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
AUG US T 2 0 1 0 A Business Information Group Publication #40069240
Domino Effect By Vanessa Mariga
Crowded House By Ken Arthurs
First-hand SABS Investigation By Lee Samis
Š 2010 FM Global. All Rights Reserved.
WHEN CONFRONTING DISASTER, HAVING ALL YOUR EGGS IN ONE
To learn more, visit fmglobal.com/insuranceevolved/safe
BASKET SHOULD MAKE YOU FEEL
Even in the best of times, it is rare to find an insurer willing to take on all of your commercial property risk. That is, however, exactly what FM Global does. Even in these times. Why is this important? Because it’s a reflection of our belief that we can help you prevent loss in the first place. That’s why we’ve created a $100 million state-of-the-art research campus and employ more than 1,700 engineers around the world working to minimize your risk. In fact, for 175 years we’ve linked our underwriting to loss prevention engineering, culminating in a streamlined, efficient and stable insurance program. An approach that clearly distinguishes FM Global from insurers that do not base their underwriting on engineering assessments. Which is to say, all of them. We feel our clients are better protected when we assume all the risk ourselves. It’s a unique approach that makes all risk transparent, so there are virtually no surprises. Even when our clients do have losses, they tend to be smaller and less frequent. In our case, it’s all about understanding risk. Then assuming the responsibility for it. Underwriting through loss prevention engineering. That’s insurance evolved.
Insurance Evolved
VOL. 77, NO.8, AUGUST 2010 CANADA’S INSURANCE AND RISK MAGAZINE. PUBLISHED BY BUSINESS INFORMATION GROUP
www.canadianunderwriter.ca
COVER STORY
Domino Theory European capital requirements are becoming much more stringent under Solvency II, potentially leading to a domino effect in the Canadian market. Some Canadian insurance branches may see their European parent companies draw back capital in an effort to comply with Solvency II.
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BY VANESSA MARIGA
FEATURES
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18 Eruption Disruption
52 Web of Risk
A volcano in Iceland begged the question: Are companies adequately prepared for disruptions to their global supply chains?
Global integration is making for a very sophisticated web of risk, making risk management that much more challenging. BY KEN LAVIGNE
BY URS UHLMANN
Crowded House
New Code
Canada’s relative economic stability is attracting new players to the Canadian insurance market, increasing competition for all.
The Institute for Catastrophic Loss Reduction (ICLR) has submitted three suggestions for improving the Ontario Building Code against the threats of water and wind.
BY KEN ARTHURS
22 VoIP Risk New risks have emerged related to the use of Voice-over-Internet Protocols (VoIP). These use unsecure phone lines to transmit Internet data. BY KEVIN KALINICH
BY GRANT KELLY
56 Privatizing Surveillance Insurers conducting surveillance would be well-advised to follow guidelines recently published by the Office of the Privacy Commissioner. BY ABIGAIL TURNER AND KIM YEE
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Canadian Underwriter August 2010
28 Cyber Protection Cyber insurance is starting to become more refined as the exposures come to be better understood. BY SCOTT SCHLEICHER AND STEVEN ANDERSON
34 Auto Reform Ontario auto insurers are preparing to change their rate structures in accordance with the province’s new auto reforms, and so executives should re-acquaint themselves with the effort involved in a typical SABS file. BY LEE SAMIS
61 Salvaging a Career Celebrating his 100th birthday in August, Sam Green reflects back on his 80-year-long association with Canada’s salvage industry. BY DAVID GAMBRILL
65 Protecting Public Officials Public Officials Liability (POL) coverage has emerged during a time when citizens are increasingly using the courts to hold public officials and agencies accountable. BY DAVID TRAN
There’s a lot more to Swiss Re than reinsurance. Isn’t it time you found out how much more? Don’t let the name mislead you; there’s a lot more to Swiss Re than reinsurance. Commercial insurance, industrial insurance, large corporate risks and specialty insurance. Insurance for aviation and space as well as environmental and commodity markets. Financial tools like insurance-linked securities and catastrophe bonds. Yet every service we offer and every challenge we face for our clients receives the same commitment and the same hands-on expertise. Why? Because across all industries, risk is the raw material with which we work; what we create is opportunity. Visit www.swissre.com/rimscanada to schedule a meeting with one of our experts or visit us at booth #72/#73 at the 2010 RIMS Canada Conference in Edmonton.
©2010 Swiss Re
VOL. 77, NO.8, AUGUST 2010
PROFILE
12 Risk Control Tino Brambilla, the new chairman of the RIMS Canada Council, has spent the greater part of his professional career in risk and loss control. BY DAVID GAMBRILL
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Editorial
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Canadian Underwriter August 2010
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DARWIN WROTE ONE OF THE GREATEST SCIENTIFIC BOOKS EVER.
YOU COULD SAY THAT WE UNDERWROTE IT.
Charles Darwin was already well known in Victorian society when he began writing On the Origin of Species. Following publication of the journals he wrote aboard HMS Beagle, he had become, in today’s parlance, a star. Yet even as his theories emerged in his study, he was plagued by a certain anxiety. Society was more conservative then. The suggestion that humans share ancestors with apes would, he feared, be branded as heresy. With so much on his mind, it is remarkable that he was able to write anything at all. But write he did, thanks in part to the wonderful seclusion he achieved at Down House in Kent. And thanks also, we believe (though, admittedly in much smaller part) to the protection he received from us. From 1844 onwards, the buildings at Down House and all their contents were insured by the 7YR *MVI 3J½GI ,MW QER] FSSOW LMW NSYVREPW ERH
even his paper and pens – all were underwritten by the company that would become RSA. 3YVW [EW RSX E WMKRM½GERX GSRXVMFYXMSR XS XLI biggest idea in the science of life. Of that we are in no doubt. But in the year that we celebrate our 300th bir thday, we hope we deserve this small liberty. As for the eventual reaction to his work, Darwin need not have worried. On the day it was published in 1859, On the Origin of Species sold out. Controversial though it was, his book was acknowledged immediately as an outstanding GSRXVMFYXMSR XS XLI GERSR SJ WGMIRXM½G XLSYKLX Which leads us to conclude that in business, as in life, it is those best equipped who will prosper. From the epic to the everyday, we continue to help the world’s people and businesses move forward. To learn more, visit www.rsabroker.ca
Underwriting progress since 1710
EDITORIAL
Jockeying for Position
The Ontario government bears some responsibility for building up the public’s unreasonable expectations related to auto insurance decreases. David Gambrill, Editor david@canadianunderwriter.ca
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Canadian Underwriter August 2010
Ontario’s auto insurance reforms suggested an odd visual when the province’s regulator posted its first reform-related insurance rates in 2010 Q2. Picture a horse race, with the horses all lined up behind the gates. At the finish line, an enthusiastic banner reads: “Race to Rate Reductions.” A gun sounds. And they’re off… Only the horses don’t go anywhere. Most stay waiting at the stalls, paralyzed. A few wander out and graze on some nearby grass. The crowd of consumers waits impatiently. A few unruly spectators start to get ugly, disappointed by the frustrated expectation of a thrilling photo finish. That’s the metaphor, here’s the reality: The government is building up public expectations about the auto reforms that cannot be met. When Ontario announced the first reform-related auto insurance rates in July 2010, it did so with great fanfare, proud of an overall average decrease of about 1% across the entire market. So proud, in fact, it leaked the average rate decrease to the mainstream press just before posting the specifics. But the fact of the matter is, when the gates were opened, eight out of the Top 10 insurers in the Ontario auto insurance market (ranked by market share) didn’t move their rates at all. Those that did offer decreases moved their rates only marginally downward. Only two insurers received rate decreases of more than 5%. No doubt the vast majority of the big players
in the province’s auto insurance market were spooked by the prospect of lowering their rates and potentially getting burned if the reforms turn out to be ineffective in lowering their claims costs. No doubt, the consumers will grouse — and already are grousing, as of press time — about the much-ballyhooed reforms that resulted in a microscopic rate decrease. But there is more to this scene than meets the eye. To even the casual industry observer, it appears there may have been a lot of jockeying going on behind the scenes. Of course one will never know what really goes on behind the closed doors of a regulator, but here’s an educated guess as to what may have happened. First of all, some basic assumptions need to be kept in mind. First, insurers generally like the reforms because they have the potential to reduce their claims costs. No one knows for sure whether this potential will actually be realized. Second, some recent private statements by the regulator suggest the potential won’t be realized. For example, the regulator has recently told members of the defence bar that, in order for insurers to make a profit under the reforms, more than half of all minor injury cases must fit within the new Minor Injury Guidelines (MIG). Given that less than 10% of all minor injuries fit within the former Pre-Approved Framework (PAF) model (the model the MIG replaced), the 5565% MIG target seems but an otherworldly dream.
Third, as insurers wait for the reforms to kick in, the property and casualty insurance industry is losing money on the product. By rights, auto insurers should probably still be raising their rates to match the bath they are taking on accident benefits claims. Fourth, the Ontario government likes the reforms, too. Through its new auto reform package, the government is promising to deliver more choice and lower rates to consumers, as indicated in their mandated flyers. Given the assumptions listed above, one can easily envision the following scenario. Ontario tells insurers behind closed doors that it will not be amenable to approving rate increases in anticipation of the reforms. Insurers are not amenable to filing for rate decreases without knowing how the reforms will play out on their claims costs. After all, what if the reforms don’t work? With the regulator pushing for downward rates, and with the industry not in a financial position to go in that direction just yet, the industry goes nowhere. Rates stay the same. Flat. End of horse race. It remains to be seen whether the government will assume any responsibility for the disappointed fans going crazy, or whether they plan to throw the insurers to the hungry lions. Either way, the government bears some responsibility for building up the public’s unreasonable expectations. It built the public up for a dud of a spectacle.
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Š 2010
MARKETPLACE
Canadian Market ONTARIO REFORM-RELATED 2010 Q2 RATES REFLECT 1% DECREASE Reform-influenced auto insurance rates filed with Ontario’s regulator in 2010 Q2 show an average rate decrease of 1.03%, when weighted by market share. The 2010 Q2 rates take into account the province’s auto insurance reforms and will become effective when the reforms are implemented on Sept. 1, 2010. Scottish & York Insurance Company Limited received the largest rate decrease of 8.07%, followed by Echelon General Insurance Company with a rate decrease of 7.24%. None of the companies were approved for an increase. Twenty-four companies — including eight out of the top 10 companies (weighted by market share) — held their rates flat.
BUSINESS INSURANCE COSTS CITED AS “MAJOR COST CONCERN” IN NEWFOUNDLAND Newfoundland businesses cite insurance costs as Number 1 among their “major cost concerns” in a business barometer survey conducted by the Canadian Federation of Independent Business (CFIB). The survey canvassed the business optimism of 1,100 CFIB members across the country. Provincial results
10 Canadian Underwriter August 2010
cite a list of 10 “major cost concerns” of provincial businesses, including tax/regulatory costs, insurance costs, fuel and energy costs, bank account and processing fees, wage costs and others. Respondents were asked to list their top concerns among those listed. Sixty-five per cent of Newfoundland businesses surveyed ranked insurance costs as a Number 1 major cost concern. Newfoundland is the only province in the survey where concerns about insurance costs ranked at the top of the list. Elsewhere in Atlantic provinces, insurance costs ranked Number 5 in New Brunswick (44% of respondents reported it being a major concern); Number 3 in P.E.I. (58%); and Number 3 in Nova Scotia (47%).
BANK-OWNED INSURERS DOUBLE MARKET SHARE SINCE 2000 Bank-owned insurers have effectively doubled their market share in personal lines between 2000 and 2009, according to the MSA/Baron Outlook Report Q1-2010. Meanwhile, the broker channel has seen its market share in personal lines sink over the past decade from 66.6% to 59.5%. “With the current rules in place, TD and RBC are chewing their way in ever-increasing chunks of the personal lines pie,” MSA Research Inc. president and CEO Joel Baker wrote in the
MSA/Baron Outlook Report Q1-2010. “Their growth has far outstripped broker writers and other non-bank writers by huge margins. “Their share of the noncommercial space effectively doubled since 2000 from 5.3% to 10.6% in 2009, while brokers saw their share slip and other [non-bank] direct writers’ shares effectively went nowhere.” Non-bank direct writers had a personal lines market share of 29.9% in 2009, which has been relatively flat since 2000. [It was 28% in 2000.]
insurers during an open meeting in June. At that meeting, the board’s actuary, Oliver Wyman, called for a flat rate adjustment. In a statement, the Insurance Bureau of Canada (IBC) questioned whether the decrease would ultimately fulfill the board’s objective of ensuring fairness to consumers by ensuring a healthy and competitive marketplace.
Claims
ALBERTA ORDERS 5% AUTO INSURANCE RATE DECREASE
SURVEILLANCE FOR EVIDENCE COLLECTION DOES NOT FALL UNDER PRIVACY LAW: FEDERAL COURT
Going against the advice of its own actuary, Alberta has ordered an industry-wide auto insurance rate decrease of 5%. The premium reduction takes effect Nov. 1, 2010. The adjustment applies only to mandatory coverage, which is required by law and includes third party liability and accident benefits coverage. “This reduction is primarily the result of a projected decline in the number of bodily injury claims in the province this coming year,” AIRB chair Alfred Savage said in a press release. “The decrease will save Alberta drivers an average of $30 per year on their mandatory insurance premiums.” AIRB said its was based on input from Albertans, the board’s consumer representative, the board’s actuary, and
Using surveillance to help mount a defence in a civil legal action is not a “commercial activity” under Canada’s privacy law and is therefore not bound by the Personal Information Protection and Electronic Documents Act (PIPEDA), the Federal Court of Canada has ruled. Nevertheless, the Privacy Commissioner does have jurisdiction to investigate the claim, the court also found. In State Farm Mutual Automobile Insurance Company and Privacy Commissioner of Canada, State Farm collected surveillance and evidence on Gerald Gaudet on behalf of its insured policyholder, Jennifer Vetter. Gaudet launched a civil tort suit against Vetter related to a 2005 automobile accident. Gaudet demanded that State Farm hand over any and all
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documentation the insurer had collected on him, arguing that to collect evidence and to use surveillance without his knowledge or permission is a violation of his rights under PIPEDA. State Farm argued the evidence fell outside the scope of PIPEDA and that it was protected by client-attorney privilege. The insurer argued further that it was not within the privacy commissioner’s jurisdiction to investigate the claim.
mandatory errors and omissions insurance. The amendment to the Insurance Agents & Adjusters Regulation was implemented on May 31, 2010, but allows for a one-year transition period.
“It is important to note that a transition period of one year will apply, as we recognize that the effective date of agents’ individual errors and omissions policies vary,” the Insurance Council of Manitoba said in its July
2010 report.”All licensed agents will therefore be required to have fraud and dishonest acts included as a mandatory requirement of their errors and omissions insurance by no later than May 31, 2011.”
Cunningham Lindsey offers expert claims handling for the most complex and specialized losses. To access our team of experts, write to us at corpservices@cl-na.com for a copy of our new Specialty Services Directory.
