Insurance Marketplace Realities 2024 – Canada

Rate predictions: Canada

	Trend	Range
Casualty
General liability, low/moderate risks		-5% to +5%
General liability, high hazard risks		Flat to +10%
Automobile liability		Flat to +7%
Umbrella/excess liability, low/moderate risks		-5% to +5%
Umbrella/excess liability, high hazard risks		Flat to +10%
Property
Catastrophe exposed		+10% to +20%
Non-catastrophe exposed		+5% to +10%

Casualty

General liability

• Renewal results, on average, showed marked improvement year over year.
• We saw heightened focus on managing non-owned automobile exposures amid supply chain challenges impacting traditional (owned/leased) automobile exposures.
• While carriers remain focused on inflationary factors, it has been downgraded by year-over-year comparison.
• Carrier priorities shift to more tech solutions that will improve efficiency in decision making, create innovation and launch products quickly as they simultaneously combat workforce challenges.
• We see no marked change in attitudes toward the need for exclusionary language applicable to territory restrictions (Russia, Ukraine, Belarus), climate change, forever chemicals (PFAS), abuse/molestation, and assault and battery.

Automobile liability

• Carrier focus remains on understanding formalized operational and risk control measures as well as the use of telematics in vehicles.
• There is deterioration in claim trends as severe weather events, rising theft and increased costs of repairs continue to exacerbate claim settlements which reflect on pricing and inability to return to decreased rates.
• There exists anticipation for new available capacity from carriers writing existing casualty product lines.

Umbrella/excess liability

• The umbrella layer is fast becoming the most challenging layer to replace as carriers must combat low attachment points combined with insufficient premium earnings.
• Attachment points where primary limits are considered inadequate are being re-evaluated.
• There is a moderate return to larger line sizes deployed on excess layers.

The notable increases in competition and market growth force carriers to retreat, further stoking the push toward a softer marketplace.

• Continued marketplace confidence has allowed the entrance of new markets (particularly, MGAs), establishing fresh capacity and new product innovation, options for brokers and clients and a withdrawal of critical senior talent from more established shops.
• A pivot toward more offensive strategies to attain new business and seek prospective clients has carriers aggressively protecting all well-performing risks and self-regulating on renewal rate asks and coverage offers (limiting exclusions, increased line sizes).
• Capacity deployed across multiple lines of business has strengthened as a winning strategy, becoming a focal point to help stimulate ambitious competition in otherwise challenging industry classes.

Local underwriting authority and referral chains pertinent to Canadian business remain impacted by U.S. and foreign viewpoints.

• Dispelling the need to apply U.S. or foreign approaches to coverage offer and acknowledging Canadian-centric coverage norms (e.g., provision of defense costs outside the limit, availability of sudden and accidental cover), will help leverage opportunities and showcase the benefits of Canadian-controlled and underwritten business.
• Underwriting remains conservative when considering client profiles with extensive U.S. exposure as carriers pursue portfolio balance and limit the probability for possible exposure into U.S. litigation, nuclear verdict and trial litigation costs.

Macroeconomic factors and Q3 center stage natural catastrophes events offer a pause on positive momentum.

• Positive momentum from Q2 paused as several Canadian catastrophic wildfire events, across multiple provinces, garnered unfavorable worldwide attention in Q3. While wildfire season looks to conclude, a cautious approach to pricing and underwriting appetite will remain, as concerns around these natural events continue to grow and carriers prepare for that future.
• Both interest and inflation rates continue to have a large bearing on carrier pricing models as carriers strategize to protect themselves against rising costs anticipated of future claim settlements and managing the escalating trend of exaggerated claims and fraudulent activity.
• Elevated carrier desire to maintain a level marketplace and motivation for long-term profitability is resulting in a strategy to front load on upfront rate and preferences to provide credits as only one-off agreements and singular payouts.

Property

Capacity in the Canadian market remains stable; however, insurers have heightened focus on natural catastrophe perils.

• For insureds with relatively low natural catastrophe exposure and good loss histories, rate increases remain modest (0-5%); however, over Q3 Canadian insurers began to stand firm on minimum rate increase levels closer to +5%; clients with challenging asset profiles and those with poor loss records are seeing larger increases as insurers manage capacity deployed and charge accordingly.
• The Canadian market has not seen capacity leave, although insurers are deploying capacity more judiciously around natural catastrophe perils.
• MGAs (managing general agents) continue to enter the market with a focus on specific coverages and industry sectors, providing capacity for distressed areas, such as residential/frame property, and providing an opportunity for direct insurers to deploy capacity behind the MGA structure.

In light of the severe wildfire season in Canada, insurers are adjusting their underwriting toward wildfire exposure.

• With the increased frequency and severity of wildfire in Canada, in Q3 2023 insurers started introducing wildfire deductibles aligned with other natural catastrophe events, such as earthquake and named storm (i.e., 3% of the total insured value of the location of loss, minimum $250,000).
• Insurers also stopped writing new business for insured locations within a certain radius of an active wildfire (anywhere from 25 – 100 kilometers).
• For insureds with exposures in British Columbia, insurers continue to model to the earthquake zone, and charging rate and applying increased deductibles.

Inflation, valuation and loss control remain areas of focus for insurers.

• Insurers are still expecting insureds to incorporate inflation into their values; however, as economic measures start to take effect and the market adjusts for improvement in supply chain, the expectation of inflationary lift is less than in previous years.
• Ensuring proper valuation is still critical, and some insurers are requiring appraisals as subjectivities. Where insurers do not feel confidence in the values reported they will look to apply margin clauses (5% to 10%). Insurers continue to apply business interruption volatility clauses to manage commodity price fluctuation, typically ranging from 10% to 15% with both an annual and monthly cap.
• Loss control and site surveys are also areas of focus and critical for insurers being able to write a risk. Similar to valuation, some underwriters will not come onto a risk without updated engineering, or for incumbent insurers, they are writing risks at higher deductible levels or sublimits until the risk engineering has been updated at key locations.

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).