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TO: MEMBERS OF THE FACILITY ASSOCIATION
ATTENTION: CHIEF EXECUTIVE OFFICER
BULLETIN NO.: F16 - 016
DATE: MARCH 2, 2016
SUBJECT: DRAFT MINUTES OF THE ANNUAL GENERAL MEETING
Please find attached, for your information, the draft minutes, Chairman’s remarks and
President’s remarks from the Facility Association Annual General Meeting held February 24,
2016.
David J. Simpson, M.B.A., FCIP, C. Dir.
President & CEO
Attach.
Minutes of the Facility Association Annual General Meeting – February 24, 2016 Page 1 of 4
Facility Association
DRAFT MINUTES OF THE ANNUAL GENERAL MEETING HELD AT THE CHELSEA HOTEL TORONTO
TORONTO, ONTARIO ON FEBRUARY 24TH, 2016
1. The President read the notice of meeting dated January 25, 2016 (Bulletin F16-002) and
confirmed the presence of a quorum.
Residual Market 1870 Votes represented in person Residual Market 406 Votes represented by proxy Residual Market 2276 Total represented (out of 2551 votes) Ontario RSP 286 Votes represented in person
Ontario RSP 1465 Votes represented by proxy Ontario RSP 1751 Total represented (out of 1974 votes)
Alberta RSP 96 Votes represented in person
Alberta RSP 283 Votes represented by proxy Alberta RSP 379 Total represented (out of 430 votes)
New Brunswick RSP 16 Votes represented in person
New Brunswick RSP 40 Votes represented by proxy New Brunswick RSP 56 Total represented (out of 77 votes)
Nova Scotia RSP 13 Votes represented in person Nova Scotia RSP 47 Votes represented by proxy Nova Scotia RSP 60 Total represented (out of 84 votes) 2. On a MOTION made by Mr. Patrick Barbeau, SECONDED by Mr. Andrew Cartmell
and CARRIED, the Minutes of the Facility Association Annual General Meeting held on February 26th 2015, as previously circulated, were approved.
3. THE CHAIRMAN’S REMARKS – ATTACHED 4. THE PRESIDENT’S REMARKS – ATTACHED
Minutes of the Facility Association Annual General Meeting – February 24, 2016 Page 2 of 4
5. REPORTS OF THE PROVINCIAL OPERATING COMMITTEES
The written reports were attached to the Agenda. The Chairman noted that not all of the Chairpersons were present, however, the President or the Committee staff liaison would be responding to questions on their behalf. On MOTION made by Mr. Steve Cohen, SECONDED by Mr. Denis Dubois and CARRIED, the reports were adopted.
6. REPORTS OF THE ADVISORY COMMITTEES
The reports of the Advisory Committees were circulated with the Agenda. The Chairman asked if there were any questions arising from these reports and indicated that the President or the Committee staff liaison were present to answer any questions. On MOTION made by Mr. George Hardy, SECONDED by Ms. Linda Regner-Dykeman and CARRIED, the reports were adopted.
7. NOMINATING REPORT
Mr. James Tucker presented the Nominating Report on behalf of the Governance and Human Resources Committee. Nominated for election to the Board of Directors for a one-year term expiring in the year 2017: Darren Lipsett Bridgewater Insurance Nominated for election to the Board of Directors for a two-year term expiring in the year 2018: Patrick Barbeau Intact Insurance Andrew Cartmell SGI/Coachman Insurance Steve Cohen Aviva Canada Karen Dyberg Dyberg Insurance George Hardy The Co-operators General Insurance Don Sollows Johnson Inc. Aaron Purdue Millenium Insurance The continuing members of the Board of Directors with terms expiring in 2017 are:
Michael Brattman Erb & Erb Insurance Brokers Linda Regner-Dykeman Travelers Canada Denis Dubois Desjardins Insurance
Minutes of the Facility Association Annual General Meeting – February 24, 2016 Page 3 of 4
Bob Hillman AMA Insurance Janis Riven Concordia University J. Robert Tisdale Pembridge & PAFCO Insurance Companies James Tucker The Boston Consulting Group
Mr. James Tucker noted that the President is a member of the Board by virtue of his office.
8. ELECTION OF DIRECTORS
The Chair asked if there were any nominations from members in attendance. There being none, on MOTION by Mr. Don Sollows, SECONDED by Mr. Patrick Barbeau and CARRIED, IT WAS RESOLVED that nominations be closed. As there were no further nominations, the Chairman directed that a single ballot be cast in favour of those nominated.