ESTIMATED $85 MILLION IN CLAIMS FROM LEAMINGTON, ONTARIO TORNADO A June 2010 tornado that touched down in Leamington, Ontario generated 4,750 home, commercial and auto claims totalling an estimated $85 million, a preliminary report from PCS Canada found. The majority of the claims were for homes, the Insurance Bureau of Canada says, based on the PCS Canada data. The F1 tornado touched down in Essex County, along the shore of Lake Erie, southwest of Leamington at around 3 a.m. on June 6.
Regulation MANITOBA CALLS FOR FRAUD ENDORSEMENT IN BROKERS’ E&O INSURANCE Manitoba licensed insurance agents are now required to have an endorsement that covers fraud and dishonest acts as part of their
www.cunninghamlindsey.com
August 2010 Canadian Underwriter
11
PROFILE
Controlling Risk and Loss David Gambrill Editor
Tino Brambilla, the new chairman of the RIMS Canada Council, has spent the greater part of his professional life in risk and loss control. For Tino Brambilla, RIMS Canada Council’s new chairman, fulfilling his aspiration of becoming a risk manager was at least a decade in the making. Eleven years, to be exact. Brambilla started his career in Canada’s risk and insurance industry in 1978 as a loss control representative for Insurers Advisory Organization Inc. (IAO). In his role at IAO in Manitoba, he had various dealings with risk managers, loss control officers, underwriters and mechanical engineers; these experiences convinced him to try his hand at becoming a risk manager. “In 1986, I was golfing with a friend of mine, John Rislahti,” Brambilla recalls. “He told me he was leaving Inner City Gas, and that his [risk management]
12 Canadian Underwriter August 2010
position was going to be advertised in the Globe and Mail the following week. So I applied for his position and wasn’t successful at it. Ironically, 11 years later, a position became available at Centra Gas in the risk management role, and I applied for it again. I was successful. I waited 11 years [to] finally land a risk management role.” Why the interest in risk management? After all, with a degree in Mechanical Engineering Technology from Red River College in Winnipeg, Manitoba — not to mention 19 years of loss control experience — Brambilla appeared set for life in the field of loss control. Risk management courses explained part of the interest. Brambilla completed an Associateship at the Insurance Institute of Canada in October 1984. The 12-course program provided an in-depth understanding of the Canadian property and casualty insurance industry. Brambilla went on to receive a Canadian Risk Management Diploma in 1992, and completed the Insurance Institute of Canada’s Fellowship program in January 1994. “Once I started taking some of those Fellowship courses, one of the majors in the fellowship was risk management, so that
was the direction that I went on,” says Brambilla. “After that, I thought I would like to get into an actual risk management role.” Many risk managers say they stay in the business because of the variety of challenges they face. Brambilla, in contrast, got into the business because it gave him a chance to narrow in
Anything we can do in our role as risk and insurance managers to help our organizations get back to financial stability is first and foremost what needs to be done. on specific risks. In loss control, he says, “I was always on what I will call the periphery of risk management. In a loss control, you are in a different occupancy all of the time. You never really get to wrap your arms around one particular industry. Loss control reps, for example, might be at a steel mill one minute, and a lumber plant or an institutional property the next. That’s very interesting, the diversity, but you tend not to become an expert in one area.”
Brambilla made the shift to risk management in March 1997, when he joined Centra Gas. There, he managed the company’s facilities, risk/loss control and office and document services. His department had a $4-million budget and he had a staff of 15 people. He stayed on as a risk manager at Manitoba Hydro after the Crown corporation bought up Centra Gas, a private company, in 1999. Brambilla has been with Manitoba Hydro ever since. Brambilla said there was “absolutely” an adjustment in risk managing a Crown corporation compared to a private company. For one thing, unlike private companies, Crown corporations have a mandate that extends beyond simply maximizing shareholder value. For another, Manitoba Hydro had deeper pockets than most private companies and a different set of stakeholders. Also, Manitoba Hydro had reduced its liability insurance coverage to a ‘bare bones’ program during the liability crisis of the 1980s. “I came from an environment at West Coast Energy, which had a complete insurance portfolio, to one that …only had a property policy and at the time were ‘self-insured.’ [Qualifying his use of the term ‘self-insured,’ Brambilla observes that, unlike
PROFILE
private companies, utilities have the ability to seek higher rates from ratepayers through regulatory applications, as opposed to transferring risk by means of purchasing insurance policies.] “On the liability side, Manitoba Hydro had dropped all of their liability policies in 1987. So there were some differences there.” During Brambilla’s tenure, Manitoba Hydro once again picked up its liability policies in 2000 and controlled costs by such measures as the use of higher deductibles. Around this time, in 2001, Brambilla joined the Manitoba chapter of RIMS Canada. He became the local chapter president in 2001. He first got involved in his work with the RIMS Canada Council in 2005. A retirement led to Brambilla becoming the RIMS Canada Council treasurer in January 2008. Just over a year later, the council’s vice chair resigned, and Brambilla stepped into the role. He succeeded Kim Hunton as RIMS Canada Council chair in January 2010. In light of the resignations and retirements that brought Brambilla to his current position, Brambilla says the council’s focus during his term will be on building a solid volunteer pipeline. He notes commitment
to RIMS Canada Council often requires at least five or six years of time; this comes at a time when risk managers are being asked to do more for their employer companies. Risk exposures have multiplied, as many risk managers note, and this has increased demands on their time from their primary employers. That makes it much more difficult for risk managers to put in a lot of volunteer hours. “A RIMS Canada Council ini-
tiative is to try and develop a robust volunteer program,” Brambilla says. “Hopefully we can come up with something that has a good pipeline. There is a time commitment, no doubt. I think there are a lot of conflicting demands on our time, between our employers, our personal lives and our association life. It’s difficult to commit for a long period of time.” The busy time for risk managers is amplified, if not caused,
by the global financial problems experienced over the past two years. This is a key issue, Brambilla says. “I can’t help but think that with the global financial meltdown that we’ve had, the return to economic viability is still the Number 1 issue,” he says. “Anything we can do in our role as risk and insurance managers to help our organizations get back to financial stability is first and foremost what needs to be done.” Also, the issue of contingent commissions has bubbled to the surface once again. Recently, RIMS expressed disappointment at AON’s decision to explore accepting contingent commissions. This is not just a United States issue, Brambilla says. Between the time contingent commissions were banned in New York and when they were later allowed once again, risk managers at utility companies in Canada reported that clients of one particular brokerage had been approached about their willingness to pay “enhanced” commissions. “There’s certainly an element of that in Canada,” Brambilla says. “It still is an issue out there. As a standing committee of RIMS, the RIMS Canada Council aligns itself with RIMS issues.”
August 2010 Canadian Underwriter
13
Crowded House Ken Arthurs
Managing Director, Zone Leader, Central Canada Region, Marsh Canada Limited
Canada’s relatively attractive economy is contributing to a heated property and casualty insurance market. Canada emerged from the financial crisis of 2008 and 2009 in relatively good shape, and with its major financial institutions very much intact. Among its strengths, Canada saw its employment rise by 93,000 jobs in June; it recently became the first major industrialized country to raise interest rates; and there are other significant indicators of a reviving economy, including in the automotive and trucking industries. The country’s relative attractiveness, however, is creating overcrowding and a hyper-competitive environment among property and casualty carriers. Some new entrants, it would seem, are mistaking this relative stability for growth.There are only about 34 million people in Canada — fewer than in California — and annual property and casualty premiums in Canada total about $40 billion. Yet there are now 230 licensed insurers competing for this $40 billion; half of this amount is in personal lines, including automobile insurance.
CANADIAN RISKS Why are so many insurers fighting for pieces of a relatively small pie? Canada is seen as a relatively catastrophe-free environment, providing insurers with an improved spread of risk and the
14 Canadian Underwriter August 2010
hope of attractive returns in the absence of major losses. Although Canada’s recent history may be encouraging in this regard, carriers should not mislead themselves as to the real risks involved in covering Canadian industries. The energy industry, for instance, entails a number of risks: • deepwater rigs operate near the coast of Eastern Canada, where severe storms are common; • “capped wells” in the Beaufort Sea face Arctic conditions; and • the Alberta oil sands and other complex risks present significant claim issues in potentially isolated, harsh conditions. The risk of environmental catastrophes in such conditions is real, and organizations should expect carriers to factor such risk into their pricing. Other risks are present, if not immediately obvious. In May 2010, for instance, forest fires ravaged vast tracts of Northern Quebec, disrupting the Canadian forest products industry. Such incidents have been commonplace in British Columbia in prior years.
Market Expansion Despite the above risks, expansion into Canada continues, with many new entrants ignoring personal lines in favor of the more lucrative commercial business marketplace. Axis and Berkley have entered the market within the last year; QBE recently opened non-underwriting offices in Toronto; and Ironshore is finalizing its licensing process. All told, there are more than 230 licensed property and casualty insurers operating in Canada, in addition to government-
Illustration by Philippe Béha/www.i2iartart.com
Canada’s relatively economic stability is attracting new players to the Canadian market.
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owned auto insurers in British Columbia, Manitoba and Saskatchewan. Marsh anticipates long-term market participants, as well as relatively new entrants, will experience significant pressure on rates as these players battle for market share. These new entrants are arriving despite less-than-stellar returns on underwriting property and casualty business in Canada. According to data published by Canadian Underwriter and MSA Research, total property and casualty industry pretax operating earnings were $3.9 billion in 2009. The bulk of these earnings — $3.7 billion — came from investment returns, as underwriting profitability was essentially flat. Canada’s industrial base still relies heavily on automobile manufacturing, forest products, oil and gas and mining. Although there are signs of economic growth in the Canadian domestic market, conditions are far from robust in Asia and the United States. Marsh anticipates it will be some time before key underwriting indicators such as sales and payrolls return to conditions reflecting substantial growth. Even after two quarters of positive growth, Canadian GDP is still below pre-recession levels, leaving more insurers chasing after pieces of a smaller economic pie.
conditions are poorly understood, but it is clear changes are taking place that will have a significant impact on how commercial lines insurance should be underwritten and priced. Similarly, the long-term environmental impact of major energy projects such as the Alberta Tar Sands needs further assessment. These undertakings are beyond the reach of any individual insurer and call for the establishment of objective public/ private partnerships. purchasers paying with Euros or U.S. dollars. Economic growth in Canada that was roughly double the U.S. rate in the first quarter of 2010 is unlikely to reverse this trend.
Tight corporate budgets Canadian companies, like their counterparts in other countries, have engaged in spending cuts across the board, and show few signs of loosening their purse strings. Indeed, 57% of Canadian financial executives surveyed recently by CFO Research said economic decisions made during the downturn have improved their companies’ long-term prospects for success — hardly a sign of an impending spending surge.
GAINING MARKET SHARE BARRIERS TO EMPLOYING CAPITAL Other complex factors at work in Canada will make it difficult for new and old market entrants to successfully employ capital, including:
Acquisitions by foreign companies Each time a Canadian company is purchased by a non-Canadian entity, the opportunity to deal with a headquarters operation and sell lines such as directors’ and officers’ liability decreases. Some industries have been affected more than others. For example, no primary steel producers remain in Canadian hands today. Strong currency With the Canadian dollar tracking closely to the U.S. dollar, Canadian goods and services are no bargain for 16 Canadian Underwriter August 2010
Of course, pointing out that the Canadian property and casualty market is crowded is a bit like pointing out that all the tables in a restaurant are full. It merely underscores the desirability of the destination. Insurers are usually confident in their ability to provide an acceptable return on their investment, no matter how competitive the environment. If Canada, with its enviable political stability, relatively strong economy and wealth of natural resources, remains an attractive market for insurers, the question then becomes: What can new and existing participants do to gain market share? Marsh believes successful Canadian insurers will focus on three key elements:
A realistic approach to risk The real risks related to climate change, ocean acidification and other evolving
Deep, specialized industry knowledge Canada’s resource-based industries, including mining and forestry, are deceptively complex. For many organizations, it can be extremely difficult to gauge the real risks involved in such enterprises, and to get a true picture of industry profitability through one or more economic cycles. And yet, such knowledge is essential to establishing appropriate pricing, funding reserves and providing a proper level of service. Innovative technology use Personal lines insurers using analytics to identify potentially problematic applications before they become disputed claims will have an important competitive advantage over insurers without access to such technology. Similarly, insurers whose systems automatically route problem claims to the right inhouse experts — saving time and money — will be able to devote more resources to core aspects of the business such as sales, marketing and investments in customer satisfaction. Canada is ultimately a great place in which to do business. Insurers in this market — both established competitors and relatively new entrants — must base their planning on realistic assumptions and not make the mistakes that too many insurers have made in the past. There will always be room for carriers that add real value, but Canada, with all of its wide-open spaces, simply isn’t big enough for insurers to compete on price alone, especially with an insufficient appreciation for the real risks of doing business here.
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Disruption Urs Uhlmann
Senior Vice President, Global Corporate, Zurich in Canada
A volcanic eruption begs the question: When we become dependent on a global supply chain, are we prepared for global risks that might affect our operational ouput? Who would think a volcanic eruption in Iceland could disrupt you from savoring a chocolate nugget strategically located on your hotel room pillow in Hong Kong? Or that an automaker would advise anxious clients that delivery of their shiny new chariot would be delayed for an undeterminable amount of time? We are all relatively aware our global economy is a tangled web, with the common goal for outsourcing being to increase profit margins. This is typically accomplished by reducing operational costs through the combined use of foreign suppliers and readily available global transportation. The new millennium approach of “just in time,” coupled with consumers’ demand for diverse products, has worn thin risk management strategies that would otherwise ensure a reliable, steady stream of products and services. Corporations’ self-imposed logistical demands are proving to be borderline careless, with little or no room for error. When companies decided to become dependent on worldwide supply chains, did they anticipate the ramifications of these actions against their operational output? Are we assured that
18 Canadian Underwriter August 2010
risk management plans in effect can safeguard the profitability of operations beyond the initially estimated recovery period? Unfortunately, history has repeatedly proven otherwise.
A VOLCANO: WHO WOULD HAVE GUESSED? No question, corporations must apply every effort to assess their supply chain risks and establish an effective mitigation and response strategy. Insurers have invested significant time and effort in products and processes over the past three years to aid corporations in addressing the risks previously mentioned. Also, a risk transfer product has been designed that includes — but is not limited to —physical damage occurrences that would otherwise be determined as uninsurable business interruption events. We can be reasonably assured that no one reliable method implemented by any current organization could have predicted the effects of the volcanic ash upon the air transportation industry and the domino effect thereafter. But it is important to identify and understand predictable vulnerabilities and available formulated methods to address and reduce the probability of loss. Before I explain further, I would like to draw your attention to some interesting documented facts about the supply chain impact associated with this recent volcanic eruption, and the subsequent down time or disruption of air travel for that five-day period. The eruption created numerous uninsurable losses as defined by traditional insurance risk
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transfer; two such instances of business interruption involved automakers’ production plants. There was no physical damage to the product, but the failure or interruption of the deliveries to meet their destination within the predetermined amount of time caused losses. Contingency plans for disruptive incidents often include the invocation of emergency air freighting from alternative
locations. But the plans rarely address the non-availability of air transport either because of the lack of aircraft or the mandatory grounding itself. After the volcano erupted in Iceland, there were numerous attempts to charter aircraft and file alternative flight plans; even then, space availability was insufficient. Following the five days of the volcanic disruption, the Business Continuity
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Institute conducted a snap survey: over 80% of mostly European respondents said they experienced some sort of disruption.The volcano caused many sideeffects, but most were associated with the availability of staff. One-third of respondents said they were required to initiate their business continuity plans. Seven per cent of respondents estimated their losses at US$12 million or more. It has never been more relevant for corporations to re-evaluate their risk management strategy, since they are bearing 100% of the risk capital for any similar event that causes no direct physical damage.
