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00:00 The strongest relationships are those where we actually know who our partners are.
00:04 If you have a claim, you don't want your policy to come in and restrict any sort of cover that you think you may have.
00:11 Risk communication has really kind of shifted away from I I think compliance towards demonstrating that risk durability over you know three year, 5 year, 10year plan.
00:23 Hello everyone. Welcome to Insurance Business TV and the Q2 edition of our property insurance power panel. Uh once again we'll be taking an overview of the
00:31 landscape and this time delving into topics such as secondary perils and risk mitigation. And to take us along the journey we welcome back Damian Eckleton,
00:39 senior vice president, national practice leader property at Galaga, Kiara Duna, AVP, senior production underwriter at FM
00:48 affiliated and Cheryl Pichelli, senior vice president and property unit leader central region commercial broking at AR.
00:57 Uh so welcome everyone and to start us off uh give us some perspective on how you were responding to this growing scrutiny that seems to be around
01:06 property valuations and under insurance in Canada particularly of course as inflation re rebuild costs and supply chain volatility continue to distort
01:15 replacement values in 2026. So uh Kiara how are you responding? I'm I'm very lucky, Paul, to be honest, working for a
01:22 company like Appam Affiliate and FM. We have great values and trust with our clients, but part of that comes from using great things like tools, some of
01:30 which being appraisals, core logics, engineering services within the company.
01:34 That's all going to help us and our clients get to where their values need to be. On the other side of it, I suggest our broker partners to look at
01:42 how the policy structured when it comes to coverage. You want to make sure you have great coverages in this market like blanket versus co insurance. You know,
01:50 that way if you are a little bit off as these values are changing throughout the year, you should hopefully not have any concerns if you've got a good blanket limit in place.
01:58 Yeah, I imagine there's a lot of different facets to take into account, Cheryl.
02:02 Right. There is. And one of the the more important one is around business interruption. So reviewing what indemnity period you're currently
02:11 insuring for whether it's 24 or 36 months, but if there's any sort of key equipment maybe that takes longer to
02:18 source that comes from the US that you have to bring to Canada, then really taking a look at a BI worksheet to understand maybe you have to increase
02:27 the indemnity period because it might take longer to get that type of equipment in into Canada, right? So AON
02:34 is really big with analytics and we can put information into a system and it'll say like you know the price per square
02:41 foot based on this occupancy or this class of construction and things like cold storage or clean rooms or data
02:49 centers are typically going to have a higher construction cost just because there's a lot more going on in the facility. So price per square foot is
02:57 always so important with valuations and that's something that underwriters look at with a lot of detail as well. And my
03:04 last point is around the wording. So merion clauses maybe they're in the policy and what that means is whatever
03:10 you declare in in your so you'll get that plus maybe 10% and that's it. So really having a good understanding of
03:19 what you're declaring on a statement of value is is um so important because if you have a claim, you don't want your
03:27 policy to come in and restrict any sort of cover that you think you may have.
03:32 Really important point that Cheryl's made Damian around valuations. I imagine a lot of refreshes are needed.
03:39 Absolutely. I think what we're doing now is we're we're really pushing for more frequent valuation refreshes particularly for those complex
03:47 occupancies and large real estate portfolios that that Cheryl was kind of alluding to. Um you know we do that via annual desktop reviews and then
03:56 supported by rolling physical appraisals which we really want to do every uh two three or four years and that's going to help underwriting, it's going to help a
04:05 client um it's going to help us in our broking position. Um you know ultimately on the broker end we are increasingly
04:12 acting as you know interpreters on replacement costs. You know helping clients understand the distinction between market value replacement cost um
04:22 rebuild versus functional replacement um and time element inflation versus cost inflation. um you know on the on the
04:30 underwriting perspective and KR knows this very well having those inadequate values or total insured values can
04:37 distort uh pricing it can impact your PMLs your loss estimates and your portfolio aggregation so the importance
04:46 of having these improved valuation data um you know ultimately benefits both insure and client uh so we really want
04:54 to be proactive in uh in approaching valuation allies Of course, this is a market where clients are under pressure
05:01 on premiums. So, Cheryl, how are you balancing rate adequacy with retention?
05:06 And indeed, what strategies would you say are most effective in terms of maintaining those long-term broker and client relationships?
05:14 I think that the hard and soft markets are hard on markets and hard on clients because we see rates going up and down
05:21 and there's a lot of push and pull. It's it's it's hard to have a balance. So really if if there's communication
05:30 around understanding what rate adequacy is and why we go through the market cycle, it's easier for clients as well
05:38 as markets to manage one another. So it's communication is is a lot of it. I think also if if clients are taking on
05:45 higher retentions, it signals to underwriters that they have skin in the game and that um they're there for the long term. And again, long-term
05:54 relationships are so important for both carriers, especially in the event that there is a large claim, right? And a lot
06:01 of it goes back to having a robust sort of risk management structure. And that just helps both manage each other, right? Like if there's good risk
06:09 management, it just helps manage the the account for the long term. And they're both in it for the long term together.
