Big losses and rising payouts behind 59 per cent hike in insurance premiums; 'Finding out (about the spike) after we renewed on July 1 is not fair to us'

Over the past three years, Canadian insurance companies have been hit hard by rising payouts as a result of massive wildfires and increased flooding blamed on climate change and more severe weather.

On Tuesday night, the impact reached Bradford West Gwillimbury.

Meghan Callaghan, Client Service Manager with BFL Canada insurance, appeared before council to explain why the town’s insurance premium jumped 59 per cent in 2019.

“Overall, the municipal market has been hardening,” Callaghan told councillors. “Insurance capacity has been at an all-time high.”

As a result, she said, “Insurers are taking a harder look at the types of risk they want to carry” and municipalities, because of the wide range of services they provide and their exposure to liability, top the list as a difficult ‘niche’ to insure.

In particular, Ontario municipalities are vulnerable under “joint and several liability” in the Ontario Negligence Act, which says that an innocent victim can seek cost recovery from any responsible party.

Even if a municipality is only 1 per cent at fault, “they can be on the hook for 100 per cent of the liability,” Callaghan said.

After three years of increasing losses, in 2016, 2017 and 2018, all carriers have been looking at ways to “course-correct in 2019,” she said.

In particular, underwriters Lloyds of London have made a “very big correction” to ensure a return to profitability in 2020 and that means a huge jump in the town’s premiums, up from $432,375 in 2018, to over $688,250.

Councillors took exception not only to the hike, but to learning of the increase only after they had renewed their insurance on July 1.

“It’s a tough one to swallow. I struggle with looking at this,” said Deputy Mayor James Leduc, suggesting the town will be approaching the Attorney-General asking for a review of “joint and several liability,” and going to the market “to see what’s out there.”

A 59 per cent increase is “tough for our residents to deal with. I will be looking towards AMO (Association of Municipalities of Ontario) and looking to Ministers to see what we can do,” Leduc said. “I’m shocked at this increase.”

“This is in no way your fault,” Coun. Raj Sandhu told Callaghan, “but shock is not the right word. This is beyond shock… Finding out after we renewed on July 1 is not fair to us.”

He said that the brokerage should have alerted the municipality that a hefty hike was on the way. “We are going to do our homework and see what else we can do as a municipality, because this is too much,” Sandhu told her.

“I agree having terms delivered at the last minute is not acceptable to anyone,” Callaghan said, promising in future to provide at least 90 days warning.

She blamed the delay on the length of time it took to review and negotiate terms and the long underwriting process.

Callaghan noted the insurance market is no longer offering municipalities the option of a ‘long-term’, three-year policy. “The current insurance market doesn’t offer that,” she said.

She pointed out that the Attorney-General of Ontario is asking for municipal input, particularly as it relates to Joint and Several Liability. BFL, as a major insurer of 30 per cent of the Ontario market, is putting together a brief “that will help you in your presentation,” Callaghan told Council.

AMO meets later this month and the town has asked for a meeting with the Attorney General, Doug Downey, the MPP for Barrie-Springwater-Oro-Medonte.

“We will be bringing this up with him at AMO,” said Mayor Rob Keffer. “Anything the provincial government can do to lessen the impact ... hopefully the provincial government will listen.”

Director of Corporate Services for the Town of BWG, Rebecca Murphy, noted that this is not the first time the municipality has faced a hefty insurance bill.

“The Town’s 2015 rate was $901,059,” Murphy noted. That sent the municipality to the marketplace and a better three-year insurance package.

“We continue to look at ways to keep our rates down, including risk management measures and deductible analyses,” Murphy indicated.