9. INDEPENDENT DIRECTOR REMUNERATION
On MOTION made by Mr. Andrew Cartmell, SECONDED by Mr. Steve Cohen and CARRIED, IT WAS RESOLVED that the independent director remuneration is established as follows: 1) An annual stipend of $12,000 plus meeting fees of $1,250 per meeting of the Board
or a Board Committee, with reimbursement of travel expenses; plus 2) $500 for each ad-hoc conference call; plus 3) A further $3,000 annual stipend for those who Chair the Board or a Committee of the
Board.
10. FINANCIAL STATEMENTS Mr. Ratan Ralliaram from the firm of Deloitte LLP advised that they were presenting an
unqualified opinion with respect to the Financial Statements of the Facility Association Residual Market Segment as at October 31st, 2015, and the Risk Sharing Pools as at October 31st, 2015.
On MOTION made by Mr. Denis Dubois, SECONDED by Mr. George Hardy and
CARRIED, all of the above Financial Statements for the fiscal year 2015 as previously circulated were accepted.
Minutes of the Facility Association Annual General Meeting – February 24, 2016 Page 4 of 4
11. APPOINTMENT OF AUDITORS
Upon MOTION made by Ms. Linda Regner-Dykeman, SECONDED by Mr. Don Sollows and CARRIED, the firm of Deloitte LLP was appointed as the auditors for Facility Association for the fiscal year 2016, with terms to be negotiated with the Audit and Risk Committee of the Board of Directors.
12. OTHER BUSINESS
No other business was brought before the meeting. 13. TERMINATION OF MEETING
There being no further business, on MOTION made by Mr. Patrick Barbeau, SECONDED by Mr. Andrew Cartmell and CARRIED, IT WAS RESOLVED that the meeting be terminated.
J. R. Tisdale Chairman
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The Chair usually begins his remarks to the Facility Association AGM
by talking about where the Association sees availability pressures
building. I am very pleased to inform you that we do not see those
pressures building at the present time. The President will have more
detail on volume changes in specific jurisdictions in his annual update.
In the meantime, I will only highlight the risk that there may be a
mismatch between the product changes in Ontario and the rates
approved by the regulator and it is far too early to tell whether that is
an issue or not.
Although we do not see availability pressures building in the
immediate term, we do know from past history that they can emerge
very quickly. I can assure you that the Board and management will
continue to remain vigilant especially through our structured
Enterprise Risk Management process.
Against that background of relatively stable residual market volumes,
the Board of Directors of Facility Association has been very active in
thinking about what the optimal residual market mechanisms for
automobile insurance in Canada could be. Our current mechanisms
are something of a “patchwork quilt”, in that they were created in
response to specific circumstances at specific times over the years,
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leading us to have, for example, five risk sharing pools for private
passenger vehicles, each with different parameters and characteristics.
Recognizing that that the status quo is always an option, the Board felt
it was worthwhile to spend an extensive amount of time and effort
looking at the various types of residual market mechanisms used in
Canada the United States and elsewhere, and the relative merits of
each.
I want to emphasize right here that no decisions have been made.
However, the Board is of the view that there is enough of an
opportunity to improve the residual market mechanism structures to
the potential benefit of the industry and its policyholders to warrant
further investigation. With that in mind, at this morning’s Board
meeting, the Board authorized the creation of a working group with
president and CEO as its liaison. The Board has given the working
group a mandate and is looking forward to hearing from it later in the
year.
Reviewing, assessing, and optimizing residual market mechanisms is
our first priority of the four priorities in the current three year strategic
planning cycle which began last year. The other three priorities are:
- enhance analysis, communication, and reporting capabilities
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- enhance operational efficiency and the control environment
- review and strengthened the ERM framework
The President will have additional detail on those three priorities in his
remarks.
Those of you that have been to previous AGMs have heard me and
other Board Chairs talk about the importance of a cost of capital
provision being allowed in residual market ratemaking. This may
seem like a technical matter, but the reality is that without all of the
cost elements of the risk transfer being allowed in residual market
rates, there is a significantly increased risk that residual market rates
will be inappropriately in conflict, and competitive, with the rates of
Facility Association’s member companies. In turn, that puts us at
significant risk of being offside the aspect of our mission statement
that says “we strive to keep the market share of the residual markets as
small as possible, so consumers may benefit from the competitive
marketplace to the greatest extent possible”.