06:16 and it just becomes more of a partnership versus I'm just here for a price play right now while the market's soft and then the second that the market
06:24 goes hard while that because it's a tough occupancy it could be the the first account at a at a market that gets the boot right so
06:33 I guess it's important to sort of bear in mind Damian that premium is not not always the focal point here yeah I agree with everything Cheryl
06:40 commented on I think the most effective strategies has been you know focusing renewal efforts on on strong data quality, um credible mitigation, sound
06:49 long-term fundamentals. Um you know, clients are being educated that premium is not the only lever. So there there's options that can include program
06:58 structure, adjustments, supplements, deductibles, you know, different attachment points, layered programs,
07:06 um or alternative ris risk transfer programs as well. So I think the most important thing which was already touched on is is the transparency which
07:13 is critical and clients being more accepting or I think that the more accepting of challenging outcomes when
07:21 they understand what pressures are systemic versus account specific and what actions could be realistically
07:27 taken to influence results. So, um, you know, long-term retention improves when brokers engage underwriters and clients
07:36 early, but ultimately, I guess, car just going back to that sort of general point then about having the the right coverage for the right segment.
07:43 For sure. You know, it really is understanding the client. Um, when brokers are and clients are looking at this, it's really having that discussion
07:52 of what's important. If you're a real estate client, things like tenant relocation, if you're in manufacturing, making sure that supply chain is quite
07:59 broad. And then it I also think it's really important to consider that market visibility, whether it's the carrier meeting the client, the broker being
08:08 with the client, making sure you're visible for the right client throughout the terms, not just at the renewal time.
08:14 um that was kind of lost in the last few years coming out of the pandemic and as really the strongest relationships are those where we actually know who our partners are.
08:25 Of course, if I look at the the news cycle since we last met, indeed probably over the the last sort of year or so, we've seen such increased attention, haven't we, on secondary perils and how
08:33 they're moving beyond those headline cat events from freeze losses to water damage and convective storms and so on.
08:41 Um Damian, from your perspective, how are these attritional CAT trends, how are they influencing underwriting strategy and indeed portfolio management?
08:49 Yeah, I mean there's been a clear shift from from these headline catastrophe events to to more high frequency
08:55 mid-severity losses such as hail, flood, uh wildfire, convective storm particularly in Canada. And I think you
09:03 know for for underwriters we are seeing more um maybe not so much in this current market which is which is extremely soft but we we do see
09:11 oftentimes depending on geography or class of business you know greater scrutiny on construction roof uh roof
09:19 age drainage uh certain protections and maintenance practices. Um but from a broker perspective, we try and frame
09:27 these potential losses as preventable rather than random or or unavoidable. Um
09:34 you know, for for for insurers, you know, attritional cat losses, they do quietly but consistently erode
09:41 portfolios. So it does require underwriting discipline from their perspective. But it's important for us as brokers um you know who can credibly
09:50 articulate portfolio level mitigation strategies and gain confidence from um underwriters as well. You know once you
09:59 kind of balance all that I think it probably does uh war the best result for your client and with your partner and I guess you kind of have to
10:07 understand as well Kiara don't you where where there is exposure on your account.
10:12 Yeah, where there is exposure and certainly in the underwriting world and what we're seeing from our competition, we're still seeing deductibles in place, they are starting to come down. What
10:20 we're seeing is we're seeing where you've got a good story, a good risk mitigation to some of these. We're seeing the rates soften certainly. Um
10:29 there is, I think, still some underwriting discipline, though it is starting to erode. And what I typically am seeing when I look at our competition is portfolios that have higher
10:38 deductibles are generally seeing the best rates and terms. That's where we're seeing the biggest.
10:44 Okay. And Cheryl, are you seeing markets perhaps have limits for secondary perils now?
10:50 Yeah. Uh they are definitely and we're pushing back more. I feel like it was more of an
10:58 issue during the hard market. just the market's so soft right now. Um but there are and I mean you'll see limits at
11:06 times of let's just say a billion dollars for example on fire but you'll see ncat for earthquake or we're not
11:14 talking earthquake right now but the secondary perils as well being more limited and during the hard market there
11:21 was a very highprofile insure that was trying to exclude wildfire as well. So, we're not seeing it anymore. Um, but it
11:30 it definitely is there and it's something underwriters are concerned with and you know, all we can really do
11:37 is just help influence strategy at this point by helping clients um understand loss control around these secondary
11:44 perils and what they can do to help protect their sites even further. And that will help limit the amount of restrictions that'll go into awarding.
