The global commercial insurance marketplace has been in a tight bind for the past few years. According to Marsh’s latest Global Insurance Market Index, global commercial insurance prices increased 15% in the second quarter of 2021 – marking 15 straight quarters of rate increases – and the trend seems to have continued in the third quarter.
Challenges in the commercial insurance marketplace have been “exacerbated over time by two key factors,” according to Don Forgeron (pictured), president and CEO of Insurance Bureau of Canada (IBC). First, the COVID-19 pandemic and related economic recession have had significant impacts on businesses, insurers included. Second, the industry is contending with: “A prolonged period of increasing claims, lower returns, lower profits within the industry, and much greater scrutiny amongst multinational insurers about where and how they put their capital to work in markets around the world,” Forgeron explained.
He shared a few statistics that highlight “just how difficult” things have been in the commercial insurance marketplace.
“The combined ratio for commercial liability in 2020 was 113%. Specific lines like excess liability had combined ratios in excess of 100% - sometimes well in excess,” he said. “CGL had reported nearly 115% combined at various times, and I’m sure there are other numbers that are much worse, but it points to the problem that we had.”
How long the hard market will last is anyone’s guess. Forgeron was active in the industry during the last hard market in the early 2000s, but he said “none of us can predict” how long the current conditions will last. There are some reports that price increases are not as high as they were in 2000, and that the market might be stabilizing in some areas, but the challenges are likely to remain for some time, particularly in the hardest hit sectors like trucking, construction, commercial property, and hospitality.
“In the very early days of this [hard] market, the strata market sort of became ground zero for us,” Forgeron noted. “It faced considerable challenges. But there have been encouraging signs that that market is stabilizing as a result of the collective efforts of our industry, condominium and strata association stakeholders, and governments to tackle the underlying risk profile and claims issues. We’re not out of the woods yet. Clearly, there’s a lot more work that needs to be done, but it’s gratifying to see that we’re making progress.”
The IBC promotes and lobbies for the insurance industry to governments and the general public, and as the national industry trade association, it is a fundamental advocate for multi-stakeholder collaboration.
In February 2020, the IBC launched a National Commercial Insurance Task Force to assess the effects of the hardening global commercial insurance market on Canadian companies and consumers. The task force is composed of insurers, brokers, business groups, and other key stakeholders. Notable representatives include the Canadian Condominium Institute, Canadian Trucking Alliance, the Canadian Federation of Independent Business, the Insurance Brokers Association of Canada, and the Risk and Insurance Management Society. Working together, they released a series of recommendations to improve the availability and affordability of commercial insurance in Canada over the short-, medium- and long-term.
David Yeatman, SVP, distribution and communications at Chubb Canada, is the chair of the IBC’s Commercial Lines Standing Committee (CLSC), whose members have been heavily involved with the National Commercial Insurance Task Force.
“[Since the start of the pandemic] CLSC started having monthly meetings, which we continued into this year, given the significant amount of issues and challenges that require the committee’s attention,” said Yeatman. “Over the past year, the committee has made many impressive accomplishments and continues to inform IBC’s policy advocacy and communication strategies.
“The CLSC members participated in the Commercial Insurance Task Force that worked with sector stakeholders to find solutions to mitigate insurance challenges. The committee helped to inform recommendations that were included in the final report of the Task Force released in June of this year. The recommendations focus on reforms in areas including the condominium/strata, market, trucking, hospitality, and not-for-profit organizations.”
Looking ahead, the IBC aims to continue strengthening the relationships it has built with industry associations, NGOs, and other business representatives through the Commercial Insurance Task Force and other industry support mechanisms, like its business insurance helpline, which it deployed during the COVID period to help small businesses mitigate their risk profiles and become stronger in the long-term.
“We’re going to continue to keep providing direct assistance through that helpline and risk managers, and we’re going to advance the policy recommendations of our task force where governments play a key role in implementation,” said Forgeron.
Likewise, the CLSC team will continue to respond to sector insurance challenges, Yeatman stressed, through participation on IBC’s Business Insurance and Condominium action teams. He added: “We also approved the development of a trucking working group to respond to commercial insurance issues within the sector and assist with IBC’s advocacy for reforms, as well as with respect to the long-term care home sector. The committee’s invaluable insight and expertise has shaped IBC strategy and initiatives on the commercial front.”
All of this meaningful collaboration is key in pulling the industry through the hard commercial market. Forgeron commented: “This isn’t the kind of challenge that’s going to get solved overnight by any one player or by any one idea. We need to work in partnership, and we need to be patient. As an industry, we need to lead, and we need to be seen to be leading. As an elected official said to me in the early days of the pandemic: ‘If you’re not seen as part of the solution, you’re going to be seen as part of the problem.’ We need to ensure that everyone, from our customers to our regulators, to our elected officials, they all understand that we’re doing what we can to make a positive difference during a very difficult time.”