AMSC Risk Management & Claims Services
Will Burtenshaw
Senior Director Risk & Claims David Johnson
August hail storm in Alberta
tops $450 million in insured damage
September HeadlinesFlood-related deaths exceed 461 in
India, Pakistan
Calgary Mayor Nenshi
„shocked‟ by damage
from heavy summer snow
September Headlines
• 2014 Prairie Flood Losses to Reach $140 million
• Mexico Struggles to return order to hurricane hit resort of Los Cabos
• Alberta’s wacky weather causing an increase in premiums
Telling the weather story
Some advice from 2012
• Public and private sector leaders need information about regional climate trends in order to adapt for the future.
• These weather trends are already affecting Canadians.
• The climate will continue to change, with varying impacts across Canada‟s regions
• Severe weather is projected to increase over the next 40 years.
• Canada must adapt to this new reality.
- Insurance Bureau of Canada: Telling the Weather Story June 2012
Some stats:
World 2013
• In 2013, 308 disaster events: 150 natural catastrophes and 158 man-made. Typhoon Haiyan struck the Philippines in November 2013, one of the strongest typhoons ever recorded worldwide. Killed 7,500 people and left more than 4 million homeless. June flooding in India, in which 6,000 died.
• Economic losses from catastrophes were US $140B . Asia had the highest losses.
• Insured losses were roughly US $45B. Natural catastrophes
generated US $37B of losses and man-made disasters the other US$ 8B in claims.
• Biggest losses included large scale floods in Europe and Canada, record-level hail and multiple windstorm events in Europe,
convective thunderstorm and tornado events in the US and Typhoon Haiyan in the Philippines.
First half of 2014
2014 World Losses
• February storms which hit Tokyo and central Japan brought overall losses around US $5B and insured losses of more than US $2.5B
• The record winter and blizzards in North America also caused significant losses totaling US $3.4B.
• Natural catastrophes marked by pleasingly low levels of global claims.
• Economic losses of US $42B and insured losses of US $17B
• Below ten year average (US $95B and US $25B respectively).
Insurance Services
• More than 725 members participate in the GI program
• MUNIX Self-Insured Reciprocal
• MUNIX reciprocal coverages include:
– Property – Liability
– Errors & Omissions/Directors & Officers – Auto – Physical Damages (only)
Why manage risk?
Why spend the time and money to manage risks…isn‟t that why we have insurance?
Fact:
• Insurance policies may respond for the cost of replacing a damaged asset or defending and
paying for a liability claim, but insurance does not cover the full costs of any claim.
Challenges to Managing Governmental Risks
There are limitations and challenges to managing risks for municipalities:
• Politics
• Limited resources
Insurance is not purchased out of desire, but out of necessity.
It isn't a commodity which is enjoyed nor displayed nor sought after by its owner.
It is like headache tablets or spare tires…bought with the hope that they will never have to be used.
Insurance should be the last line of defense and available after all other safeguards have failed.
Risk Management is essential!
What is risk management and why is it important
before a disaster?
The process of making and carrying out decisions that will minimize the adverse affects of risk on a municipality.
"An ounce of prevention is worth a pound of cure."
• Today, this statement provides the guide for the control of risk.
• Risk may be reduced, eliminated, or certainly controlled by using a well-planned risk
The chance of something going wrong: the danger
that injury, damage or loss will occur
From 12/31/2013 & 1/1/2014
• Alberta now considered a region of Natural Catastrophe
• Flood considered higher risk than earthquake due to historically higher frequency
• Lloyds/London marketplace became prominent with capacity and better deductible language
• Deductible effects:
• Traditionally Alberta Flood deductibles were between $10,000 to $100,000 flat
• Reaction from Canadian insurers are implementing flood deductibles of:
– A percentage and minimum of insured values at insured
location – essentially a per structure deductible (i.e. 5% of TIV at location subject to minimum of $1,000,000+) or
– Flat higher flood deductibles for high risk flood locations/risks (i.e. $20,000,000+)
• Capacity effects:
– Many Canadian domestic insurers are not offering flood capacity for renewals or for new business to them
– Canadian domestic insurers are restricting/reducing their flood capacities dramatically
What can you do?
• Balanced risk management & insurance program
• Risk management:
– Procedures and protocols – Contingency plan
– Crisis management plan – Communication plan
What can you do?
