than 47,000 employees globally and over 4,000 corporate clients in more than 160 countries.

December 2011 Canadian Underwriter

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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

The Ontario Pond of The Honourable Order of the Blue Goose hosted "Shuck Em and Shake Em" Martini Night at Toronto’s C Lounge on Oct. 27.

Ganders gathered and networked within the ultra-chic environment of the ‘spa-inspired’ lounge, sampling a variety of martinis, fresh oysters and other delectables bestowed upon the flock.

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GALLERY shame on him. On the other hand, we could provide all of the information, warts and all. I was then told that if I wasCollision not prepared to provide all of the CSN & Glass capiinformation, I should talized on connections in seek employment elsewhere.

Ottawa during the th Annual When 9we consider Con- the lessons from network’s Enron,from Lehman the sub-prime ference Sept. Brothers, 22 to fiasco so many 24.

CSNand members, insur-similar situations thatpartners have been prevalent in recent ance and vendors times, weWestin have to wonder if there is any met at The Ottawa such thing asbusiness a concept of business for the three-day ethics. Butto when we consider the conconference gain insight sequences of theserepair activities, we have to into today’s collision realizeand wethe cannot survive without a industry changes concept what is acceptable and itclear will face in the of future. what is not.

The Capital Gala kicked off the event, with more GREAT OF than 200 TRADITION delegates enjoyMENTORING ing dinner and an awards Bradley that Wells, ceremony recognized Blaney McMurtry LLP the network’s top performOver the pastthe few2011 decades, a push has ers — including beenTopunderway to change the percepCSN Member Shane tion of the insurance Campbell of CITY CEN- industry from a process to a profession.

Associations and TRE Collision—CSN in regulating organizations offer continuNorth Bay, Ontario.

CSN ing education programs and designaCollision & Glass pretions its forcharity achievement (i.e. CIP, FCIP, sented of CAIB, CRM), which add more depth to choice, Make-A-Wish the industry’s long-held principles of Canada, with a donation This is evidence of a ofprofessionalism. $10,000 to help make shift in the multigenerational self-perthe special wish of a child ception the insurance industry, as faced with of a life-threatenwell as ancome outward ing illness true. indication of a more

structured professional education.

The industry has a great tradition of mentoring. Even as the most senior professionals retire from the workforce, there is no reason this tradition cannot continue. Just as today’s senior professionals learned from the previous generation, they must be encouraged to pass their knowledge down to the new generation of professionals.

And as the ranks of junior professionals gain knowledge and experience, they are no longer “junior.” They should be encouraged to participate in the mentoring process, thereby continuing the existing cycle on its endless loop.

See all photos from this event at www.canadianunderwriter.ca/gallery

Many years ago, I was told that an unethical person was one who stole money.

That definition was just as inadequate then as it is now.

FUTURE OF INTEGRITY Paul Griffith, Humber College

A changing business environment doesn’t have to translate into changing values or a different understanding of what is right and wrong. During the past decades, we have experienced transformations in business methodologies, technology, rules, regulations,

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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

Catlin Canada held its summer broker appreciation event at Woodbine Race Track, featuring an evening of thoroughbred horse racing. About 100 people were in attendance for a full dinner and some friendly wagering.

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Allianz Global Corporate & Specialty hosted its 6th annual Oktoberfest at the Bier Markt in Toronto on Oct. 12. This year’s event saw more than 200 business partners and clients enjoying an evening with the AGCS team, celebrating the spirit of Oktoberfest.

December 2011 Canadian Underwriter

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Aon Benfield held its 10th annual Rendezvous on Oct. 1921 at the Delta Meadowvale Resort. This event is unique in Canada and brought together

32 Canadian property and casualty and crop insurers with 56 reinsurers from around the globe. More than 400 treaty renewal meetings took place.

Approximately 300 attendees also mingled at social events,

including luncheons addressed by Leo Rautins, the first Canadian basketball player ever picked in the first round of the NBA draft, and Robert Hogue, a Senior Economist at RBC. Each evening

TIWA’s Annual Wine & Cheese n o i t p e Rec Don’t miss out on our event of the year!

Thursday February 16, 2012 5:00 pm – 8:00 pm The Hyatt Regency 370 King St. West, Toronto

& e n i W se e e h C

Plan today to attend the premier social networking event of the New Year – the Toronto Insurance Women’s Association (TIWA) 2012 Wine & Cheese (‌a proud member of the Canadian Association of Insurance Women) Tickets are only available through advance purchase and will not be sold at the door.

TICKETS: $55 each Go to www.tiwa.org for tickets and information

Or for ticket Inquiries contact: $EBBIE (UGHES s DEBBIE CADILLACCAREER COM s Deadline for ticket orders is noon on Friday, February 3, 2012

Door Prizes Contributions are Welcome!

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included a cocktail hour, dinner and entertainment, which was provided by comedians Cory Kahaney and Jeff Caldwell. The final evening featured the Rendezvous’ traditional Casino Night, highlighted by an always competitive Texas Hold’em Poker Tournament.

Somerville, Executive Vice President, Broker Distribution and James Russell, Chief Underwriting Officer, is pleased to announce a series of appointments designed to enhance the company’s underwriting operations and commitment to outstanding broker services.

GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

WICC Ontario Chapter held its annual Breakfast for Cancer on Nov. 2 at the Arcadian Court in Toronto. More than 450 insurance industry supporters attended the sold-out event.