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Planning solely for predictable incidents, or passively exposing operations by simply reacting to unforeseen events, can place a company in jeopardy. A proactive approach to safeguarding against future failures should include the application of best business practices. A key decision is to choose a supplier with the resiliency required to survive the previously mentioned risks.This supplier would have safeguard features in place such as regular monitoring, contract management, regulatory control and business continuity management. As with many other risks, even the most comprehensive risk assessment and mitigation plans won’t guarantee the elimination of interruptions to the supply chain so long as one relies upon others to provide a product flow to maintain one’s own operation afloat. As with all other risks, a company must look to the importance of business operating plans as well as optimal risk financing to protect them from negative financial impacts in the event that mitigation efforts fail. Needless to say, the ability to assess and transfer risk in a comprehensive way provides the opportunity to use captives, insurance products and other alternative tools effectively to reduce increasing exposure. No no one knows when and where the next disruption event will occur. We do know there will always be another one to test our prevention planning.
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Voice-over Risk
Aon Professional Risk Solutions
Many businesses in Canada and throughout the world are increasingly abandoning the traditional landline for Voice-over-Internet-Protocol or VoIP. A recent survey found close to one-third of businesses are now using VoIP and that number is expected to be nearly 90% by 2013. VoIP is an emerging risk that should be top of mind to risk managers since the phone line now opens the office door to additional cyber risks such as hackers, spam and eavesdropping. A May 2010 report by Emerson Development LLC, VoIP Security Review: Insurance, outlines serious, pervasive and unavoidable cyber-security risks associated with VoIP.The Emerson report predicts VoIP will raise insurance rates for users due to extensive flaws that enable hacker attacks.
VoIP VoIP phones offer an optimal means of communicating, considering quality and cost. They can save businesses up to 80% on their phone bills regardless of company size. Enterprises are moving
22 Canadian Underwriter August 2010
toward VoIP in corporate networks to enjoy bandwidth efficiency and flexibility benefits including: • substantial cost savings by using the Internet to bypass long distance tolls; • the implementation of advance applications such as unified messaging (voice/data/facsimile/ voice-messaging/email/Web conferences/ etc); and • improving employee collaboration and productivity. Some VoIP providers such as Skype want to add voice and video call capability to more devices (think Research in Motion’s BlackBerry), making communication ubiquitous.Vonage, Net2Phone, AT&T and others are introducing new features —and related new exposures — on a monthly basis. Acquisitions in the VoIP space are becoming common. Google purchased Gizmo5 for $30 million to improve Google Voice and made an offer to buy Global IP Solutions for $68.2 million to enhance technology.
21ST CENTURY EXPOSURES With VoIP, all calls are subject to the limitations of normal computer issues. More than 90% of all VoIP solutions providers operate on unsecure lines or platforms, whether free or charging for services. Calls placed on unsecure lines travel from one computer, over the Internet, to another computer; they have little or no protection to guard against terminal viruses, Trojan horses, unscrupulous hackers or uninvited guests listen-
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Kevin Kalinich
As insurance companies increasingly use Voice-overInternet-Protocols (VoIP) technology, new risks have emerged related to using unsecure phone lines to transmit Internet data.
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ing in on private conversations. These unsecure lines leave users dangerously vulnerable to the inevitable and expensive computer crash that forebodingly looms on the horizon. Additional challenges include:
Quality of service By default, IP routers handle traffic on a first-come, first-served basis, so there could be delays in transmitting VoIP communications. Phone conversations can become distorted, garbled or lost because of transmission errors. Susceptibility to power failure Traditional analog telephone service is usually connected directly to telephone company lines independent of local power. With VoIP, no power means no phone service.
Emergency calls Unlike traditional phone lines, it is often difficult to locate VoIP users geographically.
Redundancy With separate Internet and phone lines, it is less likely that both systems will malfunction simultaneously. Integration with traditional phone systems Technical challenges remain, depending upon the type of legacy phone system (digital video recorders, digital subscription TV services and home security systems all use a standard phone line to do their thing). Currently, there is no way to integrate these products with VoIP. Security VoIP is vulnerable to unique risks related to voice communications such as eavesdropping on and recording of phone calls, or redirecting calls to an imposter organization (e.g., a hacker instead of a bank). As VoIP becomes more prevalent, it will become increasingly attractive to those with malicious intent.Therefore, it will be
progressively more vulnerable to hostile acts such as spying/espionage, hacking, intrusion, interruption of service and identity and intellectual property theft.
Regulatory authority Laws applicable to traditional phone lines have not all been applied to VoIP. There remains ambiguity, especially outside North America.
RISK MITIGATION AND INSURANCE The Emerson report predicts VoIP will increase insurance rates for users. How-
ever, insurance carriers have not (yet) raised rates solely because an insured elects to implement VoIP. Insurance carriers conduct underwriter due diligence to determine whether an insured’s information technology security has implemented industry best practices — VoIP or otherwise. For instance,VoIP developers are working on VoIP encryption to counter the bad guys. Calls placed on secure lines go through a VoIP platform (server) that incorporates its own security (including patented technology) against the ills of
unsecure lines, thereby offering maximum security, privacy and peace of mind for its users. Contact your VoIP solutions provider and request written information regarding security of their service, along with patented technology they own or license. Risk managers should ask their VoIP provider if their service hosts embedded spyware on lines and/or allows public access to names and numbers of subscribers. The National Institute of Standards and Technology has published Security Considerations for Voice Over IP Systems1, which lists recommendations. Risk mitigation includes the following best practices:
Awareness Educate your employees about what information should or should not be disclosed to third parties over the phone. Devise policies and awareness programs concerning appropriate usage and dangers of common vulnerabilities such as phishing.
Prevention Ask your VoIP provider if it has had a vulnerability assessment done by a certified third-party entity. Incorporate in your service agreement that your VoIP provider must provide you with the results of such assessment on an annual basis. Protection Engage your IT security expert to request contractual representations from your VoIP provider. Such representations would relate to perimeter and internal security devices and hosted-based applications that protect your network — e.g.VoIP network intrusion prevention/detection systems, denial of service attack defenses, authentication, authorization and accounting servers, encryption engines and antivirus software. Mitigation A combination of human intervention and security management tools are being developed to mitigate the impact of
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hacker attacks.This aspect must evolve as security evolves to address new exposures.
CONTRACTUAL REQUIREMENTS Once VoIP users have conducted due diligence regarding their providers, risk managers should include contractual insurance requirements in the service provider agreement. The contract should specifically request insurance coverage for all aspects of the service contract, including: • a service level agreement guaranteeing uptime without degradation (failure to meet the agreed-upon service levels should result in remuneration to the user); and • privacy and security/cyberliability coverage to address defense costs and indemnity for any losses or expenses incurred by the VoIP user due to security lapses of the VoIP system. An example of the above might read as follows below: “INSURANCE. VoIP Vendor warrants that it will maintain sufficient insurance coverage to enable it to meet its obligations created by this Agreement and by law.
“Without limiting the foregoing, VoIP Vendor will maintain (and shall cause each of its agents, independent contractors and subcontractors performing any services hereunder to maintain) at its sole cost and expense at least the following insurance covering its obligations under this Agreement. “Professional Liability Insurance with a combined single limit of not less than xx Million Dollars ($xx,000,000) per occurrence. Such insurance shall cover any and all errors, omissions, or negligent acts in the delivery of products and services under this VoIP Vendor Agreement. Such errors and omissions insurance shall include coverage for claims and losses with respect to network risks (such as data breaches, unauthorized access/use, ID theft, invasion of privacy, damage/ loss/theft of data, degradation, downtime, etc.) and intellectual property infringement, such as copyrights, trademarks, service marks and trade dress. “The retroactive coverage date shall be no later than the Effective Date.
“VoIP Vendor shall maintain an extended reporting period providing that claims first made and reported to the insurance company within two (2) years after termination of the Agreement will be deemed to have been made during the policy period.”1 1 - In providing this sample language, Aon is not providing and cannot provide legal advice or a legal opinion concerning whether the insurance program satisfies insurance provisions in a VoIP contract. This sample should not be relied upon by you or a third party for any legal purpose. Aon does not provide an opinion as to whether an insurance program covers any legal obligations contained in VoIP or other contracts. All descriptions of insurance coverages are subject to the terms, conditions, exclusions and other provisions of the policies or any applicable regulations, rating rules or plans. Suggested additional or alternative wordings in any VoIP contract that we may recommend should be ratified by your legal advisor before being adopted.
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For more information, please contact your local underwriter or visit www.cnacanada.ca.
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STABILITY The Toa Reinsurance Company of America 200 King Street West Suite: 1001, P.O. Box 41 Toronto, Ontario, Canada M5H 3T4 Phone: 416-366-5888 Fax: 416-366-7444 Web Site: www.toare.com Tokyo • Morristown • Toronto • London • Switzerland • Hong Kong • Kuala Lumpur • Singapore • Taiwan
Cyber
Protection Insurance coverage for cyberliability is starting to become more refined as exposures become better understood. Actor Marlon Brando once said:“Privacy is not something that I'm merely entitled to, it's an absolute preScott Schleicher requisite.” Like Brando, most people value their priAssistant Vice President, vacy.While Brando went so far as to purchase his own private island to protect his privacy, most of us do not Manager, have the luxury to live on our own island. Even if we Technology E&O, did, in today’s technologically-driven world, most XL Insurance would still choose to remain connected in some way.And that is making safeguarding privacy much more of a challenge these days. Technology is allowing us to conduct business anywhere in the world, no matter where we are or where we may go. Increased social interaction via technology, as well as our dependency on technology, however, leaves both our businesses and personal lives vulnerable to a variety of cyber risks. For instance, Steven Anderson breaches in computer networks can pose a threat Assistant Vice President, to financial, customer, employee and other propriSenior Underwriter, etary data, putting it in the wrong hands. Hackers Select Professional, can take down a Web site and totally interrupt XL Insurance a company’s online operation. The wrong post on a company Web site can leave it fighting copyright infringement.
28 Canadian Underwriter August 2010
Despite the potential risks, far too many companies are overlooking cyber-liability.A recent poll of Canadian Business conducted by EKOS for the Office of the Privacy Commissioner of Canada found that 42% of businesses surveyed were not concerned about security breaches. This is despite the fact that businesses are increasingly collecting and holding personal information about their customers. Other businesses are not hiding their heads in the sand — especially after seeing some very costly incidents. Most recently, a security flaw in AT&T’s network exposed the e-mail addresses of more than 100,000 owners of Apple’s 3G iPad. Thus far, the breach-of-all-breaches occurred in 2008 at Heartland Payment Systems, the fifth-biggest payments processor in the United States. Considered the largest-ever criminal breach of credit card data, security experts estimate that as many as 100 million cards issued by more than 650 financial services companies may have been compromised. Heartland has recorded $12.6 million in expenses related to the intrusion, including litigation and fees. No industry is immune to potential privacy breaches. They have occurred in both private and public enterprises, as well as in government agencies. In a study conducted by the Ponemon Institute, the 2009 Annual U.S.Enterprise Encryption Trends Study, 85% of the 997 survey respondents reported experiencing at least one data breach sometime over the past 12
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months. In addition to threats from outside ‘hackers,’ as was the case in Heartland, there is a threat of current employees gaining access to and wrongly distributing information. In Canada, dozens of workers at the Canada Revenue Agency were recently discovered reading confidential tax files, snooping on their ex-spouses, mothers-inlaw, creditors and others. Internal reports uncovered that rogue employees were improperly reviewing the private financial affairs of taxpayers without their knowledge. In one case, an employee accessed 37,500 emails and 776 documents containing confidential financial information about ordinary Canadians and downloaded the files onto 17 compact discs for her personal use.
SEEKING STRONGER PRIVACY PROTECTION Given these high-profile incidents and more, as well as taking into account their costly repercussions, the Canadian government is seeking more privacy protection for its citizens.The Government of Canada introduced several significant amendments to the Personal Information Protection and Electronic Documents Act (PIPEDA) on May 25, 2010. PIPEDA governs how private-sector organizations collect, use and disclose personal information in the course of commercial business. Introduced as Bill C-29 in the House of Commons, the amendments aim to incorporate recommended changes including the mandatory reporting of data breaches and provisions permitting personal information to be used and disclosed for business transactions. If and when the provisions of the bill come into force, businesses with a presence in Canada will need to review their privacy policies and procedures to ensure compliance with the amendments. Critics say the proposed amendments will not do enough to protect consumers’ privacy.They say the language is too “wishywashy” and the amendments have too many loopholes and ambiguities to address privacy concerns adequately. For instance, the legislation does not require businesses to contact those consumers that may be affected by a possible data breach immediately. Instead, it suggests they should be contacted as soon as feasible. In the United States,
30 Canadian Underwriter August 2010
many individual states are imposing harsher penalties for failing to quickly notify individuals whose information may have been compromised. Whatever the outcome of Bill C-29 in Parliament, businesses need to be ready to address and resolve situations involving their customers’ information. According to Ponemon Institute's Fifth Annual Cost of Data Breach Study, the average cost of a data breach has risen to $204 per customer record in 2009 from $202 in 2008. The costs involved with notifying customers about breaches can be substantial, but the loss of customer trust and loyalty is not as easily quantified. When a breach of private data occurs, in addition to the operational expense of notifying customers, companies may find themselves
The average cost of a data breach has risen to $204 per customer record in 2009 from $202 in 2008. The costs involved with notifying customers about breaches can be substantial, but the loss of customer trust and loyalty is not as easily quantified. paying for costs related to crisis management efforts, restoration or reconstruction of data at the very same time they are dealing with a potential decline in their own revenue.They might also be susceptible to potential third-party claims — general damages; out-of-pocket expenses related to data restoration or credit monitoring services for those affected; contractual fines; and even shareholder lawsuits.
PROACTIVE RISK MANAGEMENT So how does a company protect itself from cyber risks? In general, risk management is not about being reactive, but proactive. Companies recognize they have tremendous risk related to identity and security breaches, and they are closely examining their risk management strategies to reduce their exposure. For instance, companies can:
• train employees and contractors to understand their responsibility in the protection of data assets; • ensure mobile devices are encrypted and that employees understand the organizations’ policies with respect to downloading sensitive information and working remotely; and • make employees aware of the precautions that should be taken when travelling with laptops, PDAs and other data-bearing devices. Additionally, Canadian carriers are offering cyber-insurance policies to help protect businesses from a variety of tech-related liabilities. Coverage offers protection against a variety of cyber liabilities, including:
Network security liability Such coverage protects companies from losses associated with unauthorized access to or theft of customer, employee or other proprietary data or e-business activities, computer viruses, denial of service attacks, as well as alleged unauthorized e-commerce transactions. Privacy Liability This coverage provides protection if an insured fails to protect electronic or non-electronic information in their care custody and control. Media Content Services Liability Thanks to the Internet and social networking sites such as Facebook, LinkedIn and Twitter, all businesses are media companies, too; therefore, they need to be concerned with media liability.Although blogging and other forms of business-related social media seem to be harmless, businesses are liable for the content they generate and post on their Web sites.They have to be wary of misusing competitors’ copyrights and trademarks or disclosing confidential information. Many businesses have adopted clear media policy or social computing guidelines, because employers are generally responsible for independent actions taken by employees if these actions are deemed to be within the scope of employment. Media content insurance covers the insured for intellectual property and personal Injury perils that result from an error or omission
Every file is different
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in content. (It is important to note that coverage for patent and trade secrets is generally not provided.)