With that as background, I am pleased to inform you that in the past
year, a cost of capital provision has been approved for use in residual
market ratemaking in the Yukon, the Northwest Territories, and
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Nunavut. That brings to eight of the nine jurisdictions that we serve
that allow the cost of capital provision in our rates; leaving
Newfoundland and Labrador as the only jurisdiction that does not
allow it thus far. Your Board plans to address the cost of capital
provision issue in Newfoundland and Labrador at some point in the
future, however given the very costly nature of the regulatory
framework there, and the need to maintain our focus on rates for
specific lines of business, we will continue to prioritize our efforts
there in the best interests of the membership.
In 2014, the Audit and Risk Committee of the Board led a request for
proposal process for our audit firm and the membership accepted the
Committee’s recommendation to continue with our incumbent firm,
Deloitte. In 2015, our audit partner at Deloitte, Doug Gray, retired
and on behalf of the Board I want to thank our new audit partner at
Deloitte, Ratan Ralliaram, for ensuring a smooth transition.
I would now like to thank our departing directors for their service.
Jean Roy joined the Board in February of 2014 and stepped forward
immediately by volunteering as a member of the Audit and Risk
Committee of the Board. As a member of that committee he
contributed actively to the RFP conducted for Facility Association’s
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external audit services. He then served as Deputy Chair of the Board
which made him a member of the Governance and Human Resources
Committee of the Board as a result. Jean was always engaged, focused
and committed to participating constructively in the dialogue with his
fellow Directors. He resigned from the Board following a personal
career transition from working at a member company to working at a
consulting actuarial firm and we certainly wish him all the very best.
Our broker representative for Alberta and the Territories, Ken Dueck,
is leaving the Board following the conclusion of his two year term,
and on behalf of the Board I thank him for his thoughtful, deliberate
and constructive approach to the issues which came before the Board
in that time.
Jason Sharpe, our broker representative for the Atlantic Provinces, is
leaving us after only one year on the Board. We all know that those
who do things well get asked to do more, and that has been the case
with Jason. Last fall, he was elected Vice President of the Insurance
Brokers Association of Newfoundland and between those
responsibilities and those of his own business, we certainly understand
his decision to step away from the Facility Association Board. I thank
Jason for his service.
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I have been a Director on the Facility Association Board for quite
some time now. Over those years, I have seen the progress and
evolution in the quality of the governance at the Board and its
committees. Being on the Board has also given me a “front row seat”
for automobile insurance issues across nine jurisdictions, giving me a
perspective that has enhanced my understanding of the Canadian
automobile insurance marketplace generally. Because it has been, and
continues to be, a very positive experience for me, I was somewhat
surprised and disappointed at the low number of candidates that came
forward when the call went out in early December for nominations to
the Board. In the coming year, in my role as Past Chair, I will be
encouraging my industry colleagues to think of being a Director on the
Facility Association Board not as an obligation, but as an opportunity.
I also call on my fellow Directors to encourage their industry
colleagues in a similar fashion.
I will now turn the podium over to our President and CEO, David
Simpson, for his remarks.
Thank you.
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Thank you Mr. Chairman. Consistent with my customary practice, I will be providing the annual roundup of market share and financial results by jurisdiction. I will then update you on some of the things we have accomplished operationally over the last 12 months and what we are planning to achieve in the current year.
The market shares I will be presenting are for Private Passenger vehicles (or PPV) only. They are presented on a preliminary basis in that we currently only have 2014 industry data available to us for use in our calculations. Final market share figures will be posted on our website when they become available.
The financial results are based on our audited financial statements for fiscal year 2015, which ended October 31st. Accounting standards do not make it feasible to show the impact of our results on the industry in our statements; however charts illustrating the impact of our results on our member companies are available on the “provincial profiles” section of our website. Costs incurred by our members as a result of their compulsory participation in Facility Association are outlined in Note 2 of our Financial Statements.
Residual market volumes have been volatile over the years. Because of that, relatively minor changes in loss ratio estimates on older years where volumes were much higher can have a disproportionate impact on the current fiscal year, where volumes are much lower. Therefore, I will also provide an overview of loss ratios by accident year to give you a better sense of how the business is actually performing through time. As with market share, the loss ratios are for private passenger vehicles only.