They heard the personal and courageous story of John Sylvester, who was diagnosed with cancer in 2004 when they found a tumour the size of an eggplant on his kidney.

Fortunately the cancer had not spread. Surgery removed the tumour and John didn’t require any radiation or chemotherapy. He was one of

the lucky ones. John is a professional photographer and a contributor to PhotoSensitive’s Cancer Connections Project, a photo exhibit that documents the effects of cancer on the lives of people living across Canada. WICC Ontario Chapter co-chair Jean Faulkner and executive director Barb Reddick presented a cheque for $56,000 to Martin Kabat, CEO of the Ontario Division of the Canadian Cancer Society. This brought WICC Ontario’s 2011 year-to-date funds donated to the Canadian Cancer Society to over $900,000.

Maurice Tulloch, President & Chief Executive Officer of Aviva Canada, announces the appointment of Louis Durocher to the role of Senior Vice President, Chief Actuary.

In this role, Louis will lead Aviva’s corporate actuarial and economic capital teams in support of the company’s strategy and operations.

He brings over 18 years of industry experience and actuarial expertise to Aviva.

Louis joins Aviva Canada from The Economical Insurance Group where he led The Missisquoi Insurance Company in Quebec.

While at Economical, he also held the role of Vice President, Actuarial Services, responsible for Commercial and Personal Lines Pricing, Research and Development, and Management Information.

Louis holds a Bachelor of Science in Actuarial Mathematics from Concordia University and his professional designations include Fellow of the Canadian Institute of Actuaries, Fellow of the Casualty Actuarial Society and Associate of the Society of Actuaries.

Aviva Canada Inc. is one of the leading Property and Casualty insurance groups in Canada, providing home, automobile, recreational vehicle, group and business insurance to more than three million customers. The group has more than 3,000 employees, 33 locations, 1,700 independent broker partners and is a whollyowned subsidiary of UK-based Aviva plc, the world’s sixth-largest insurance group. www.avivacanada.com.

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The ARC Group Canada held its 2011 seminar Litigation and Privacy Challenges in the Electronic Age on Oct. 27 in Toronto. Speakers from various ARC Group member law firms from across the country addressed a variety of related current topics, including: Obtaining Social Networking Site information on Discovery; Invasion of Privacy as a Tort; Privacy Legislation in Litigation & Surveillance; Libel & Slander in the E-Age; and Internal Email. Attendees had a chance to discuss these legal issues during a cocktail reception after the seminar.

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APPOINTMENT NOTICE APPOINTMENT NOTICE

See all photos from this event at www.canadianunderwriter.ca/gallery

Chris White Don Forgeron, President & Chief Executive Officer of Insurance Bureau of Canada (IBC), is pleased to announce the appointment of Chris White to the role of Vice-President, Federal Affairs.

In this role, Mr. White directs the P&C insurance industry’s strategic and government relations efforts on Parliament Hill and oversees the daily operations of IBC’s office in Ottawa.

Mr. White joins IBC with more than 20 year experience in public and government relations, including strategic communications planning for both the public and private sectors. Previously, he was Chief of Staff for five federal Cabinet Ministers, and held executive positions as Vice President, Government Relations and Public Affairs and Vice President, Government Relations in the auto and finance industries.

Mr. White holds undergraduate and masters degrees in political science from the University of Ottawa and University of Windsor.

Insurance Bureau of Canada is the national industry association representing Canada’s private home, car and business insurers.

Its member companies represent 90% of the property and casualty (P&C) insurance market in Canada.

The P&C insurance industry employs over 114,000 Canadians, pays more than $7 billion in taxes to the federal, provincial and municipal governments, and has a total premium base of $40 billion.

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IBAO Awards Insurance Brokers Association of Ontario (IBAO) presented its 2011 Awards of Excellence during the Gala on the final night of its 91st Annual Convention in Toronto on Oct. 21.

gories: including Broker of the Year, Brokerage of the Year, Young Broker of the Year and Affiliate Achievement. The 2011 winners are listed to the right.

This is the third year the IBAO has recognized its outstanding members for the work they do in the industry and in their respective communities.

The awards include four cate-

IBAO President Peter Burns presented the following Awards of Excellence (1-5): 1) BROKER OF THE YEAR Craig Musico, Callister Musico Insurance Group Inc., Sarnia.

2) BROKERAGE OF THE YEAR (more than 10 brokers) Donovan Insurance Brokers Inc., Waterloo.

Pictured are Dianne Monteiro, Jacquelyn Schultz, Tam Good and Kevin Donovan.

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1

4

5

3

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3) YOUNG BROKER OF THE YEAR Morgan Girouard, All Insurance Ontario Limited, Orleans.

4) AFFILIATE ACHIEVEMENT Ottawa Insurance Brokers Association.

Pictured are Patricia Bilodeau, vice president, and Greg Janes, president.

5) BROKERAGE OF THE YEAR (fewer than 10 brokers) Johnston & Mackie Limited, Pembroke.

Pictured is Mary Hill.

Other honours and special recognition presented at the IBAO 91st Annual Convention included:

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6) Wallace E. Wood Memorial Award Bryan Yetman, IBAO Chairman.

8 7) Beyond Best in Class Graduates Steve Wagler, Scott Wagler, Chris Hill, James Chmiel, Daryl Hudson, Jamie Ostic, Kathy Richardson and Catherine Wilson.

8) CEO Panel and IBAO Executive 9) Rick Orr, IBAO Incoming President.

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10) Presidents Award Scroll Peter Burns, IBAO President.

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