• Insurance Program:
– If you experienced a flooding in 2013, then your program is being tested – lessons learned to be incorporated into the program
– If you were fortunate not to experience a flood event – model a flood scenario against your insurance program if you are located in flood prone areas
Insurance coverage treatment
• Have flood insurance – it is available on a commercial basis
• Deductible structure/language
• Business Interruption/Loss of Revenues
• Extra Expense coverage
• Expediting Expense coverage
• Mould coverage (restricted)
• Asbestos coverage (restricted)
• Evacuation Expenses coverage
• Sue & Labour Expenses coverage
The 2013 floods – insurance marketplace reaction
• Insurance marketplace now reviewing the Alberta natural catastrophe landscape
• Reaction is slow
• Reaction is inconsistent
• Flood Capacity review
• Insurers reviewing their portfolio
– Rates
– Deductibles – Capacity/limits
Is your municipality prepared?
• Risk tools- emergency plan and business continuity….
• Identify exposures to loss
• Analyze loss exposures
• Examine Risk techniques
• Select risk techniques
Risk Management – key objectives
• Reduce frequency and cost of claims ( insurance)
• Save Resources
• Protect Public Image
• Protect people from harm
• Reduce Legal Liability
• Protect the environment
• Know what the risks are
• Increase stability of operations
Steps to take before a disaster..
• Know and trust your insurance provider
• Make sure you review your insurance policies every year and make sure that every property is on the schedule
• Keep detailed inventories of contents.
• Make sure that the listed values are correct.
Some things to be aware of
Claims typically have to be sudden or accidental
• For example, insurance is not a maintenance policy. Most policies will typically not pay for regular wear and tear. If you have an older
building which needs shingles replacing, that‟s not an insurance claim. But if a hail storm
completely destroys the shingles, they may be covered
What are the deductibles? Are they the same for
everything or different?
Vehicles and buildings will have different
deductibles…
• Flood and earthquake are typically much larger than fire deductibles
Exclusions
What is an exclusion?
• An exclusion gives a condition for which an insurance policy does not cover.
• For example, typically most policies will exclude (not cover) mold or asbestos remediation.
• Sometimes, you have to purchase specific insurance to cover the risk such as boiler and machinery
insurance, as typical policies exclude boiler explosion.
• Insurance is complicated, so you need to have confidence in your insurance advisor.
Other Considerations
• Contractual obligations
• Lease agreement responsibilities
• Landlord -Tenant agreement responsibilities
– Personal belongings of tenants
• Internal policies
– Personal belongings of staff – what do people keep in their desks?
– Privacy legislation implications
• Liability effects - can you be sued for negligence?
– Directors & Officers Liability – General Liability
After the disaster, it becomes a claim
• An adjuster will be assigned to determine the extent of the damage and if coverage has been triggered and what if any exclusions apply.
• The adjuster is the eyes and ears of the insurer.. Will require cooperation from many parties including your team.
• For significant damage several things will happen:
a) restoration experts trained in the most current best practices will be brought in for water removal, fire/smoke restoration, mould removal and other disaster restoration services. Remediation may include drying out walls and contents, or removal
Post disaster
b) A specialized multi-disciplined, post loss construction consulting firm, with a staff of highly qualified and
experienced construction management, and restoration professionals will be engaged to determine the costs to repair and or rebuild.
c) If a building is damaged repairs will be effected to return it to the same condition it was in.
d) If a building is destroyed, you will have to decide if you
want to replace the building in like kind and quality or if you want to build a grander facility. But realize, that you won‟t get extra funds for the enhancements.
e) It takes time…many factors come into play such as loss of rents, getting bids from contractors etc…and determining what will be rebuilt…
Anatomy of a claim
Claims Costs Retained Costs Soft Costs
• Claim costs
• Loss or damage to asset
• Court awarded damages
• Defense Costs
• Adjuster Fees / Expert Fees
• Retained Costs
• Deductibles
Anatomy of a claim
Claims Costs Retained Costs Soft Costs
• Internal costs and staff time
• Initial reporting, investigation, gathering information
• Interruption of services
• Responding to customer complaints
• Prep time – examination for discoveries, pre-trial meetings, court time, etc.
Changed attitudes
• “Someone else is responsible for my injury” has replaced a previous willingness to accept the risk of injury.
• Society has higher expectations for the designers, installers and operators of governmental
infrastructure systems.
• The monetary setback is not a matter that needs to be solved by the individual but is a
Risk Management Program
Module 1: Essentials of Municipal Loss Prevention and Facility Loss Control
Module 8: Insurance Basics Module 2: Liability Loss Control – Public
Works
Module 9: Enterprise Risk Management
Module 3: Fleet and Equipment Loss Prevention
Module 10: Emergency Planning & Business Continuity
Module 4: Liability Loss Control – Parks and Recreation
Module 11: Seniors Facilities Module 5: Liability Loss Control – Contractual
Issues
Module 12: Workplace Violence Module 6: Liability Loss Control – Municipal
Errors and Omissions
Modules 13: WHIMIS Module 7: Environmental Risk Management
Guidelines