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Slide 3
Residual Market - Private Passenger Market Share @ December 31, 2015
All Jurisdictions
Exposure Count Basis 3
1.81.5
0.80.6 0.5
0.7
1.6
3.8
2.3
1.31.0
0.7 0.6 0.5 0.4 0.4 0.4 0.3 0.3 0.3
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
On an all jurisdictions basis, the residual market private passenger
market share was 3 tenths of one percent, the same level that we saw in
2013 and 2014.
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Slide 4
Residual Market – All Vehicle TypesFiscal Year Combined Operating Ratio @ October 31, 2015
All Jurisdictions
4
87
7668
93
108
123
149
172
67 69
55
99
126
94
4757
7282
9284
0
50
100
150
200
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
The combined ratio for all jurisdictions and all vehicle types ended the
year at 84%. Again, this is from the perspective of the Facility
Association. It does not include all costs from the Membership
perspective and the policy liabilities have been valued using a 0%
discount rate.
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Slide 5
Residual Market - Private Passenger Market Share @ December 31, 2015
Newfoundland & Labrador
Exposure Count Basis 5
5.25.0
4.5 4.6
3.63.8
6.6
7.5
6.5
4.7
2.82.4 2.4
3.23.4
3.84.1 4.0
3.73.4
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
I will now take you through our individual jurisdictions from east to
west. Our private passenger market share in Newfoundland & Labrador
moved down slightly to 3.4%.
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Slide 6
This chart shows Newfoundland & Labrador’s private passenger loss
ratios by accident year. If you cannot see the legend, the blue represents
paid indemnity, the red represents case reserves, and the green
represents IBNR. The dotted line indicates our current estimate of the
ultimate indemnity amount that will be paid out plus a provision for
adverse deviation. Please note that not all loss adjustment expenses are
included in the loss ratio figures.
-
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Residual Market - Private Passenger Accident Year Loss Ratios @ October 31, 2015
Newfoundland & Labrador
Paid Indemnity as % EP Case Reserves as % EPIBNR for Indemnity (nominal) as % EP Ultimate Indemnity (F/S) as % EP
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Slide 7
Residual Market – All Vehicle TypesFiscal Year Combined Operating Ratio @ October 31, 2015
Newfoundland & Labrador
7
Newfoundland & Labrador’s combined ratio for the year, for all vehicle
types, was 127. A significant loss driver for the province continues to
be taxis. We recently received approval to increase our taxi rates there
but, even with that increase, we believe our rates to still be inadequate,
and with the support of the Board of Directors, we will continue to
pursue rate adequacy there.
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Slide 8
Residual Market - Private Passenger Market Share @ December 31, 2015
Nova Scotia
Exposure Count Basis 8
4.1
3.2
1.3
0.81.1
1.9
4.9
7.1
7.7
5.9 6.0
4.6
3.2
1.9
1.00.8 0.7 0.7 0.6 0.7
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
Our PPV market share in Nova Scotia moved up marginally to 7 tenths
of one percent.
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Slide 9
Nova Scotia’s residual market private passenger accident year loss
ratios continue to be relatively moderate.
(10.0%)
-
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Residual Market - Private PassengerAccident Year Loss Ratios @ October 31, 2015
Nova Scotia
Paid Indemnity as % EP Case Reserves as % EPIBNR for Indemnity (nominal) as % EP Ultimate Indemnity (F/S) as % EP
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Slide 10
Residual Market – All Vehicle TypesFiscal Year Combined Operating Ratio @ October 31, 2015
Nova Scotia
10
97 94 9199
114
163152
127
59
99
7386
194
-23
-2
4451
97 9384
-50
0
50
100
150
200
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
Nova Scotia’s residual market combined ratio for all vehicle types was
84 for the year.
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Slide 11
Nova Scotia Risk Sharing PoolMarket Share @ December 31, 2015
Exposure Count Basis 11
1.0
2.1
2.6
1.9 1.9
2.42.2 2.3 2.3
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2007 2008 2009 2010 2011 2012 2013 2014 2015
%
The Nova Scotia Risk Sharing Pool market share remained stable at
2.3%. This pool is for inexperienced drivers with clean records and,
like all of our Risk Sharing Pools, is for private passenger vehicles
only.
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Slide 12
The loss ratios for the Nova Scotia RSP have been more stable over the
last four years than one might expect from a small premium pool with a
very specific target class (that being inexperienced drivers with clean
driving records).
