Canada's hospitality industry at risk as insurers withdraw

Experts say "the perfect storm" of issues has led to insurers either raising their premiums or outright withdrawing

Canada's hospitality industry at risk as insurers withdraw

Hospitality

By Lyle Adriano

Canada’s hospitality industry – which has already taken a severe financial hit due to the COVID-19 pandemic – has suffered another heavy blow as a large number of insurers have either raised their premiums or are exiting the space.

Even prior to the pandemic, hospitality was considered by many insurers to be a higher risk compared to most other industries. Toronto Insurance Council president and Baird MacGregor Insurance Brokers vice-president Karen Ritchie noted that this increased risk is more pronounced for those restaurants or bars that need coverage for accidents caused by inebriated clients.

However, the major health threat posed by COVID-19 only increased that risk further, as well as insurer’s worries.

“It’s a perfect storm,” Ritchie told Reuters in an interview.

Canada’s hospitality businesses carry the same risks as other similar businesses around the globe, Ritchie said. However, Canada has a much smaller insurance market, and it is dominated by Lloyd’s syndicates.

In a previous statement to Reuters, Lloyd’s revealed that its business volumes fell 8.6% in the first half of 2020; this reflected an intentional reduction by several syndicates exposed to poorly performing business segments.

While Lloyd’s syndicates have slowly withdrawn from insuring Canada’s restaurants and bars, the few insurers remaining are said to be either mulling their own exits, offering very limited coverage, or increasing their premiums by a large percentage, Reuters reported. The shrinking and hardening insurance market paints a grim outlook for Canada’s hospitality segment.

Andrew Clark, chief executive of mortgage broker for ALIGNED Insurance, commented that despite their limited ability to operate during the pandemic, “many bars and restaurants here still had contractual obligations and real risk that needed to be insured and insurance had to be maintained.”

“The unfortunate reality is that the insurance companies aren’t willing to insure some businesses right now and they don’t really have many other options than to close,” Clark told Reuters.

What do you think of the hospitality insurance crisis in Canada? Is there any hope for the industry? Leave a comment below with your thoughts.

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