BROKERS are bearing the brunt of a challenging market environment which has resulted in cancelled contracts and changes in underwriting practices, the CEO of the Insurance Brokers Association of Ontario said.

Colin Simpson said that while these conditions aren’t what the industry typically calls a hard market, certain characteristics fit that bill.

“Generally a hard market occurs when the capital in the market starts to reduce or is less accessible and quite often it starts at the reinsurance level because the large catastrophes then end up with the retail (insurance) companies,” he told Thompson’s.

He said a lot of weather events are affecting insurers’ bottom lines but aren’t large enough to reach their reinsurance policies.

“They have a lot of events that don’t reach their reinsurance policies which means it’s the retail companies that are having the contraction of their capital,” he said. “The hard market here in Ontario isn’t what people in the industry would describe as a hard market.”

Mr. Simpson said insurers’ underwriting practices in Ontario have changed over the past year, putting more pressure on brokers.

“The reason you don’t read much about this at the moment is because the brokers are taking the heat,” he said. “They’re fending off client concerns by either finding them alternative products or explaining the reason for price increases. But at some point if the market gets tight enough that brokers are unable to do that then you’ll find consumers will start raising their voices and the politicians will hear about this.”

AIG Canada’s recent exit from the personal lines market is due to the uncertainty around the profitability in that line of business, he said. It didn’t come as a shock to brokers as pressure has been building up across the industry.

He said while industry challenges span personal and commercial lines, Ontario auto is putting pressure on other books of business.

“You may find that some of the property rates increase, or (insurers) are tighter on where they write property if there are any flood zones or water risks,” Mr. Simpson said.

“This is what I would term to be a hardening of the Ontario market, because of the knock-on effect,” Mr. Simpson said.

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