The property and casualty (P&C) insurance market had a turbulent year in 2017. This article takes a look at the potential impact of risks in 2018 and looks at options to minimize them.

In the second half of the year, extreme weather was widely covered in the media, and rightly so. It’s estimated the damages in the wake of hurricanes Harvey, Irma and Maria and forest fires in California could surpass US$135 billion and will exert pressure on the North-American re-insurance market.

After a flurry of insurance company mergers and acquisitions in the past five years, several transactions affected the Regroupement de cabinets de courtage en assurance in 2017.

Legislative changes

Bills 141 and 150 will likely change the business practices of insurers and market intermediaries, particularly in terms of the business relationships between brokers and issuers and the marketing of P&C insurance products. Federally, Bill C-45, on legalizing marijuana, is causing some concern with insurers.

According to MSA Research, first quarter underwriting revenues for Canadian insurers were down from the same period in 2016: the first quarter of 2017 posted a loss of $3.7M, compared with a $616.8M gain in the same period in 2016.

In recent years, favourable insurance market conditions allowed companies to renew their insurance programs somewhat informally—this may change in the future. The current insurance and re-insurance market is such that businesses face an increased potential of changes in rates, coverage and terms and conditions.

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Growing risks

The year 2017 saw the emergence of new risk exposures for businesses:

  • Cyber crimes (e.g.: the Wannacry ransomware);
  • The impact of workplace harassment (e.g. the Harvey Weinstein affair);
  • Technological innovations (e.g. artificial intelligence, blockchain, drones and driverless cars);
  • The sharing economy.

To limit the dangers of current insurance market trends and offset the potential impact of emerging risks, companies will need to adopt a more rigorous process when renewing their P&C insurance program. The process should provide for:

  1. Monitoring and understanding insurance market trends;
  2. Determining and evaluating current and developing risks;
  3. Efficiently analyzing insurance coverage and the targeted risks and determining any adjustments needed;
  4. Determining uninsured risks and implementing an mitigation action plan;
  5. Assessing the insurance program claims ratio;
  6. Undertaking an in-depth and relevant update of underwriting data;
  7. Assessing the insurance provider’s financial soundness and the quality of the insurance broker’s services;
  8. Setting out renewal objectives in terms of rates, improved coverage and service quality for both the insurer and broker;
  9. Setting a renewal strategy (negotiation or call for tender) based on defined objectives.

Implementing a rigorous renewal process will improve integrated risk management by factoring in the thoroughness required to ensure that current and developing risks are adequately reflected in the insurance program.