RSA Canada’s decision to discontinue its Canadian Northern Shield (CNS) brand in 2022 created substantial challenges for insurance brokers and homeowners in British Columbia, where exposure to earthquakes, wildfires and flooding was already putting pressure on insurance and reinsurance capacity.
The closure removed an established provider from the provincial property and casualty insurance market, forcing brokers to transfer policies to other carriers at a time when catastrophe coverage was becoming more expensive and difficult to secure.
- RSA Canada’s closure of Canadian Northern Shield in 2022 forced brokers to transfer policies to other insurers, increasing pressure on British Columbia’s limited catastrophe reinsurance capacity.
- Homeowners in earthquake and flood-prone areas faced higher premiums, larger deductibles and reduced coverage limits, with some insurers declining new risks altogether.
- A magnitude 9.0 earthquake in British Columbia could cause losses approaching $75 bn, raising concerns about insurers’ capacity to cover catastrophe-exposed properties.
Canadian Northern Shield had received an AA- Insurer Financial Strength rating from Fitch Ratings in July 2022, shortly before the brand’s discontinuation. The decision therefore involved an insurer with a strong financial strength assessment rather than one identified as financially distressed.
Cassie Ayers, then a personal insurance trainer at Megson FitzPatrick, told Insurance Business Canada that replacing CNS coverage was particularly difficult in areas with substantial earthquake exposure.
Vancouver Island presented one of the greatest challenges because insurers had limited reinsurance capacity for earthquake risks. Brokers serving communities exposed to wildfires and flooding faced similar constraints.
The withdrawal also increased brokers’ administrative workloads as existing policies had to be remarketed and replacement coverage arranged.
Megson FitzPatrick transferred its CNS clients to other insurers through coordinated placement arrangements, but Ayers said individual files still required considerable attention.
Higher insurance premiums and reduced catastrophe coverage
Canadian Northern Shield had offered some of the most competitive insurance rates in parts of British Columbia before its closure.
Moving customers to other carriers often resulted in substantial premium increases, particularly as rising construction costs affected property replacement values.
Ayers said brokers were attempting to secure comparable coverage and pricing, although replacement policies frequently differed in deductibles, limits and insured risks.
Some policyholders could no longer obtain the same protection they previously held. Others faced higher deductibles or reduced coverage despite paying more.
The transition also affected renewal administration, with some customers receiving replacement policy documents closer to their renewal dates than usual.
British Columbia’s catastrophe exposure complicated the process. Earthquake risks are concentrated around Vancouver Island and the Lower Mainland, while wildfire exposure is significant in the province’s Interior. Flood risks extend across multiple regions.
Limited reinsurance capacity, changing regulatory requirements and declining reinsurer appetite made these exposures more difficult for domestic insurers to manage.
According to Ayers, insurers had sharply restricted earthquake coverage during the six months preceding the interview, reducing available limits, increasing deductibles and excluding earthquake protection in certain areas.
Most of her clients could still obtain some earthquake coverage, but the additional premium sometimes represented approximately half of their total insurance cost.
The potential financial exposure was substantial. A magnitude 9.0 earthquake in British Columbia was estimated to cause losses approaching $75 bn.
Insurers could also assess earthquake eligibility based on a property’s construction year, building materials, proximity to known faults and underlying ground conditions.
Insurers responded differently to the Northern Shield exit
The redistribution of CNS policies affected underwriting capacity across Western Canada, with insurers taking different approaches to the additional business.
Some carriers viewed the closure as an opportunity to expand their relationships with insurance brokers and attract new customers.
Others imposed significant restrictions. Ayers reported that one insurer refused to accept applicants whose most recent coverage had been with CNS.
Certain insurers agreed to assume CNS policies only when brokers committed additional commercial insurance business or placed policies from other geographical regions with them.
Canadian Northern Shield’s history in British Columbia
Canadian Northern Shield had been an established participant in British Columbia’s insurance market before joining RSA Canada.
In October 2007, Royal & SunAlliance Canada Group announced an agreement to acquire CNS from The CUMIS Group Limited for approximately C$75 mn in cash.
At the time, CNS generated approximately C$164 mn in annual premiums, based on 2006 figures, and distributed personal property, commercial and private automobile insurance through more than 200 brokers across British Columbia.
The acquisition strengthened Royal & SunAlliance’s position in the province and was expected to make it Canada’s sixth-largest property and casualty insurer.
Rowan Saunders, then president and CEO of Royal & SunAlliance Canada, said the transaction would diversify the group’s business and provide brokers and customers with additional underwriting capacity and expertise.
CUMIS Group CEO Kenn Lalonde explained that the sale reflected the company’s strategy of concentrating on credit unions and their members, whereas CNS served a broader customer base.
Nearly 15 years later, the retirement of the CNS brand presented a different challenge for British Columbia’s insurance market.
Instead of adding underwriting capacity, its withdrawal required other insurers to absorb existing customers while managing substantial catastrophe exposures.
The experience demonstrated the consequences of reduced insurance capacity in high-risk markets, where replacing an established insurer can lead to higher costs, more restrictive policy terms and difficulties obtaining essential earthquake and flood protection.
