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Understanding Why Global Volatility Affects My Rates


The basis behind insurance is that the premiums of many pay for the losses of a few.  This is true whether you are buying travel insurance, cyber liability insurance, or protection for your 1980 John Deere Tractor that refuses to retire.

As an independent insurance broker, we represent many different insurance companies who offer a wide assortment of insurance coverage for many things.  One recent trend that we are seeing is insurers requesting higher premium to provide similar coverage.  There are a few reasons for this, one of them being that their expenses have gone up.  Just like the cost of growing a crop has increased over the past decade, the cost of building materials, skilled labor, defense and liability claim payouts and overall operating costs have also grown for insurance companies. The insurance companies that are still profitable in this market are working hard to control their costs, along with working hard to choose the right clients to insure. One expense that is difficult to control is the cost insurance companies pay to reinsurers for their own insurance coverage.

Globally, insurance companies have been dealing with some catastrophic losses in the past 3 years.  This affects the local insurers who write policies for their local clients, but also the reinsurers who are backing those local insurance companies.  The concept of reinsurance is that insurers will sell off a portion of their risk to reinsurance companies to spread out their exposure.  This is how small insurance companies can take on liability that could potentially exceed their company’s annual revenue, as they are selling a percentage of the risk to other insurers to once again spread the losses to the reinsurers.

The reinsurance industry has suffered in the past 3 years, with the top reinsurers in the world struggling to break even.  When businesses don’t make money, they adjust their practices to become more profitable.  This is what we are seeing and hearing from the reinsurance partners of our local Canadian insurers.  In most instances, our Canadian insurers are being asked to share more of the premium they collect with their reinsurer partners to help improve overall profitability.  This starts the chain of increases, which ultimately trickle down to you and I as we look to purchase insurance. 

This is important information to understand, as it helps us as policy holders realize that we aren’t being punished or unfairly treated when our local insurers come to us requesting higher premiums.  There has never been a better time to make sure you are working with a broker that understands your operation and the risks involved.  Consider making Rempel Insurance Brokers your insurance broker of choice.

Be sure to seek advice and purchase insurance from those who understand your business!