David Edgar, Managing Director, Underwriting, Captives & Alternative Risk Solutions at Acera Insurance, explains the impact of Lloyd’s of London on the insurance marketplace for businesses in Canada.
What is Lloyd’s of London?
“Although Lloyd’s obtains a license to operate as an insurance company in countries across the globe, Lloyd’s is actually a market, not an insurance company,” explains David Edgar. “A lot of companies use Lloyd’s to access or distribute insurance in countries where they don’t have a very big presence or don’t have their own license. Lloyd’s license is used like a franchise and Lloyd’s will ensure the money is there to pay out insurance claims and that everyone is behaving properly.”
The Importance of Lloyd’s in Canada
Lloyd’s has been providing insurance and reinsurance in Canada for almost 200 years – in particular, solutions for larger complex, hard-to-place risks as well as specialty insurance products. “The world – and Canada – depends on Lloyd’s for its specialist way of thinking,” says David.
Globally, Lloyd’s writes £35 billion in premiums, and CA$4 billion of that is written in Canada. That means Lloyd’s is responsible for insuring approximately one third of complex risks in Canada.
In recent years, Lloyd’s financial performance has suffered, which has contributed to the hard market conditions that the Canadian insurance industry continues to face – increased underwriting scrutiny, new coverage limitations and higher deductibles. Under a hard market, you may find it harder to renew your policy, or, depending on your location or type of business, getting any kind of coverage may be difficult. “If Lloyd’s is writing a third of our complex business and they are uncompetitive, that has a direct impact on our entire market,” Edgar explains.
The Impact on Your Business
We may be seeing an upturn. Lloyd’s, alongside most insurance companies in Canada, posted positive financial results in 2021. Offerings have become more competitive, and relief appears to be in sight for insurance buyers.
There are, however, a few exceptions. Categories of insurance unlikely to see market softening include cyber insurance and management liability. Businesses severely affected by the pandemic such as those in hospitality and long term care may still be up against a hard market. Additionally, severe weather and natural disasters such as floods, earthquakes and wildfires continue to drive up property insurance premiums.
The good news: as insurance capacity returns, the insurance limits that were unavailable for a period of time will be offered once again and harder, complex risks will become easier to write, David adds. Although inflation can still drive up premiums, increasing capacity in the marketplace stimulates competition – companies seeking to grow will be delivering more attractive packages for insurance customers, making it easier for businesses to get the coverage they need.
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