Extortion Threat This coverage includes payments made to a party threatening to attack an insured’s computer system in order to avert a cyber attack. Disgruntled employees, customers or vendors can cause significant harm. For instance, a laid-off IT administrator was recently arrested and faces up to five years
in prison after he tried to extort money from his former employer, a mutual fund company, by threatening to crash the company’s servers. Demanding a better severance package,he threatened to use his connections with hackers in Eastern Europe to wreck havoc on their customers’ private information. Other risks that can be insured in cyberliabilty protection include: • Regulatory Liability: Coverage for privacy-related lawsuits or investigations by federal, provincial or foreign regulators;
• Notification Expense: Coverage to address firstparty expenses to comply with privacy law notification requirements; • Credit Monitoring Expense: Protection against first-party expenses to comply with privacy law credit- monitoring requirements; • Crisis Management: Cover to address first-party expenses to hire a public relations firm; • Data Recovery: Protection to address firstparty expenses to recover data damaged on an insured computer system as a result of a failure of security; and • Business Interruption: Covers first-party expenses for lost income from an interruption to an insured computer system as a result of a failure of security. Cyber-liability insurance has been around
Some risks insured in cyberliability protection include regulatory liability, notification expense, credit monitoring expense, crisis management and data recovery.
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32 Canadian Underwriter August 2010
in some form or another for the last decade. But insurers have carefully expanded the insurance protection to offer coverage as discussed above, as well as coverage costs related to crisis management, business interruption, privacy notification or creditmonitoring costs, as well as regulatory fines that a business might suffer following an cyber incident such as an extortion attempt or privacy breach. A company may feel more secure with all of these coverages, or just a few, depending on the nature of business and the breadth of information stored in your computer systems. Privacy is valuable. Protecting it is going to be a shared challenge for all businesses going forward.
In Canadian Underwriter’s July 2010 cover feature, ‘Flatland,’ MSA Research president Joel Baker was cited as saying the Canadian insurance industry has about $3 billion in capital right now. The $3 billion figure was actually in reference to Canada’s reinsurance industry. Canadian Underwriter apologizes to Joel Baker for the error.
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Opinion/Analysis
Lee Samis
Principal, Samis & Company
As Ontario auto reform moves forward, decision-makers charged with the task of determining premium should familiarize themselves with what is involved in handling a SABs claim. Once again, Ontario’s auto insurers are in the uncomfortable position of trying to forecast the effect of mandated, and untested, product changes. On Sept. 1, 2010, Ontario’s legislated auto insurance reforms will alter the Statutory Accident Benefits Schedule (SABS) and tort response for motor vehicle injuries. The changes may prove to be profound — or perhaps not. The urgent need for cost relief drives some rushed decisions for insurers. Perhaps that’s not a bad thing: I suspect more careful, studious, and thoughtful evaluation of the known changes would not change the comfort level much. Whether the conclusion reached is optimistic or pessimistic, it has to be tempered by a sizeable measure of uncertainty. A major problem for those who must forecast the impact of such product changes is the real-
34 Canadian Underwriter August 2010
ity that subtle procedure changes cause significant loss cost changes. When the regulation is changed so — or interpreted to mean — that assessment costs or benefits are increased or decreased, this has a ripple effect that alters expenses, benefits, disability durations, SABS frequency, tort bodily injury claim frequency and the friction cost of claims resolution. It is not easy to quantify this in the best of circumstances. It’s even harder when confronted with an untested design change in the product. A good example of this challenge is the new rule that limits insurers to spending $2,000 for an assessment. No doubt this reform is intended to respond to the grotesque assessment business fostered by the SABS. Ever since a Financial Services Commission of Ontario (FSCO) arbitrator decided insurers had to pay for assessments instigated by the claimant, this caught most insurers off-guard and created a new industry. But many are questioning the impact of this reform. Will it be helpful or harmful? After all, insurers need assessments to inform claimshandling decisions and, ultimately, to support entitlement decisions challenged in dispute resolution at FSCO or in court. If they can’t get the assessments they need, especially from countervailing experts that could be marshalled in
an adversarial process, this procedural change might well cause a marked uptick in indemnity costs. Similar challenges are associated with many of the SABS changes. What is the impact of changes to “incurred” costs? What about the changes introduced to limit who can do certain kinds of assessments? Or, importantly, how will adjusters react to changes that contem-
The urgent need for cost relief drives some rushed decisions for insurers. Perhaps that’s not a bad thing: I suspect more careful, studious and thoughtful evaluation of the known changes would not change the comfort level much. plate denial of SABS claims without the precondition of an insurer assessment? There aren’t any right answers to these questions. But business carries on, forecasts are made, rates are set and fingers are firmly crossed. As the industry has moved through this process over the past few months, some comments have been made that highlight a concerning reality. Many industry leaders — those charged with making the very tricky forecasts — don’t really have a good grasp of what is involved in a SABS claim. It’s not for lack of interest, I hope. But it does seem peculiar that SABS claims should be such an unknown quantity for key decision makers. After all, for most property and casualty companies, these claims are the most significant cost drain for their most significant product,
36 Canadian Underwriter August 2010
and in their most significant market. It’s hard to believe decisions are made with only an opaque view of the product. Truly the key benefit concepts are well understood. The limits are understood. The concept of optional coverage has been mulled over with some muted enthusiasm. And everyone immediately recognized the critical issues of “minor injury” and “catastrophic impairment” as potential deal-breakers. But the next level of understanding is lacking. The very important, yet nebulous, procedural/definitional reforms are not easily evaluated, and are impossible to evaluate without a very good sense of how SABS claims have become a field of game-playing and rule manipulation. In a changing environment, the insurer that best understands the strengths and weaknesses of the reforms will fare best.With every set of reforms, some insurers are markedly quicker than others to recognize the new reality.This might be a good moment to enhance understanding, to allow a nimble response as the new version of this key product unfolds. One might ask if decision makers can do something to improve their chances of keeping on top of the issues. Here’s a simple recipe for getting a good grounding. You could benefit from much more, but if you can’t bring yourself to do any more, this will give you a much better idea of what you are dealing with. • Ask the claims people to give you one simple SABS file, and one complex SABS file. Read it from cover to cover — this may require stamina — and put yourself in the position of your team having to meet deadlines, deal with resource limitations, etc.
• Spend half a day with a front-line SABS adjuster. Help them handle their work. Find out what they do and why. Be sure to note the numerous transactions in which they are engaged that must meet various service level standards mandated by regulations, legislation, FSCO guidelines and courts. • Accompany your ADR person to a FSCO mediation.This will probably take half a day.Think about how this kind of process, as an end point, drives behaviours in the earlier stages of a claim. Just to enhance the value of this experience, you might debrief afterwards, asking how the SABS claims process
Moving through the reform process, some comments have been made that highlight a concerning reality. Many industry leaders — those charged with making the very tricky forecasts — don’t really have a good grasp of what is involved in a SABS claim. meets your customers’ expectations of what they pay premiums for, and gain an appreciation of how much process/money is involved in getting (any) benefit to the customer. This two-day experience will change your view of this core product. At a minimum, you will have a new respect for the challenges faced. Come September, you will speak with new authority about the reforms, and you will have a great answer when asked about how you spent your summer.
The Domino Effect European regulators have proposed very stringent capital requirements for the European insurance market as part of Solvency II. Risk managers in both Europe and Canada are concerned these requirements might have a ‘domino effect’ on the Canadian market, featuring shrinking coverage availability, higher prices and, potentially, mergers and acquisitions. BY Vanessa Mariga
38 Canadian Underwriter July 2010
Canadian
and European risk managers are warning about a potential domino effect created by the Solvency II regime that regulators are now drafting for the European property and casualty (re)insurance industry. Solvency II is a fundamental review of the capital adequacy regime for the European insurance industry. It will result in a number of new regulations to be implemented on Dec. 31, 2012. Risk managers are warning that dominoes might be teetering based on the recent work of the Committee of European Insurance and Occupatonal Pensions Supervisors (CEIOPS), Europe’s integrated regulator for insurers. Specifically, risk managers are concerned that, in its efforts to protect policyholders, CEIOPS has set the bar for economic capital requirements too high. As a result, the Solvency II regime may in fact have a negative effect on the availability and price of insurance coverage. Also, experts warn, small- and mid-size insurers might have a hard time meeting the requirements. If so, larger insurers would likely swallow these small- and mid-sized insurers, thus reducing competition in the market place. The Federation of European Risk Management Associations (FERMA) issued a statement in March 2010 laying out its concerns. “The fact that insurance companies are concerned that they will have to raise premium by 20% for non-life insurance is a notable development,” the statement reads. “However, our main concern is the potential reduction in the number of insurers capable of covering our risks. This could force us to retain more risks on our balance sheet, impacting our ability to invest and remain competitive in a global economy.”
August 2010 Canadian Underwriter 39
COVER STORY
Domino Effect Here in Canada, the Office of the Superintendent of Financial Institutions (OSFI) is carefully observing the European approach. OSFI appears to be playing a wait-and-see game before it finalizes its own approach to a riskbased capital regime, with an eye to implementation around 2014-15. Canadian risk managers fear that should these “overly stringent” capital requirements make their way into the final draft of Solvency II, they might be enough to set the dominos tumbling overseas. Some suggest the stringent capital requirements will disrupt the flow of capital between European parent companies and their Canadian subsidiaries. Others worry OSFI will mimic the overly prudent tone of the Solvency II regime, thus raising capital requirements for all insurers, not just European-based ones. “We operate in a global village,” says FERMA president Peter den Dekker. “The world does not stop at the borders of Canada, I am afraid. Solvency II will have an impact on the Canadian insurance market. How and what the actual impact will be is a big uncertainty and a big question mark, as it is also here in Europe.”
Solvency II — What it will Look Like In a nutshell, Solvency II is a regulatory capital model based on an economic capital view, says Sharon Ludlow, the CEO of Swiss Re in Canada. It has a three-pillar approach: • minimum capital requirements; • governance and risk management requirements; and • disclosure and transparency requirements. As the 2012 implementation date draws near, CEIOPS is finalizing what each set of criteria will look like under each of the above pillars.The framework’s principles are very similar to those OSFI is contemplating, Ludlow continues. “It comes back to understanding the risks that you have,” she says. “It’s insurance risk (‘So do I understand the exposure?’); market risk (‘What’s happening to my investment portfolio?’ and ‘Am I 40 Canadian Underwriter August 2010
heavily concentrated in Industry A versus Industry B?’); counterparty risks exposure (‘What would happen if a reinsurer or a trading partner becomes insolvent?’); and operational risk, or the risks within your own organization.”
Risk managers are concerned that European regulators, in their efforts to protect policyholders, have set the bar for economic capital requirements too high. As a result, the Solvency II regime may in fact have a negative effect on the availability and price of insurance coverage. The first of the pillars mentioned above — the minimum capital requirements — appears to have caused the Solvency II edifice to sway somewhat. Just like OSFI, CEIOPS is proposing a system in which (re)insurers will be able to choose between using a standard formula to determine their capital requirements, or developing an internal model approved by the regulator. But, as the saying goes, the devil is in the details. When CEIOPS rolled out its fifth quantitative impact study (QIS 5), insurers, reinsurers, captive insurers and risk managers alike voiced concern over the stringent requirements set forth in the criteria.
Bones of Contention QIS 5 launched at the beginning of August 2010. Insurers and reinsurers have until the autumn of 2010 to complete the study and report results; at this point, CEIOPS will review the calculations and make any required tweaks before sending off its final draft to the European Commission. But even before the study officially got underway, insurance buyers and carriers alike raised red flags. CEIOPS issued its previous quantitative impact study (QIS 4) just as the credit crunch was unwinding, notes David Simmons, managing director of analytics for Willis Re London. “It was using the 2007 numbers, and all the factors were predicated prior to the credit crunch,” he says. “The results of that study indicated that just under 11% of companies in Europe could have been challenged by Solvency II,” Simmons says. “Now, QIS 5 is being set post-credit crunch,” he continues. “It’s based on year-end 2009 numbers, and a lot of the ratios and tests have increased. “It certainly is going to be a much more rigorous regime than what we have had in the past. Where regulatory capital hasn’t been an issue for companies before, it may become an issue for some, certainly not all. It may be that certain companies writing certain lines of business may have more of an issue than other companies that write a more diversified book of business. It’s a little hard to predict at this point exactly where the pressure points are going to lie.” The controversy around QIS 5 has to do with CEIOPS’ suggestion that a factor called ‘in-force cashflows’ or ‘expected future profits’ should not be taken into consideration when calculating an institution’s core capital. An April 2010 position paper issued by the CEA, a 33-member federation of European insurance and reinsurance associations, describes CEIOPS’ decision to exclude this factor from the calculation of core capital as potentially having “a devastating impact on the industry.” In-force cashflows include premiums already received; premiums to be received; related acquisition costs; future
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COVER STORY
Domino Effect claims; future expenses; and future investment income. “A firm’s available capital (its own funds) is the net of these assets, less liabilities, and therefore a firm’s own funds includes its best estimate in-force cashflows for existing business,” the CEA says in its position paper. “There has been some discussion as to whether in-force cashflows should be included as Tier 1 capital in Solvency II… The total in-force cashflows for the European insurance industry is of the order of 200 billion euros; we believe that the CEIOPS concept could be in the order of 100 billion euros.” In other words, the CEIOPS proposal could potentially halve the amount of capital available for use in the European insurance marketplace. Without commenting on the actual formulas under Solvency II, James Falle, Aviva Canada’s chief financial officer, says it was never the intention of Solvency II to “put capital requirements so high that it would put anyone out of business or at a competitive disadvantage. The intention always was to ensure that you had enough capital to run your business and to maintain through shocks that might affect your business.” Risk-based capital modelling forces an organization to consider the consequences of a 1-in-200 year event, he continues. “And then, when you take a look at all of those shocks and those stresses, decisions are made… as to what level of capital you would need to run your business in each of those circumstances.” Falle and Ludlow say the recent set of QIS 5 calculations are alarming, to say the least. Nevertheless, both remain confident finessing will be done to properly calibrate the formulas. “Under QIS 5, a significant majority — maybe two-thirds of the industry — would be considered insolvent under those proposed rules,” Ludlow says. “We clearly don’t agree that the [current] calibration is right because the results are quite alarming.” Having said that, Ludlow says CEIOPS just needs to get back to the right calibration and make sure the right risk factors have been considered. “We need 42 Canadian Underwriter August 2010
to make sure the right credit or recognition for the benefits of reinsurance and the correlation of risks are all in the right place,” she says. FERMA’s den Dekker says he is already starting to see the effects of the pro-
Experts warn that small- and mid-size insurers might have a hard time meeting the proposed capital requirements. If so, larger insurers would likely swallow these small- and mid-sized insurers, thus reducing competition in the market place. posed increase in capital requirements, as the industry braces itself for the stringent regime. While he notes pricing has not yet been affected, “you can see some insurers are reducing capacity in hurricane and earthquake areas. The [coverage available for] catastrophic risks is decreasing and so effectively [the coverage is] becoming more expensive. One area in which European insurers have reduced their capacity is the Gulf region for hurricane exposures, and it has everything to do with the preparation for Solvency II.” Commercial catastrophe risks, highvolatility risks and long-tail liability risks are more expensive to underwrite than a homeowner’s policy, den Dekker
adds. “We are afraid that within an insurance company, there is going to be a fight for capital. Underwriters have knowledge of their clients and their exposures. Now they have to go to their chief risk officers or chief financial officers to ask them to allocate capital to this risk. Meanwhile, at the same time, an underwriter from personal lines is asking them for capital. You might understand that the CFO of a big insurer would like to allocate less expensive capital to a customer more than very expensive capital.” den Dekker adds the fear is that catastrophic, volatile and long-tail liability exposures will be so expensive for the underwriter that insurers will be forced to raise prices considerably — or lower the availability of insurance limits. Falle says the use of economic capital modelling in pricing will likely have an impact on the pricing and geographical mix of business. But to what degree remains unclear at the moment. “For example, you wouldn’t be assigning the same level of capital to a business that’s in Toronto to one that’s located in Vancouver and sitting on top of an earthquake fault line,” he says. “It is going to cause people to take a different look at their business. Is it going to create capacity issues? I think it’s way too early to tell. It is going to cause companies that deploy this to think about the mix of their businesses, the types of businesses in which they get involved and the types of risks they underwrite. It is going to cause all of us to go back and take a second look at all of that. How that impacts policyholders and the industry at large is too early to tell.” For his part, den Dekker remains cautious. “If capacity runs scarce because underwriters are not able to allocate capital anymore, then we [risk managers] really have a large problem because we will not be able to insure our largest risks that we have as companies.”