11:54 opinion though the climate theme somewhat yarao we're seeing regulators and stakeholders place greater emphasis now on on climate disclosure and indeed
12:02 resilience as well so how is that translating into into practical changes in terms of how you assess uh price and indeed communicate property risk to
12:11 commercial clients in um my company in the insurance world we only offer resilience credits but we've certainly seen some of our
12:18 competition have resilience teams resilience engineering resilience reports It's it's very much a concern
12:26 going forward and it's those clients that are starting to address it are starting to focus on resilience. They're the ones who are seeing the best terms from us.
12:37 Okay. Is that something you would agree with as well, Sharon?
12:39 Absolutely. I think um the mindset of a client is it's so important around this um what they're doing then to u use risk
12:49 management to reduce perils early warning system maintenance um just the mindset of a client and you know using
12:57 AI as well I love AI I think it's part of my daily life and I hope clients also
13:04 embrace it to help formulate risk risk control decisions you think though Damian, that perhaps
13:11 the expectation now is is perfection or not?
13:15 I I wouldn't say perfection. It's it's hard to say, you know, I have any client that's um that that can be perfect with
13:23 the risk profile or their resilience planning, but I think what brokers can really help with is play a key role in
13:30 translating climate data into into really layman's terms or plain language business implications
13:37 uh for clients such as operational downtime or capital expenditure planning and and and long-term success and
13:44 insurability. um you know I don't think the expectation is perfection from from an insurer side. I I think it's more of
13:51 a demonstrated planning on um intent and and awareness and articulating a
13:58 resilience roadmap even if it's still evolving um which is being differentiated and not and not really passive. So risk communication has
14:06 really kind of shifted away from I I think compliance towards demonstrating that risk durability over you know threeyear, 5year, 10-year plan.
14:15 Well, from risk communication to risk mitigation. Um Cheryl, what role are you seeing for clients in terms of actively
14:22 reducing their own exposure? Indeed, how are insurers incentivizing or or supporting more proactive risk management in 2026? Yeah, I think a lot
14:32 of clients again because we're in the soft market, they're seeing a lot of rate reduction. They're seeing improvements in covers and you know,
14:41 it's again it's the client's mindset of taking the savings that they're finding and reinvesting what they're finding in
14:47 savings into their portfolio. So whether that be buying additional loss limits or maybe getting a lower deductible or just
14:56 improving their overall risk management attitude, they're going to find that they fare better over market cycles. Um,
15:04 and again, higher deductibles, I think, you know, it's so important for underwriters to feel comfortable with accounts. So
15:13 yeah, about clients attitudes, Damian, would you say that they're uh perhaps more into this or or perhaps more passive than they were before?
15:22 I think so. I think what came out of, you know, the hard market was there there was such an emphasis from carriers on risk control and recommendations and
15:30 completion that, you know, they' taken that away and they built that into their resilience planning and and their capital expenditure moving forward. that
15:38 insurance is a real align item on their on their budget now and they need to really take it into account in order for them to improve their coverage, reduce
15:47 their premium. Um, so I would say that they're they're less passive clients now and they're they're more active in risk management. Um, you know, I do believe
15:55 that insurers are rewarding uh, you know, these documented maintenance programs on flood or or or water loss or
16:03 or prevention measures. And these these incentives are not always immediate in terms of premium, but they're they're often times reflected in improved
16:12 capacity or less year-over-year volatility and more stable uh terms and maybe stress markets. So I think for
16:19 brokers, you know, help helping clients prioritize practical loss relevant investments rather than theoretical theoretical practice best practices is
16:28 important. And ultimately I think the best relationship is that open partnership between client broker and uh
16:37 insure to get the best results and uh purest transfer.
16:42 Is that true from your perspective as well Kiara? Do you think that uh there are appropriate rewards being offered from insurers? For sure, Paul, you know,
16:49 to touch on something that again we offer at FM is we offer resilience credits on the FM side of the book um that the client can use whether it's to
16:57 improve resilience or to actually do risk improvement. We've started to see on some of our portfolios risk improvement credits being offered where
17:05 as insurers or ourselves we're looking to help improve certain key items. And then the final thing I've seen in this
17:12 market is engineering services come back as a focus. And what I mean by that is the insurer either providing our own services or helping to pay for the
17:21 broker services or any thirdparty services the client may use to help mitigate risk.
17:27 Well, another great panel indeed. Huge thanks to all of you for joining us again. Remember this power panel will be back in Q3 and we also boast panels on
17:36 subjects as diverse as cyber, motor and fleet, environmental and professional risk. To keep hearing from the brightest minds in insurance, keep it right here on Insurance Business TV.