Simon Julien
Lead Senior Director | B.B.A. FPAA | Financial advisory

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.

20 Feb 2018  |  Written by :

Mr. Julien is your expert in financial advisory for the Québec office. Contact him today!

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Jean-Pierre Poulin
Partner | CPA, CA | Tax

One significant component of wealth management is transferring your property at the time of death.

The objective of will and estate planning is to ensure that your property transfer is as straightforward as possible and maximizes the tax benefits. In practice, among others, planning serves to determine your personal and financial objectives to:

  • Protect your heirs’ financial interests;
  • Minimize taxes, administrative costs and delays;
  • Ensure the smooth settlement of your affairs.

A will is undeniably the best way to set out your objectives and intentions.

Reduce your estate’s tax burden

The terms and clauses in this document will determine the parameters of your plan to transfer your property by setting out how it will be distributed to your heirs. You can, therefore, ensure that the people you choose are financially protected while maintaining overall wealth management.

By judiciously using the provisions in tax legislation, you can also reduce your estate’s and heirs’ tax burden. Depending on the type of property you own (real estate, private company shares, partnership units, registered plans [RRSP, RRIF and TFSA], investment portfolio, etc.) and what your will states, you can define strategies to meet your needs while maximizing the tax considerations.

Questions to guide your estate planning

The following questions could help guide your estate planning thought process:

  • Do you have a will? If so, is it up-to-date?
  • Have you listed all of your assets and liabilities (current and potential)? If so, are the lists recent?
  • Have you determined who should inherit what? If so, do you want to make changes?
  • Do some of your heirs have special needs?
  • Will your estate have sufficient cash to cover the taxes payable at the time of your death and any cash legacies you may wish to make?

A careful analysis of your financial situation and defining an estate plan that reflects your wishes will avoid conflicts and confusion in settling your estate. Our will and estate planning experts can support you in the process to ensure that your planning is compliant and to provide you with peace of mind.

 

02 Feb 2018  |  Written by :

Mr. Jean-Pierre Poulin is a partner at Raymond Chabot Grant Thornton. He is your expert in taxation...

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Adviser alert – January 2018

A briefing for Chief Financial Officers

The Grant Thornton International IFRS team has published the 2017 edition of Navigating the changes to International Financial Reporting Standards: A briefing for Chief Financial Officers. This publication has been designed to provide chief financial officers high-level awareness of the recent changes that will affect companies’ financial reporting in the future.

This publication covers both new standards and interpretations that have already been issued, and new amendments made to existing ones, giving brief descriptions of each.

Navigating the changes – What’s new?

The 2017 edition of this publication has been updated for changes to International Financial Reporting Standards (IFRS) that have been published between December 1, 2016 and November 30, 2017 and now covers the following financial year-ends:

  • March 31, 2017;
  • June 30, 2017;
  • September 30, 2017;
  • December 31, 2017;
  • March 31, 2018.

This publication has been designed to help entities planning for a specific financial reporting year-end identify changes mandatorily effective for the first time, changes not yet effective, and changes already in effect. For each change included in the publication, commercial implications are outlined with information on how many entities will be affected, and potential impacts on such entities. A traffic light system indicates the assessment of the answers to these questions.

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Canadians who own real estate in the United States may be subject to estate tax. There are a number of factors related to such property that must be considered in order to fully understand what is involved.

Here are answers to some frequently asked questions our U.S. tax experts have received on this topic.

Q: What is the U.S. estate tax?

A: The U.S. estate tax is a tax that is payable by non-residents of the U.S. who own property in the U.S. at death. This estate tax is calculated on the fair market value of property located in the U.S. at the time of death.

Q: If at the time of my death I own real estate in Florida valued at $1,000,000, do I have to pay the U.S. estate tax?

A: For the year 2018, if the value of your worldwide estate is less than $11,200,000 (including your RRSPs), no estate tax is payable upon death. However, if the value of your worldwide estate is greater than this amount, you should consult a tax adviser from Raymond Chabot Grant Thornton.

Q: If at the time of my death, I own real estate in the U.S. but no estate tax is payable, do any U.S. tax forms still have to be filed?

A: Yes. The requirement to file form 706-NA is mandatory if, at the time of your death, you own property in the U.S. valued at over US$60,000.

Q: What is the best way to own real estate in the U.S. (condo/house)?

A: It all depends on the facts at hand, and as such, each case must be assessed individually. You should always consult your tax adviser before buying property in the U.S.

Q: Could other fees be payable at the time of my death if I own real estate in the U.S.?

A: Yes, probate fees could be payable to the State. Some planning options can make it possible to avoid probate fees.

Q: Should I prepare a mandate in case of incapacity if I own real estate in the U.S.?

A: The Canadian mandate in case of incapacity is not recognized in the U.S. You should therefore have a durable power of attorney which is recognized in the U.S.

Q: Should I amend my Canadian will if I own real estate in the U.S.?

A: In some cases it would be preferable to have a specific, English-language will for that property. Such a specific will could make it easier to transfer the property to the heirs at the time of death.

Do you have questions relating to U.S. tax issues? Our tax experts can help you.