Knocked out of the game If risk managers’ concerns about the rising cost and shrinking availability of capital prove to be founded, den Dekker sees the stringent requirements under
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COVER STORY
Domino Effect Solvency II spurring merger and acquisition activity, thus decreasing competition in the insurance marketplace. “The smaller and medium-sized companies in Europe that fill a very important role — these are the very old and longstanding mutual and cooperative companies that carry niche products — do not have as easy access to capital markets as regular insurers,” he says. “If they have to increase their internal capital, what you are going to see is that they will likely close down or be acquired by the larger insurance companies. That observation is starting to [manifest in the European market] and it has already started to create some complications.” Simmons agrees that smaller, less diverse companies will face a greater challenge than their larger counterparts. “It’s not just that the factors to be applied to premium, reserves and investments which have increased, but there are also changes to the handling of diversification, correlation and catastrophe risk. The combined impact will be very specific to each company.” The weight of the governance and compliance requirements may prove to be too much for these smaller companies to bear, Simmons says. “The compliance issue shouldn’t be a driver for why companies will merge but, broadly speaking, it wouldn’t surprise me.” Simmons observes further that larger companies have the ability within Solvency II to replace either all of the standard formula for calculating capital or some of the standard formula with approved internal models. A smaller firm, on the other hand, will not have the resources to develop their own internal models. As a result, the smaller operations will be held to the standard model’s more stringent capital requirements. Bill Panning, executive vice president with Willis Re in Philadelphia, agrees the ability to create an internal model will further divide the smaller companies from the larger ones. He also sees the potential for the use and development of internal models to exacerbate any market fluctuations in the future. 44 Canadian Underwriter August 2010
“If you look at what happened in the investment world … there was a culture that developed in which people were specialists in this area and they moved around to all of the firms, and all of the firms ended up with similar models,” Panning says. “So, if there is a blind spot in one firm’s model, all of the firms have similar blind spots.”
We operate in a global village. The world does not stop at the borders of Canada. Solvency II will have an impact on the Canadian insurance market.
Domino Effect Whether or not Solvency II causes a hard market and a rush of mergers and acquisitions activity in Europe or in Canada is yet to be determined. But here on the home front, the uncertain direction of the proposed Solvency II changes has already fanned speculation about a potential domino effect. To prevent Europe’s regulatory dominoes from falling over into North America, some argue OSFI should be applying to CEIOPS for what is called ‘equivalency status.’ If OSFI were to gain equivalent standing, essentially it means CEIOPS would recognize OSFI’s regulatory regime as being on par with its own, and therefore the requirements of Solvency II would not apply to Canadian entities. But as of press time, OSFI confirmed it had not applied for equivalent standing with CEIOPS.
Until the issue of equivalent standing among the regulators is resolved, Canadian organizations with ties to Europe should prepare themselves for the possibility that they will be held to CEIOPS’s high capital standard. And until OSFI firms up its own risk-based capital regime, Canadian entities are bracing themselves for a regime as stringent as the one to which their European counterparts are being held, says Keith Old, the managing director (Canada) of Bishop Phillips Consulting in Vancouver. Old’s clients include organizations in the banking industry, the insurance industry, multinational corporations (one with a captive insurer in Europe) and an insurance sector regulator. “The general perspective is that there is definitely a lot of uncertainty, so that is affecting people,” he says. “The whole financial regulation sector in Europe is undergoing a fair level of change and that’s creating a level of uncertainty here. Each of [my clients] requires a fair level of resources to identify the implications and put in a process to deal with those.” One of Old’s clients is an aerospace engineering firm with a captive based in Luxembourg. Under Solvency II, captive insurers will be held to the same standard as their regular market counterparts — a decision that has raised the eyebrows of many risk managers who rely on self-insurance as part of their organization’s risk management program. Old says under the Solvency II regime, his client’s captive would be required to keep roughly three times its current holdings. “They’re not comfortable with that,” he says. “They only set up this captive two or three years ago; now they’re having to consider moving it, because they consider the requirements for that captive to be unrealistic.” For Canadian branch insurers with European parent companies, the potential exists for the flow of capital between the parent company and the Canadian branches to be affected, “particularly in times when there are major events occurring and a lot of claims are being incurred,” Old says. “It’s an unknown effect, but I think potentially that could definitely happen.”
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Domino Effect
It was never the intention of Solvency II to put capital requirements so high that it would put anyone out of business or at a competitive disadvantage. The intention always was to ensure that you had enough capital to run your business.
Parent companies based in Europe may benefit from the strength of their Canadian branches, but it may not necessarily be a two-way street, Simmons says. “Implicitly, if you are a European entity operating in Canada or in the United States, then you can [benefit from] the profit and the strength of your overseas operation. But unfortunately, the reverse doesn’t necessarily work.” Ludlow points out that operating under two different regimes is really no different than how Canadian branch operations or subsidiaries already operate. If anything, the regimes will be brought closer into line with one another once all is said in done, she says. At the moment, working within the various regulatory regimes that are currently so different from one another actually inhibits the ease of exchanging capital (this is called ‘fungibility’). “Assume for a moment that the Canadian model converges quite closely with Solvency II,” she says. “We’re not there yet, but that would mean it would make our lives much easier because we would have fungibility of capital. From a regulatory burden perspective, we would be no worse off than if we were to have a separate Canadian regime. Solvency II is not going to make things worse, but we will have a transition period of a number of years that will make things complicated and confusing. But I think 46 Canadian Underwriter August 2010
the ultimate goal around the world is that there is a convergence of capital tests and accounting (i.e., the conversion to IFRS), such that you end up with a much easier system, with less regulatory burden, that would allow companies to operate in a much freer manner across borders.” Should CEIOPS not ultimately recognize OSFI as an equivalent, “it will continue to impact the credit for reinsurance/collateral regime if we are looking for credit as a reinsurer,” Ludlow says. “If we’re not equivalents [under this scenario], then all of my comments about capital fungibility go away. I won’t have that ability. But, let’s be very clear, I don’t have that ability today.” For those organizations able to embrace risk-based capital modelling, it would create a competitive advantage, Falle adds. “One of the things you have to do in the use test is to make use of the economic capital modelling in pricing. So, clearly it would give us a better view as to the most efficient way to deploy capital and maximize returns in Canada.”
Wait and see To some extent, the Canadian regulator has already headed down the path of a risk-based regime, says Nigel Ayers, Zurich in Canada’s CFO. “What’s happening right now is that OSFI is working with the industry to look at certain aspects of Solvency II and how those might be
implemented in Canada and how our regime might change in light of Solvency II,” Ayers says. “That’s not to say that OSFI will be adopting Solvency II in full, but certain aspects of it.” When all is said and done, the market tends to adjust to these new regulatory regimes, Old says. Theoretically at least, as long as regulators keep the playing field even, the players competing on the field won’t change. But the worry with Solvency II is that its application “won’t be done in an even-handed manner, and it will create more inequity in the market place,” Old says. “If that happens, then risk managers will be operating on a very different purchasing landscape.” Old believes OSFI is doing the right thing by observing the Solvency II roll-out before deciding which aspects, practices and principles it would like to adopt — or whether or not it sees a value in applying for equivalent standing. Still, he adds, “until people know what OSFI’s attitude is, there will always be that nervousness. OSFI is doing the right thing in my view. They’re not saying anything that will cause panic or set people off down the wrong path until they know what the story is. And that’s entirely appropriate. It will always be that until OSFI comes out and says, ‘Here’s our position in relation to Solvency II,’ the uncertainty and the nervousness will persist. In the meantime, the market and industry is trying to keep nimble.”
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Built to a New Code Director, Climate Change Adaptation Projects, Institute for Catastrophic Loss Reduction (ICLR)
The Institute for Catastrophic Loss Reduction (ICLR) has called for changes to the Ontario Building Code to help prevent water and wind damage. Insurers have a long and proud record of promoting public policy changes that improve public safety. Continuing in this tradition, the Institute for Catastrophic Loss Reduction (ICLR) recently made three submissions to Ontario’s Ministry of Municipal Affairs and Housing to strengthen the Ontario Building Code. ICLR’s submissions represented its contribution to the Ontario Ministry of Environment’s Regional Adaptation Collaborative (RAC).The RAC’s objective is to help integrate climate change adaptation considerations into decision-making at the community level. One goal of ICLR’s project is to provide information to support future updates of the National and Ontario Building Codes and related standards, rules, regulations and practices.This would help aid Canadian communities to adapt to more frequent and more severe extreme weather events. ICLR’s three initial proposals to strengthen the Ontario Building Code are requiring sewer backflow
48 Canadian Underwriter August 2010
valves on all new homes built in Ontario; using more nails to hold down roof panels; and tying down garage roofs to walls.
Require sewer backflow valves on all new homes built in Ontario Every new home is at risk of flooding and needs a sewer backflow valve. These valves significantly reduce the risk of sewer backup damage and basement flooding.The cost of adding a backflow valve is less than $200 if it is part of the initial construction of a home. Backflow valves should be installed when the home is initially constructed: it costs significantly more for homeowners to retrofit their home with a sewer backwater valve than it does to have a builder install it. A retrofit requires breaking basement floors and removing sections of sewer connections. This costs thousands of dollars. During new construction, a plumber is already onsite and has open access to install the valve properly. This reduces costs significantly. All available scientific evidence suggests extreme rain events will become more frequent over the next 40 years.The Ontario Building Code should address the risks of severe flooding caused by sewer back-ups. To illustrate the point, a severe rainstorm on Aug. 19, 2005 dumped 153 mm of precipitation in the City of Toronto in a three-hour period. It resulted in insurance losses of more than $500 million
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Grant Kelly
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dollars; sewer back-up flooding of basements accounted for approximately half of these losses. Assume the average cost is between $10,000 and $50,000 to repair the damage caused by a sewer backwater flood in a basement: these potential losses make a backflow valve a cost-effective investment even if the valve were to prevent just one sewer backflow in the lifetime of the home. It is, in fact, less than the deductible homeowners are required to pay under the terms of their insurance policy following a flood.A sewer backwater valve is cost-effective if one valve out of every 100 installed actually prevented a flood. Some communities, like Toronto and Edmonton, require backflow valves in all new homes; we propose this should be required in all jurisdictions.
Requiring more nails will also help minimize the impact of nails that are improperly fastened or simply missed. For example, for each typical roof-sheathing panel at the Insurance Research Lab for Better Homes test house, at least one nail is missing or improperly fastened.The quality of construction of the test house is similar to those found in practice according to surveys conducted by building inspectors. Missing nails can mean roofs people believe to be built to code are actually not; thus, less intense winds could cause preventable damage.
Tied down roof to walls in garages ICLR’s final recommendation is to require hurricane straps to connect the roof and walls of any garage that is not integral to the home. (This means the garage sits in front
More nails to hold down roof panels The Building Code currently requires roof panels to be nailed down every six inches on the end and 12 inches across the middle of the panels. This translates to 33 nails in a typical size of 1.22 m x 2.44 m
ICLR recommends nailing all sides of the roof panel every six inches. Research shows that extra nails will increase a roof’s capacity to handle wind risks (like tonadoes) by 50%. (i.e., 4’x8’) roof panel. ICLR recommends nailing all sides of the roof panel every six inches. Research at the University of Western Ontario estimates these extra nails will increase the roof’s capacity to handle wind risks (like tornadoes) by 50%.A strong roof is essential to ensure the safety of inhabitants and prevent excessive damages to the light-frame wood structures. Disaster literature suggests the majority of damage to property and contents are caused by roof panel failure.The ingress of rain could also cause health hazard due to possible mould growth.
50 Canadian Underwriter August 2010
of or beside the house.) After the 2009 tornadoes in Vaughn, Ontario, researchers learned garage roofs were particularly vulnerable to damage. The wind blew down garage doors, creating tremendous internal pressure that lifted the roofs.The airborne roof became debris that damaged other homes. Loss of roof structure is usually the precursor to wall collapses; these wall collapses often lead to death or injury in windstorms. Therefore, it is critical to keep the roof structure stable. Note ICLR’s recommendation does not apply when there is an integral (to the
house) second-floor structure above the garage. The weight of the second-floor structure is sufficient to mitigate the elevated internal pressures in the garage. ICLR also considered requiring stronger garage doors to address this problem. However, stronger garage doors are very expensive (thousands of dollars) relative to the cost of hurricane straps (approximately $200 per home).
BUILDING TO CODE Many hurdles must be crossed before ICLR’s submissions become part of the Ontario Building Code.As a next step, a technical advisory committee comprised of building
ICLR recommends requiring hurricane straps to connect the roof and walls of any garage that is not integral to the home. (This means the garage sits in front of or beside the house.) regulators, builders, contractors and building owners and managers will assess ICLR’s submissions. This committee will approve changes that will subsequently be released for two rounds of public consultations beginning in the fall of 2010. The goal is to have a new Ontario Building Code in 2012. ICLR will make similar suggestions to the National Building Code Commission and to other provinces. We are working with our insurance advisory committee to develop a long-run strategy to allow insurers to provide more input into the building code development process. In order to be successful, we are looking for industry volunteers from all parts of Canada to participate by joining one of the National Building Code Commission’s many Task Groups. We also welcome members of the industry making suggestions about building code changes that we should be seeking. Changes to the National Building Code of Canada take a long time to happen. Every long journey begins with taking that first step, and ICLR just took our first three.
