Canada's struggling hospitality businesses face 'perfect storm' as insurers flee
(This October 8 story corrects the penultimate paragraph to say that ALIGNED Insurance is an insurance broker, not a mortgage broker.)
By Nichola Saminather
TORONTO (Reuters) - Canadian hotel companies already hit by the downturn sparked by the coronavirus pandemic face another existential threat as insurance companies raise premiums or leave the room, citing losses and the risks to the sector.
Even before COVID-19, insurers around the world were pulling back on riskier companies to improve performance. The profit losses from the pandemic have accelerated the trend, prompting underwriters to exit selected categories or increase premiums in these.
The hospitality industry, especially those that require coverage for accidents caused by alcohol-disabled customers, has already been classified as a higher risk, said Karen Ritchie, vice president of Baird MacGregor Insurance Brokers and president of the Toronto Insurance Council. The coronavirus made that worse.
"It's a perfect storm," she said.
Many hotel companies were already operating with wafer-thin margins before the pandemic-related lockdowns. The inability to access affordable insurance could mean the end for them as they barely manage to hang on amid distance restrictions.
While these companies bear the same risks as elsewhere, the Canadian hospitality industry is facing greater success due to a much smaller insurance market dominated by Lloyd's syndicates, Ritchie said. Far more domestic insurers cover and spread the risk in countries like the United States, she said.
Lloyd's is a marketplace that includes various specialized insurers or syndicates that take out policies.
Lloyd's business volume declined by 8.6% in the first half of 2020, due to an intentional reduction by several syndicates exposed to poorly performing businesses, the group said in a statement: https: //www.lloyds .com / investor-relations / financial-performance / financial results / half-year results 2020.
The Lloyd's market lost £ 438 million ($ 569 million) from a profit of £ 2.3 billion a year earlier, mainly due to coronavirus losses.
"I would close"
Erik Joyal, co-owner of Ascari Hospitality Group in Toronto, was informed last month that the guidelines for his Hi-Lo bar would not be renewed because his insurer, part of Lloyd's, had moved away from restaurants and bars.
His broker found a policy with another insurer that was more than three times its current annual premium of $ 9,000, even though the restaurant had never made a claim.
"I would close the deal before I sign up for it," said Joyal, who continues to look for affordable policies.
Insurers, like other companies, need profits, said Pete Karageorgos, director of consumer and industry relations for the Insurance Bureau of Canada.
And there is still capacity and affordable coverage for businesses to point out measures to minimize risk, he added.
Arron Barberian said his Harry's Steak House in Toronto was dropped by his insurance company Groupone Insurance Services despite paying premiums when the store closed.
Groupone declined to comment.
Barberian found a policy through Intact Financial Corp that covers its other Toronto restaurant, Barberian's Steak House. While it's cheaper, it offers slim, potentially inadequate coverage, he said.
Intact's eligibility criteria for restaurants have not changed, and guidelines continue to be updated and new ones written, a spokeswoman said via email.
A Nova Scotia hotel owner who said he had increased premiums by 50% to extend his policy also found cheaper coverage through Intact.
Even so, the owner, who refused to be identified when negotiating the return of some premiums paid during the shutdown, said he was bracing himself for thousands of dollars in additional costs as a change of insurer accompanied by an inspection is and often calls for changes.
His former insurer, Wawanesa Insurance, attributed the premium increase even before the pandemic to higher fire and storm-related losses.
Despite being inoperable, "many bars and restaurants https://www.alignedinsurance.com/restaurant-insurance-overview still had contractual obligations and real risk that needed to be insured and maintained," said Andrew Clark. Managing Director of the mortgage broker ALIGNED Insurance.
"The unfortunate reality is that insurance companies are not ready to insure some companies right now, and they really don't have a lot of options but to close," said Clark.
(Reporting by Nichola Saminather; Additional reporting by Allison Martell; Editing by Denny Thomas and Steve Orlofsky)
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