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Web Risk of
Ken Lavigne
Senior Vice President, Manager, FM Global (Canada Division)
The interconnectedness of risk is making for challenging times ahead, particularly for businesses with growing supply chains and those striving for improved sustainability. Risk and risk management have evolved considerably over the course of the past decade. A barrage of extraordinary events — from Y2K, 9-11 and the H1N1 pandemic to Hurricanes Katrina, Ike and the financial meltdown — has compelled organizations to reconsider how they deal with risk and pushed them to identify quicker and more effective ways to manage it. But just as one exposure is identified, others appear on the list: terrorist threats, the environmental impact of business operations, IT-related attacks, etc. etc. On top of all of this, companies still have to account for more “traditional” risks such as fires and natural disasters. These major events — along with daily business challenges posed by realities such as complex supply chains, globalization and the recession — have raised concern among many organizations about preserving the integrity of their overall operations.
52 Canadian Underwriter August 2010
Understanding risk and adapting appropriately is critical, especially as the world becomes increasingly interconnected and interdependent.
SUPPLY CHAIN RISK In an effort to trim costs, suppliers are outsourcing to companies thousands of miles away — including areas that have limited regard for sound risk management practices. Adding to the complexity, many of those suppliers are in turn outsourcing to companies with even lower production costs. In such emerging markets, the concept of risk management is still in its infancy; the knowledge of actual risk is not well known. In a day and age of thin inventories, any breakdown in this chain can spell disaster for business continuity. To add to the risk manager’s challenge, many organizations outsourcing a key business process have a procurement function that typically focuses more on cost and quality than on risk.The performance of procurement departments is often measured on such cost criteria. So it has become critical not only to evaluate new suppliers, but also to revisit existing ones to ensure their continued viability. It is vital to maintain strong relationships with every supplier and gain a thorough understanding of the processes and exposures at all of these suppliers’ facilities. Leading organizations do a “deep-dive”
Likes to simplify the process whenever he can. – Mark VanHelden, Underwriting Manager, Middle Market, Specialty Casualty, Toronto office, LIU Canada
Yes, there’s a Specialty Casualty insurer as responsible as you are. As a dynamic sector in the Canadian economy, small and medium-sized enterprises (SMEs) deserve special attention. That’s why LIU is launching a bilingual B2B site in fall 2010 devoted to its Private Advantage Liability (PAL) policy, which includes D&O, Employment Practices and Fiduciary Liability coverage. Brokers will be able to obtain an instant risk analysis and access on-line quotes with ease and efficiency. Learn more about our Specialty Casualty products by contacting Mark VanHelden at (416) 307-4363 or visit www.liucanada.com
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to understand the viability of their supply chain partners, but it’s not an easy task. Surveys show most risk managers struggle with managing supply chain risk. Companies look beyond cost when it comes to site selection for a new facility, constructing a plant, signing a deal or deciding whether to work with a particular supplier. Many companies, W
for example, may consider the stability of the government in the country in which they want to operate. Furthermore, they might investigate the intensity of competition for vital resources like energy and water, which are sure to become major concerns in the coming years as global resources become strained. Fortunately, there is a trend towards an
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increased global acceptance of risk management practices among companies in emerging countries that want to participate on the world stage. As companies from emerging markets increasingly compete in global markets, they must develop the same level of resiliency as their competitors from developed markets.
WEB OF RISK Reputational Risk Companies today face threats to their reputations, threats over which they have little control. An organization’s reputation is increasingly affected by the actions of its suppliers and others associated with it.When it comes to reputation, focusing on understanding one’s own risks and loss prevention is paramount: insurance alone will not make a company whole when it comes to protecting their corporate image.
Sustainability Organizations are striving to meet their own sustainability goals and building green has become popular. Among the driving forces behind a company’s decision to build to more sustainable standards are increased regulations, environmental concerns, the enhancement of corporate image and return on investment. As a result, many companies must now consider the unintended consequences of such pressures, actions and responsibility. In construction, for example, green building introduces an increasing amount of carbon during the construction phase, even though a larger percentage of carbon emissions occurs during a building’s normal, dayto-day operation. Still, it makes sense that it is better for the environment to protect a facility from fire and other major hazards than it is to completely rebuild one that suffers a major loss. Loss Prevention According to FM Global’s own published research, without effective fire protection systems, fire increases the carbon emissions of a standard office building by 1% to 2% (30-40 kg of
CO2/m2) over its lifecycle. In areas exposed to natural hazards, such as wind hazards in the East and Gulf Coast areas of the United States, risk from wind damage also increases carbon emissions by 1% to 2% over the lifecycle of a typical industrial building. Clearly, preventing a building from destruction can play a significant role in sustainability. Loss prevention measures such as automatic sprinklers mitigate fire loss; limit carbon emissions from any fire; and decrease or eliminate carbon emissions that might be released during reconstruction, since there will not be
It has become critical not only to evaluate new suppliers, but also to revisit existing ones to ensure their continued viability. any need to rebuild. Protecting a facility, by reducing its vulnerability to fire and natural disaster risks does more than just safeguard the environment: it protects the jobs of employees and suppliers, a critical benefit in today’s economy.
UPSIDE TO RISK Times change, sometimes all too quickly. A short five to 10 years ago, most companies focused primarily on business risk, such as that associated with launching a new product. Companies at that time didn’t accept any risk that didn’t offer an immediate return. Instead, they transferred most of their risk through insurance because they perceived risk as having only a downside. But, today’s organizations recognize there is actually an upside to risk. In fact, strong risk management can be viewed as a competitive advantage. It is an exciting time to work in the risk management field.The challenges and opportunities have perhaps never been greater. In the face of disaster, companies with appropriate recovery and contingency plans can take advantage of competitors that do not have them in place. More organizations now realize that companies with stronger risk management practices — and therefore greater resiliency — can reap significant benefits. Not only can these companies take advantage of competitors’ missteps, but this kind of resiliency can also allow the board and senior management to focus on their primary task, which is determining how to grow their top/bottom line strategically. Whether an organization chooses to embrace or transfer its risk, a focus on business continuity planning will serve it well in the coming years. It is sure to be a decade fraught with hazards not yet imagined. And yet, despite increasing exposures related to distant suppliers, financial pressures, political situations and other significant threats, resilient organizations will persevere.
August 2010 Canadian Underwriter
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Editor’s Note: Just as Canadian Underwriter went to press, the Federal Court of Canada ruled in State Farm v Privacy Commissioner of Canada that using surveillance for the purpose of mounting a defence in a civil legal action does not fall under the Privacy Act, although the Privacy Commissioner does have jurisdiction to investigate the matter.
Abigail C.F. Turner
Partner, Harper Grey LLP
Kim Yee
Associate, Harper Grey LLP
When it comes to insurance investigations and privacy law, insurers would be welladvised to follow guidelines recently published by the Office of the Privacy Commissioner. The Office of the Privacy Commissioner of Canada (OPC) is an advocate for the privacy of the rights of Canadians. The Personal Information Protection and Electronic Documents Act (PIPEDA) is a federal privacy law from which the OPC derives its authority. There has been much debate in recent years about whether the OPC has the ability to regulate how private organizations such as insurance companies conduct covert video surveillance of individuals about which they seek to obtain further information. According to the OPC, private sector privacy laws require an organization to balance its need to conduct a video surveillance with the individ-
56 Canadian Underwriter August 2010
ual’s right to privacy, which includes the right to lead lives free from scrutiny. The OPC rendered a decision in August 2008 regarding images of a third party that a private investigative firm collected during covert surveillance on behalf on an insurer. In its decision, the OPC held private investigators should mask or pixilate any third party image as soon as possible after collection, and before disclosure to insurer clients. Subsequent to its decision, in May 2009, the OPC released a set of guidelines with respect to video surveillance in the private sector “to help organizations achieve compliance with private sector privacy legislation.”1 The guidelines stipulate that covert video surveillance in the private sector that captures images of identifiable individuals is considered to be a collection of personal information. Organizations contemplating the use of covert video surveillance should be aware of the criteria the OPC says must be satisfied in order to collect, use, and disclose video surveillance images in compliance with PIPEDA. Organizations are not released from their privacy obligations if covert video surveillance is conducted in a public place. Any collection of personal information taking place in the course of commercial activity, regardless of the location, must conform to the requirements in the guidelines.
Illustration by Philippe Béha/www.i2iartart.com
Privatizing Surveillance
CONDUCTING SURVEILLANCE IN ACCORDANCE WITH THE GUIDELINES The insurance industry should be aware that the OPC guidelines are only guidelines. They are not law. However, if a complaint is made to the OPC, it will certainly require time and effort to prepare a response. Currently it is unclear what the other consequences may be for failing to comply with the guidelines. State Farm Insurance is currently challenging the OPC’s jurisdiction to regulate the private sector in this way. Until the court resolves the abovenoted issues, it is recommended that organizations comply with the guidelines to the best of their ability. Here is a summary of some steps that should be taken in an attempt to ensure that covert surveillance is conducted in accordance with the guidelines.
ATTEMPT TO OBTAIN INFORMATION USING OTHER, LESS-INVASIVE MEANS The OPC takes the position that covert surveillance should be used as an inves-
must be a demonstrable, evidentiary need for the collection, and it must be for a legitimate business purpose. In other words, it is not enough for the organization to be acting on a mere suspicion. There should also be a strong likelihood that collecting the personal information will help the organization achieve its stated objective.
LIMIT THE TYPE AND THE AMOUNT OF INFORMATION OBTAINED tigative tool of last resort. Any organization contemplating the use of covert video surveillance should consider other means of collecting the personal information first, given the inherent intrusiveness of covert video surveillance.
ESTABLISH THAT THERE IS A PURPOSE FOR THE SURVEILLANCE The starting point for an organization that is contemplating putting an individual under surveillance without their knowledge is to establish what purpose the surveillance aims to achieve. There
Organizations must take care to limit both the type and amount of information to that which is necessary to fulfill the identified purposes. If personal information of third parties is captured, it should be deleted or depersonalized “as soon as practicable” (the OPC has not indicated how quickly this should be done).This refers not only to images of the individuals themselves, but also to any information that could serve to identify them, such as street numbers and license plates. The OPC advocates the use of blurring technology when required.
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DOCUMENT INVESTIGATIONS AND OTHER MATTERS RELATED TO THE SURVEILLANCE Organizations must document to ensure that privacy obligations are respected and to protect the organization in the event of a privacy complaint. There should be a documented record of: • a description of alternative measures undertaken and their result; • a description of the kind of information collected; • the duration of surveillance; • names of individuals who viewed the surveillance; • what the surveillance was used for; • when and how images were disposed of; and • a service agreement with any third party that is hired to conduct the surveillance that complies with the guidelines.
DEVELOP A POLICY ON COVERT VIDEO SURVEILLANCE The OPC recommends that organizations using covert video surveillance should implement a policy that: • establishes privacy-specific criteria that must be met before covert video surveillance is undertaken; • requires that the decision be documented, including rationale and purpose; • requires that authorization for undertaking video surveillance be given at an appropriate level of the organization; • limits the collection of personal information to that which is necessary to achieve the stated purpose; • limits the use of the surveillance to its stated purpose; • requires that the surveillance be stored in a secure manner; • designates the persons in the organization authorized to view the surveillance; • establishes procedures for dealing with third-party information; • establishes a retention period for the surveillance; and • establishes procedures for the secure disposal of images.
CONCLUSION The OPC guidelines are only guidelines; they are not law. The extent to which the OPC can regulate the private sector remains unclear. If covert surveillance is not done in compliance with the guidelines, this may result in time and expense spent in responding to a privacy complaint. It is recommended that organizations wishing to carry out covert surveillance review the guidelines carefully before they embark on conducting surveillance. A policy statement should be established and procedures in keeping with the guidelines should be adopted. If third parties are retained to conduct surveillance, there should be an agreement in place setting out that investigations conducted will be in compliance with the guidelines. 1 The guidelines may be viewed online at http://www.priv.gc.ca/information/pub/gd_cvs_20090527_e.cfm August 2010 Canadian Underwriter
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Leadership, Knowledge, Solutions... Worldwide.
Congratulations to our newest Managing Directors. Every day their hard work and dedication shows their commitment to our clients’ success. Patrick Baker - Toronto Lisa Ann Bartko - Saskatoon Lyne Erwin - Toronto David Mew - Toronto Matthew C. Yeshin - Toronto
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Salvaging an
80-year
career
David Gambrill Editor
Born in 1910, Sam Green of Canada Salvage talks to Canadian Underwriter about his interest and professional career in salvage — a way of life that has spanned about eight decades. During the same year Sam Green got started in the Canadian salvage business, the U.S.S.R. exiled Leon Trotsky, Benito Mussolini outlawed Italy’s opposition parties and Amelia Earhart became the first woman to fly over the Atlantic Ocean. The year was 1928. Green, then 18 years old, was looking for a way to make the $44 monthly payment on the new Durant car he had just bought. He worried he might have to sell his car because he didn’t know where he would find the money to make his car payments. The Great Depression had just started. His father, a plasterer, and his mother, a dietician, were both out of work. Green was apprenticing with an electrician who couldn’t keep him on for a lack of business. At this point, a relative of Ambrose Small, the Toronto theatre tycoon who mysteriously disappeared and was never found, offered to find Green work at Continental Salvage. “So he came back to me and he said: ‘I can get you in, Sam,
but it’s 50 cents an hour,’” recalls Green, who is preparing to celebrate his 100th birthday on Aug. 20, 2010. “And I said, ‘Well, I’ll take it, because I don’t want to lose my car.’” And the rest, as they say, is history. Sam Green has been in the salvage business ever since (with some brief professional detours along the way). For almost eight decades, Green has paid insurers for stock lost in fire losses, and then re-sold the salvaged stock. “I was the insurance company’s man,” Green says of his time in the business. “If I could save them any money, I did.” For much of his career, Green worked on and off for Continental Salvage. He later became a partner at Consolidated Salvage Company. He then split from Conslidated to form his own company called Canada Salvage. He says he has “been out of the salvage business” for about 16-17 years, having sold his interest in Canada Salvage, although during this period he has regularly appeared between the hours of 10 a.m. and 4 p.m., Mondays through Fridays, to help out at the Mississauga location of Canada Salvage. Green’s entire professional career turns on a question of value. “In the salvage business, you’ve got to know one thing:What can I get for this stock? What’s it going to cost me to move it? Now what do I want to make?” An anecdote from his early days in the business illustrates the importance of experience when it
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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
Informco Inc. Integrated Graphic Communications Specialists. www.informco.com
CONSULTING FIRMS
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Cameron & Associates Insurance Consultants Ltd. Claims consultants to the insurance and reinsurance community. www.cameronassociates.com
Aviva Canada Inc. Home Auto and Business Assurance. www.avivacanada.com
Keal Technologies Complete technology solutions for insurance brokers. www.keal.com
CONSTRUCTION CONSULTANTS Risk & Insurance Management Society Inc. Dedicated to advancing the practice of effective risk management. www.rims.org
MKA Canada, Inc. Providing creative solutions to the Construction, Legal and Insurance Industries. www.mkainc.ca
CLAIMS ADJUSTING FIRMS
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ClaimsPro Inc. Committed to providing leading-edge claims management services. www.scm.ca
SPECS Ltd. (Specialized Property Evaluation Control Services) Providing Innovative Solutions to Control Property Claim Costs www.specs.ca
Crawford & Company (Canada) Inc. Enhancing the customer experience, every day. www.crawfordandcompany.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 PCA Adjusters Limited Adjusting to Meet your needs™ www.pca-adj.com
62 Canadian Underwriter August 2010
GRAPHIC COMMUNICATIONS
Quelmec Loss Adjusters Identifying, Investigating, Resolving...for over a quarter century! www.quelmec.ca
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
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 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 The Guarantee Company of North America “Specialized insurance products...professional service” www.gcna.com Wawanesa Insurance Earning your trust since 1896. www.wawanesa.com
INSURANCE LAW Walters Forensic Engineering Inc. Providing scientific answers to complex engineering incidents. www.waltersforensic.com
The ARC Group Canada Inc. Your Partner in Insurance Law & Risk Management. www.thearcgroup.ca
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 ARC Group Canada Inc. Your Partner in Insurance Law and Risk Management. www.thearcgroup.ca
SPECIALTY INSURANCE William J. Sutton & Co. Ltd. Insuring Special Risks since 1978 www.wjsutton.com
comes to thinking about value. “From a store [that suffered an insurance loss], I got a bunch of shoes that were damaged and recovered,” he says. “I had to go in and bid on it. “And [the man with whom Green was negotiating] said: ‘Well, how much is it worth, salvage man? You know, I was in the shoe business once.’ “And I said, ‘Oh, $150.’ “He said, ‘I was in the shoe business once.’ “I said, ‘$250.’ I bumped it up $100, I was so scared. “He said, ‘Good, take them out.’” Green is obviously much more confident now, having spent many years paying insurance adjusters for products recovered from an insurance loss — objects he would later turn around and sell. Green will tell you dishes are a lousy seller. “You can only get 25% or 30% [of the retail price] on dishes,” he says. Furs and Persian rugs are also tough sells, primarily because people may not appreciate the full value of a good Persian rug. He has recently taken a flyer on shoes, buying up 12,000 of them and selling them at a price of $5 a pair. (The retail value is $22 per pair.) Green takes pride in knowing the value of individual items, bristling at the suggestion that someone might buy up salvaged stock at a bundled or aggregated price. “I understand that if a guy says he’s got $50,000 [worth of stock to salvage], they predicate his loss on $50,000,” he says. “I don’t believe in that. I want him to show me he’s got $50,000.” In keeping with this philosophy, Green started insisting on seeing physical inventories around the time he was 24 years old. His method initially met with resistance from business owners, although they would eventually relent. Also, Green says he was a pioneer in discriminating between damaged and undamaged stock, often buying up individual items and sending them to a University of Toronto lab to test for smoke damage. He also developed a valuation method in which he would first determine the
total amount of stock and then deduct the value of the undamaged stock from the total. If a fire happened in the basement of a store, for example, but the top floor suffered no damage, he would bid two different amounts for the damaged and undamaged goods. In insurance circles, he became known as a fair and honest man who paid insurers the true value of the stock. He recalled one time in which an insurance adjuster told Green he was offered $7,000 for goods recovered from an insurance loss. “I told him I would give him $12,000, because I knew I could make 50 cents on the dollar if it wasn’t burned or soaking wet,” says Green. “I
got more than that. If I said it was worth $10,000 to me, and it was going to work out that I was going to make more than $10,000, I paid [the insurance company] more than $10,000. That’s the way I built myself up. I did it honestly.” Honesty proved to be a lucrative policy. In its day, Green’s salvage operations moved between $2 million and $4 million a year. Green could just as easily have been an insurance adjuster, given the company he kept. He often went out with insurance adjusters socially, citing many of them as friends. “I started to learn the adjusting business, but never was an adjuster,” he says. Insurers trusted Green enough that they allowed him to sell the goods on a 10%-15% commission basis, which was an innovation at the time. “I suggested to the adjusters that if they turned [the salvaged goods] over to me on a commission basis — it was 10% then; 15% in the later years — I would handle it,” says Green. “I would keep track of all my expenses, keep track of my sales and, subject to an insurance company or adjuster’s audit, I would charge that 15% or 10% commission, and then I would pay [the insurer] the balance and give [the insurer] a statement. And that went over very big.” What isn’t going over very big is “retirement.” Born in 1910, Green is sharp as a whip, although he is legally blind and has some trouble with his balance while walking. Because of his ailments, he isn’t able to go out on calls, although insurance adjusters still call him to see if he is interested in making a bid on salvaged goods. He describes not being able to participate on this side of the business as “painful.” Certainly he comes by his durability honestly: his brother Harry is 93, and his mother, a dietician, worked as late as the age of 88. When all is said and done, Green says the salvage industry has been good to him. “You know, if I had my life to live over, I wouldn’t change a thing,” he says. “I’d stay here because I love it. I just love it.”
August 2010 Canadian Underwriter
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CIP Society Annual Ontario Golf Tournaments Join us in helping to support the John E. Lowes Insurance Education Fund and other local charities at the CIP Society Ontario Annual Golf Tournaments. Space is limited. Guarantee your spot by contacting us today.
Ottawa
September 15, 2010 Cedarhill Golf Course elegault@insuranceinstitute.ca
GTA
September 20, 2010 Wyndance Golf Club gtaevents@insuranceinstitute.ca
Southwestern
September 24, 2010 Pine Knot Golf & Country Club wbarbour@insuranceinstitute.ca
We would like to thank our sponsors for their generous support.
Prestige Sponsor:
Gold Sponsor:
Sponsorship opportunities are available for this event. Please contact your local chapter.
rotectin g PPublic Officials Public Officials Liability (POL) coverage has evolved in a time when litigation is increasingly becoming a tool for holding public officials accountable. David Tran
Public officials in today’s economic environAssistant Vice President, ment face ever-increasing, costly litigation threats IronPro - Financial & that can severely hinder the operations and fiProfessional Lines, Ironshore Canada Limited nancial stability of the public entity and themselves. The degree to which public officials may be liable for their actions is an important issue at every level of government service. These threats can harm the public entity’s financial performance and the communities directly served by it, not to mention the threat to the public officials’ personal assets. Public Officials Liability (POL) policies are designed to shield the personal assets of a public entity’s elected and appointed officials, and protect them against breaches of duty, neglect, error, misstatement or omission while in the performance of their duties for the public entity. These policies can be tailored specifically to address the
insurance needs of municipalities, governmental bodies or any department or unit therein.
PUBLIC OFFICIALS’ VULNERABILITY Safeguards are in place to protect public officials from litigation provided they acted fairly and without malice towards others. However, such safeguard measures are not always readily available or applicable in the most-needed instances. Historically, the courts have created remedies in damages against public authorities for wrongful acts that give rise to personal injury or economic harm. For example, courts routinely grant an injured party damages for wrongful governmental action.These public authorities have also been held liable in damages if they act negligently in relation to a person to whom the official owes a duty of care. A re-occurring issue facing public officials is their need to consider the “complex problem of how a true balance is to be struck between the necessary requirements of a public service and the just rights of the citizens.”1 From time to time, a public official may be held liable for misfeasance in a public office or for a violation of an individual’s constitutional right. The view is that public officials and the
August 2010 Canadian Underwriter
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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 and Seminars Moncton - CIP Society Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .August 12
London - PROedge Seminar: Advanced Business Interruption . . . . . . . . .September 22
Edmonton - CIP Society Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .August 23
Toronto - PROedge Seminar: Severe Weather . . . . . . . . . . . . . . . . . . . . . . .September 23
Hamilton - Annual CIP Society Beach Volleyball Tournament . . . . . . . . . . . . . .August 26
London - CIP Society Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . . .September 24
Saskatoon - CIP Society Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . . . . .September 1
Hamilton - Speakers Luncheon with Lea Alger . . . . . . . . . . . . . . . . . . . . . .September 28
Ottawa - 13th Annual CIP Golf Tournament . . . . . . . . . . . . . . . . . . . . . . . . .September 15
St. John’s - Boiler and Machinery/Equipment Breakdown . . . . . . . . . . . . .September 29
Toronto - CIP Society Annual Fellows' Golf Tournament . . . . . . . . . . . . . .September 20
Toronto - Palette to Palate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .October 28
Keeping you at the forefront of the P&C industry. The CIP Society. MEMBERS BENEFIT. www.insuranceinstitute.ca/cipsociety
public entities that serve the public interest must shoulder the responsibility towards the community at large under the threat of litigation should they fail to do so. In the province of Alberta, a recent case examined the personal legal liability of politicians for the decisions they make while governing. In this case, claims were made for damages based on personal injury claims that the public officials were negligent in their decision-making on funding for health care, and as a result of their negligence the plaintiffs suffered harm. In a separate matter, the Supreme
When considering Public Officials Liability (POL) coverage, one must reason that if executive officers of a profit-making corporation can be sued for the decisions they make that can result in economic loss to their stakeholders, so too can the case be made against elected and appointed officials of provincial agencies, authorities, commissions or special boards. Court of Canada has created certain remedies to permit monetary relief to be awarded for bad faith decision-making. Even in cases in which a public official is immune from suit for negligent acts, such immunity may not be absolute. Liability is found when it has
been determined that the public official acted in bad faith or when the exercise of power is unreasonable.
POL COVERAGE When considering POL coverage, one must reason that if executive officers of a profit-making corporation can be sued for the decisions they make that can result in economic loss to their stakeholders, so too can the case be made against elected and appointed officials of provincial agencies, authorities, commissions or special boards. Persons who were, are or shall be lawfully appointed or elected officials of a provincial or municipal agency, members of commissions, boards or other units operating by or under the jurisdiction of such entity are usually covered. Generally speaking, the public interest is to shield officials from litigation and personal financial liability. However, this is certainly easier said than done. Public bodies carrying a POL policy include local government, port authority, housing authority, transit authority, school districts, utility, water/sewer authority, development/finance authority, sports/convention centre/parks department, power authorities, water authorities, etc. It should be noted, however, that a number of differences exist between a standard D&O policy and a POL policy. For example, a POL policy will likely include automatic entity coverage; for a standard D&O policy, this might not always be the case. The POL policy can also provide coverage for employees as insureds as well as volunteers. Coverages usually provided under such policies include breaches of
A number of differences exist between a standard D&O policy and a POL policy. For example, a POL policy will likely include automatic entity coverage; for a standard D&O policy, this might not always be the case. The POL policy can also provide coverage for employees as insureds as well as volunteers. duty, neglect, error, misstatement or omission while in the performance of their duties for the public entity. Under certain circumstances, coverage for some POL policies can also be amended to add coverage for employment practices liability for the insured entity’s law enforcement agency or fire fighting agency.
CONCLUSION Public official exposures are very apparent. However, the availability of coverage in a Canadian context is still rare and often difficult to secure. There are many reasons to seek public officials coverage: the simplest is that constant government intervention, frequently rationalized on the basis of ever-changing economic conditions, exposes more and more public officials to the very issues raised. The exposures are real and the stakeholders numerous. 1 Hamson, C.J. “Escaping Borstal Boys,� [1969] Camb.L.J. 273, 283).
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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
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Two new Ontario Bar Association (OBA) executives are insurance law specialists. Lee Akazaki, the OBA’s new president, is a lawyer at Gilbertson, Davis, Emerson in Toronto. He specializes in personal injury, property damage, coverage disputes, commercial law, professional responsibility and property title defence. Morris Chochla was elected to the newly created position of second vice president of the OBA. Chochla is a partner with Forbes Chochla LLP and is based in Toronto. Paul Sweeny of Evans Sweeny Bordin LLP in Hamilton will be the association’s first vice president. The addition of a second vice president provides continuity in the transition of leadership between incoming presidents, an OBA release says.
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Paul Spence has been appointed senior underwriter at Catlin Canada, where he will focus specifically on boiler and machinery. Spence has been involved with the boiler and machinery business since 1987, when he entered the insurance industry with RSA Canada. At RSA, he worked in the Ontario Region and later in the risk management unit in different underwriting and marketing roles. In 2002, he joined Chubb,
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where he extended his existing broker network to include Alberta and B.C.
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TorQuest Partners, a Canadian-based manager of private equity funds, has made what it calls a “significant equity investment” in SCM Insurance Services (SCM). The exact amount of the investment was not disclosed. TorQuest Partners has more than $700 million of equity capital under management. It has made a number of previous investments in the insurance and insurance services industries, including the creation of a limited partnership in early January 2007 that now operates under the name of FirstOnSite Restoration LP. SCM is an independent, privately owned provider of claims management, risk management and related services in Canada. It has more than 110 offices nationally, with more than 1,400 employees. SCM’s management team will continue to hold a sizable equity stake in the company, according to a joint press release. “The leadership and operations of SCM Insurance Services, ClaimsPro, Forensic Investigations Canada and SCM Risk Management Services will remain unchanged,” the release says. SCM also notes the national launch of iClarify, its proprietary insurance-to-value (ITV) solution, will continue on schedule.
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The Sovereign General Insurance Company sponsored Pierre-Marc Brunet of MP2B in his recent quest to climb Mount Kilimanjaro in April 2010. Brunet completed the quest of climbing the highest mountain in Africa to raise support for The Foundation Centre de Cancerologie Charles-Bruneau. The Foundation is a Quebec-based facility where children with cancer can receive treatment and where research aimed at finding a cure for the disease is carried out. Brunet was a member of one of three teams climbing the mountain to raise funds for the foundation. In total, more than $1.1 million was raised.
Marsh announced the appointment of 59 new managing directors in North America, five of which are Canadian. The 2010 ‘Class of Managing Directors’ work within a number of different risk practice and industry groups within Marsh and are located across both Canada and the United States. “Achieving the milestone of managing director is a significant career accomplishment,” said Dan Glaser, Marsh’s chairman and CEO. “These individuals are being recognized for their outstanding service to clients and leadership in risk innovation and stewardship of the firm.” The Canadian appointments include: • Patrick Baker [5a], con-
MOVES & VIEWS
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struction and design practice; • Lisa Bartko, Saskatchewan leader; • Lyne Erwin, consumer practice; • David Mew [5b], national broking resource; and • Matthew Yeshin [5c], marine practice.
from the reforms for brokers doing business in Ontario is the requirement to use the Ontario Application for Automobile Insurance CSIO (0910E) form, which is now available in sigXP.
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Gore Mutual Insurance Company is in production with Duck Creek Technologies Inc. to process Gore Mutual’s commercial property policies using Duck Creek’s policy administration system. “This new system for Gore Mutual’s national commercial property line is the first of many releases that will replace their aging legacy system,” the companies announced in a joint press release. Gore Mutual is Duck Creek’s first Canadian
Keal Technology has launched software to support brokers through the implementation of the Ontario auto insurance reforms, which take effect Sept. 1, 2010. To comply with Financial Services Commission of Ontario (FSCO)’s reform standards, a special release of Keal’s Broker Management System sigXP was developed and released ahead of schedule. The most significant change resulting
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customer. It is also the first to implement Duck Creek’s EXAMPLE Platform v4.1, including the new integration hub. “Our solutions are designed on a technology platform that enables customers the flexibility in managing products across multiple business lines including personal, commercial or specialty,” Duck Creek says on its Web site. “Having one platform for all lines of business truly sets us apart. It allows insurers to react quickly to market changes and update products through a single point of change.”
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CARSTAR Automotive Canada has announced a series of appointments to its corporate management team. Lisa Mercanti-Ladd [8a] has been promoted from senior director to the assistant vice president of marketing and client services. Lillian Haskett [8b] assumes the role of marketing manager. Michael Macaluso [8c] will serve as quality systems manager. He joined CARSTAR’s insurance team two years ago and was instrumental in getting the company’s CARSTAR Care Centre operating. Other appointments include: • MJ Marshall has been appointed to assistant vice president of finance; • Mike Beier is the newly appointed procurement man-
ager; and • Matt Bell is the new human resources and training manager.
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The Co-operators today announced $253,050 in donations to Canadian charities selected by Cooperators staff members, directors and delegates.The contributions are part of the organization's Directed Donations program, in which staff members each direct $75 of corporate funds and directors and delegates steer $125 to the charitable organization of their choice. In total, 3,164 staff members directed $237,300 to 84 employeenominated organizations, while 126 directors and delegates steered $15,750 to 80 organizations of their choice. The organizations receiving donations are spread throughout Canada in communities where The Co-operators has offices. Some of this year's biggest staff-directed donations went to: • The Toronto Hospital for Sick Children ($23,475); • The Alberta Children's Hospital Foundation, Calgary ($8,925); • The Children's Wish Foundation of Canada, Saskatchewan Chapter ($8,700); • Hope's Home, Regina ($8,475); • The Canadian Cancer Society, Guelph ($6,900); and • Friends of Moncton Hospital ($5,400)
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GALLERY
The Insurance Brokers Association of B.C. (IBABC) offered a ‘Hall of Fame’ sports theme at its 62nd Annual Conference & Trade Show in Victoria, B.C. on June 16-18. About 70 exhibitors attended the event, which featured a ribald keynote address by Hockey Hall of Fame great Dennis Hull, a star player for the Chicago Blackhawks in the 1970s. The association held its annual general meeting on Thursday, after which time delegates and guests kicked back at the President’s Gala dinner and dance with Chic Gamine and Jake & Elwood’s Blues Brothers Revue. Also, IBABC held a cocktail celebration in honour of its new Broker Essential Skills Program.
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APPOINTMENT
GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
Charles Paré Charles Paré joins Zurich Canada as Chief Underwriting Officer for Commercial Markets Alister Campbell, President and CEO of Zurich Canada, is pleased to announce the appointment of Charles Paré as Chief Underwriting Officer for Commercial Markets in Canada. Charles will manage Canada’s Underwriting Centre of Excellence with additional accountability for Reinsurance and Proposition Development. He will also provide executive oversight for our Risk Services capabilities in Canada. A Fellow of the Canadian Institute of Actuaries (FCIA), he brings with him a wealth of experience from a number of progressively senior actuarial and underwriting roles, including 15 years with another major insurer. As Zurich Canada continues to build and deliver deep and rich value propositions to target customers, Charles will provide considerable technical underwriting expertise, experience, added value and insight. Zurich Financial Services Group is an insurance-based financial services provider and the insurer of choice for many of Canada’s leading corporations as well as the majority of Fortune 100 global companies. Founded in 1872, Zurich has a global network of subsidiaries and offices in North America, Europe, Asia Pacific, Latin America and other markets.Zurich’s 60,000 employees serve customers in more than 170 countries.
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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
More than 165 insurance professionals participated in the 12th Annual McCague Borlack LLP Golf Tournament on June 30. The tournament took place at the prestigious Club at Bond Head, in Bond Head, Ontario. Attendees supported the DareArts Foundation Inc. for Children, a Canadian not-forprofit organization that uses arts education to empower children to become leaders.
ADVERTISERS’ INDEX ACE INA Insurance Aon Risk Solutions The ARC Group Canada Inc. Aviva Canada Inc. AXIS Reinsurance Company (Canadian Branch) Berkley Underwriting Managers Canada, Ltd. The Boiler Inspection and Insurance Company of Canada (BI&I) Canadian Litigation Counsel Catlin Canada Chartis Insurance Chesterfield Canada Inc. CNA Canada Crawford & Company (Canada) Inc. Cunningham Lindsey Canada Direct IME FirstOnSite Restoration FM Global Great American Insurance Group The Guarantee Company of North America Insurance Brokers Association of Ontario (IBAO) Insurance Institute of Canada Insurance Internet Directory Intact Insurance Liberty International Underwriters Marsh Canada McLarens Canada Oil Casualty Insurance, Ltd. The Ontario Broker Magazine (IBAO) RSA – Royal & Sun Alliance Insurance Company of Canada SCM Insurance Services ServiceMaster of Canada Limited The Sovereign General Insurance Company Swiss Re Travelers TOA Re WINMAR Xactware XL Insurance Zurich Canada
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9 21 31 23 35 47 45 51 55 43 32 26 17 11 81 24, 25 2, 3 (IFC) 19 20 76, 77 57, 64, 66, 83 (IBC) 62 84 (OBC) 53 60 33 59 77 7, 41 37 12 73, 75 5 49 27 54 79 15 29, 71
APPOINTMENT
GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
CULE Insurance held its annual ‘Fly-In’ Golf Trip on June 4-6. The courses in Muskoka, Ontario included ‘The Rock’ and the ultra-exclusive ‘Oviinbyrd.’ CULE hosts the annual event in appreciation of their markets’ support. This year’s participants included Ken Rayner, CULE; Ron Fritz, Leeds; Bill Jonas, Everest Re; Andy Tarantino, Everest Re; Bob Ryan, Lombard; Jim Willis, AON Benfield; Matt Cook, Omega General; Tim Woods, Aviva. Bill Jonas and Ken Rayner won the coveted “CULE CUP” for the two-man, best- ball tournament.
The Sovereign General Insurance Company - Peter Primdahl Mr. Rod Bresciani, Vice President of Regional Operations and Corporate Services for the Sovereign General Insurance Company is pleased to announce the appointment of Peter Primdahl to the position of Regional Manager, Central Region. Peter joined Sovereign in January 2010 as Team Leader/Senior Liability Specialist and holds his BA (Honours) and Certified Insurance Professional designation. Peter also brings a wealth of experience from his background working for both insurers and the specialty wholesale markets. Peter’s entrepreneurial spirit and drive for success will create new and exciting opportunities for The Sovereign, the central region team and our strategic partners. The Sovereign General Insurance Company is a Canadian owned property and casualty insurer headquartered in Calgary, Alberta with full service offices from coast to coast.Sovereign distributes its products exclusively through independent brokers. With 270 staff throughout our 10 regional and service offices, we believe that open minds create better solutions. Our experienced insurance professionals across Canada are empowered to create innovative solutions to your specialized insurance needs. When you’re facing a complex challenge, our knowledgeable team is committed to solving it.
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GALLERY
This year’s Canadian Cancer Society’s Relay For Life featured the largest-ever number of insurance industry participants. The relay celebrates survival and is a tribute to the lives of loved ones who have been touched by cancer. In June, teams of 10 people participated in a 12-hour, overnight, non-competitive relay, taking turns walking, running or strolling around a track. More than 500 friends and members of the insurance industry formed teams under the Team WICC banner in well over 20 different locations across the country. WICC’s headquarters for the event were located at Esther Shiner Stadium in North York, Ontario. Approximately 300 participants at this location raised more than Cdn$200,000 in pledges and corporate sponsorships on June 25. WICC Ontario presented a cheque for Cdn$200,000 to the Canadian Cancer Society at the North York Relay.
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APPOINTMENT
GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
The Sovereign General Insurance Company - Serge Byette
Mr. Rod Bresciani, Vice President of Regional Operations and Corporate Services for the Sovereign General Insurance Company is pleased to announce the appointment of Serge Byette to the position of Regional Manager, Quebec. Serge began his career at Sovereign in 1988 and until recently held the position of Branch Underwriting Manager since 2002. With more than 38 years of service in the Insurance industry, Serge’s knowledge and previous leadership roles within the organization will be well utilized in his new position as he takes on operations in Quebec. The Sovereign General Insurance Company is a Canadian owned property and casualty insurer headquartered in Calgary, Alberta with full service offices from coast to coast.Sovereign distributes its products exclusively through independent brokers. With 270 staff throughout our 10 regional and service offices, we believe that open minds create better solutions. Our experienced insurance professionals across Canada are empowered to create innovative solutions to your specialized insurance needs. When you’re facing a complex challenge, our knowledgeable team is committed to solving it.
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INSURANCE BROKERS ASSOCIATION ONTARIO
90 th Annual Convention Wednesday, October 20th – Friday, October 22nd, 2010
Sheraton on the Falls Hotel & Conference Centre, Niagara Falls, Ontario Thursday, October 21st, 2010 IBAO’s Annual Convention is the biggest and most exciting insurance broker event on the Canadian insurance industry calendar.
There is simply no other event quite like it!
KEYNOTE SPEAKER:
Jeremy Gutsche, Founder of Trendhunter.com, Author of Exploiting Chaos Times of change and uncertainty can spark the greatest opportunities for innovation. Many multibillion dollar corporations like Hewlett-Packard, Disney, and Microsoft were started during periods of economic recession. Jeremy Gutsche, North America’s most sought after authority on trend hunting, shows you how to gain an edge in business by harnessing the creativity that will help your company survive and flourish in any economic climate. With a respected understanding of exploiting what’s cool and predicting future trends, Gutsche shows how to create a culture of innovation in your company, maximize the exposure of your marketing message, and think big while acting small. A fascinating and valuable talk, Gutsche details how to stimulate creativity and unlock the powerful strategies of trend-hunting to help your business thrive in these uncertain times.
EDUCATION PROGRAM AT A GLANCE: CSR SEMINAR: Jargon Busting - The Importance of Explaining Insurance Coverages in Plain Language (RIBO CE - 3 Personal Skills Hours)
Jo Anne Mitchell - Effective Training & Communications Plus
MEMBER’S SEMINAR: CEO PANEL Back by popular demand, our CEO Panel will be moderated by Evan Solomon - CBC Television Broadcaster, Journalist, Author and one of Canada’s best moderators to participate in a round table discussion with our CEO’s. This year, the Panel will be comprised of five top executives from leading property and casualty underwriters.
Friday, October 22nd, 2010 EDUCATION SEMINARS:
Banquet & Ball featuring: 3rd Annual Award of Excellence Gala
The Do’s & Don’ts of Social Media and Web 2.0 (RIBO CE - 3 Personal Skills Hours)
Amber MacArthur - MGI
Hot Topics 2010 (RIBO CE - 3 Technical Hours) Moderated Panel of Industry Experts
Performance Management – Lessons from the Pros
For a complete program and a registration package, please call IBAO at 416-488-7422, 1-888-ASK-IBAO or visit our Website: www.ibao.org
(RIBO CE - 3 Management Hours) Neil Curtis - ENGAGE Human Resources Solutions Inc.
This year, don’t question whether or not you should stay for our closing night. IBAO will be hosting its 3rd Annual Award of Excellence Gala where we will be recognizing brokers for their contributions to the industry and community. Also featuring the entertainment of singer, songwriter, producer, arranger and fervent jazz-pop musicologist Matt Dusk one of Canada’s most beloved male vocalists.
Be one of more than 500 guests who will be on hand to support the nominees, cheer for the winners and celebrate their peers!
Platinum Sponsors:
GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
Origin and Cause Inc. (OCI)’s charity committee ‘OCI for others’ held its 2nd fundraising event “Swing into Spring” charity dinner dance on April 24 at the Canadian Warplane Heritage Museum in Mount Hope, Ontario. OCI donated $11,500 to Hamilton Health Sciences Burn & Trauma Unit, bringing the total amount of ‘OCI for others’ donations to the facility to $18,500. Other ‘OCI for others’ events include customer appreciation barbeques, with canned goods collected and donated to local food banks.
The 12th Annual McKellar Charity Golf Day raised Cdn$19,050 for WICC (Women in Insurance Cancer Crusade). The golf day was held at Crosswinds Golf & Country Club in Burlington, Ontario on June 14.
Participants from the legal and insurance claims communities enjoyed a fun-filled day of events, including morning clinics with golf professionals, a buffet luncheon, golf, massages, prizes and a cocktail reception.
Subscribe now to access
The Ontario Broker magazine is a monthly ‘priority-read’ – receiving rave reviews from brokers across the province! Broker Profiles – learn the interesting and unique stories that make-up our membership each month. 12 print issues packed with in-depth features and association’s action plan on strategies, ideas and innovations. Also includes special reports on hot topics such as auto reform and market environment.
Annual subscription rate is:
$52 + gst Order today: TOB Subscriptions Department TOB@ibao.on.ca August 2010 Canadian Underwriter
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Manchester United defeated Celtic 3-1 at the Rogers Centre on Friday, July 16. As the new principal sponsor of Manchester United, Aon colleagues, clients and friends gathered together to watch the game and celebrate.
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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
Insure your portfolio to value with the industry’s most reliable replacement cost estimator. Now you can manage your underwriting business more effectively with real-time reporting and industry trending.
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The CICMA of Ontario Annual Golf Tournament was held on June 25 at Cardinal Golf Course in Newmarket, Ontario. The CICMA and tournament participants raised $26,000 for Camp Oochigeas—Kids Cancer Camp. Also, the CICMA presented claims industry veteran Mike Yang with a new custom wheelchair.
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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
ExamWorks Family Companies Newest Member
Direct IME Announces Partnership with ExamWorks. Direct IME is pleased to announce it has joined the ExamWorks family of companies. We will now offer our clients unparalleled North American wide geographical coverage and access to the largest panel of leading medical experts in the world. Through this partnership our clients will come to enjoy greater technological service enhancements and an expanded portfolio of complementary service lines. ExamWorks, Inc. is the largest independent medical examination company in the world, offering a full line of best-in-class IME and review services. Direct IME is focused on providing insurance carriers with the international presence they need with the local service they have come to expect. For further information, contact Sandy MacSpadyen, Vice President of Direct IME. Tel 416-609-3211 or Sandy@DirectIME.ca
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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery
The Ontario Risk and Insurance Management Society (ORIMS) held its annual golf tournament on June 22 at Deer Creek Golf Club in Ajax, Ontario. Three hundred and nineteen golfers attended the event, which took place immediately following the ORIMS annual general meeting. A torrential rain may have soaked the golfers, but it didn’t dampen anyone’s spirits, as many colleagues used the time to network and reconnect.
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“We were
robbed
on December 4th.” Carmen, customer, Québec
Carmen remembers Dec 4th like it was yesterday. She remembers her overpowering sense of loss. Cherished possessions, gone forever. But she also remembers how she felt after Sacha Mihajlovic, Intact Insurance Adjuster, rushed over. It’s why she wrote us a letter. “He managed to completely calm me and my husband… made us feel like we were not alone.” At Intact Insurance we know that break-ins rob people of more than their possessions. Memories and sentimental attachment are also stolen. It’s why you have our word that we will make the experience of getting your customer back on track as respectful, fair and easy as possible. Because we believe insurance is not about things, it is about people. People like Carmen and her family, and yes, you too Sacha.
HOME • AUTO • BUSINESS Certain conditions, restrictions and exclusions may apply. Services are not available in Saskatchewan or Newfoundland. 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. © 2010, Intact Insurance Company. All rights reserved.