-
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015
Nova Scotia Risk Sharing PoolAccident Year Loss Ratios @ October 31, 2015
Paid Indemnity & Allowed Claims Expense Ratio Case RatioIBNR (nominal) Ratio Ultimate Indemnity & Allowed Claims Expense (F/S) as % EP
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Slide 13
13
Nova Scotia Risk Sharing PoolFiscal Year Combined Operating Ratio @ October 31, 2015
218
204
10391 96 100
138
152146
0
50
100
150
200
250
2007 2008 2009 2010 2011 2012 2013 2014 2015
%
The combined operating ratio of the Nova Scotia RSP has been quite stable over the last three years, ending the year at 146.
For those of you not familiar with risk sharing pools, RSP risks are written at member company rates, in contrast to the FARM, where risks are written at our rates (subject to regulatory approval).
RSPs are designed to allow member companies to pool risks that they believe to be underpriced. Because of that, over time, we expect to see loss ratios and combined ratios in the RSPs that are relatively high.
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Slide 14
Residual Market - Private Passenger Market Share @ December 31, 2015
Prince Edward Island
Exposure Count Basis 14
4.3
3.2
2.6 2.6
3.3
4.6
6.5
8.0
7.1
5.5
3.7
2.6
2.0 1.9 1.82.0 1.9 1.8 1.7
1.9
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
The market share for PEI’s Private Passenger residual market moved
up marginally last year to 1.9%.
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Slide 15
The PEI residual market private passenger accident year loss ratio
moved up 10 percentage points in 2015. In jurisdictions like PEI, where
the premium volumes are quite small, one or two large losses in a year
can have a dramatic impact on the loss ratio. Because of our focus on
our mission to keep our market share as small as possible, most lines of
business in the FARM in most of the jurisdictions we serve are, or are
becoming, very small in absolute terms so increasing volatility is
becoming the order of the day.
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Slide 16
Residual Market – All Vehicle TypesFiscal Year Combined Operating Ratio @ October 31, 2015
Prince Edward Island
16
73
129
8792
110
88
112
96
74
60
49
72
133
86
8
102
66 66
116
71
0
50
100
150
200
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
PEI’s residual market combined ratio for all vehicle types ended the
year at 71.
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Slide 17
Residual Market - Private Passenger Market Share @ December 31, 2015
New Brunswick
Exposure Count Basis 17
3.8
2.6
1.20.8 0.9
1.5
4.94.5
2.52.3
2.11.7
1.5 1.61.8 1.8 1.7
1.5 1.5 1.6
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
The residual market private passenger market share in New Brunswick
has been stable at between 1.5 and 1.8% for the previous eight years,
and last year was no exception at 1.6%.
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Slide 18
The New Brunswick Private Passenger accident year loss ratio
increased again last year but is still at a reasonable level.
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Slide 19
Residual Market – All Vehicle TypesFiscal Year Combined Operating Ratio @ October 31, 2015
New Brunswick
19
113
96 96
130 132
150
183
104
30
78
55 60
88
174
-12
62 6759
98 98
-50
0
50
100
150
200
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
The New Brunswick combined ratio for all vehicle types again ended
the year at 98.
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Slide 20
New Brunswick Risk Sharing PoolMarket Share @ December 31, 2015
Exposure Count Basis 20
1.9
2.42.6 2.5
2.7
2.1
1.7
2.21.9 1.8
2.1
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
The New Brunswick RSP market share increased slightly last year to
2.1%.
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Slide 21
The accident year loss ratio for the New Brunswick Risk Sharing Pool
continued to climb last year.
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Slide 22
New Brunswick Risk Sharing Pool Fiscal Year Combined Operating Ratio @ October 31, 2015
22
103
123
135
120
174
24
8089
111
136140
0
50
100
150
200
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
The combined ratio for the New Brunswick Risk Sharing Pool ended
the year at 140.
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Slide 23
Residual Market - Private Passenger Market Share @ December 31, 2015
Ontario
Exposure Count Basis 23
1.0 0.9
0.2 0.1 0.2 0.3
0.9
3.5
1.3
0.60.4 0.3 0.2 0.1 0.1 0.1 0.1 0.0 0.0 0.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
In Ontario, the residual market private passenger market share dropped
slightly again last year and remains less than one tenth of 1%.
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Slide 24
The Ontario residual market private passenger accident year loss ratio
continues to be stable.
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Slide 25
Residual Market – All Vehicle TypesFiscal Year Combined Operating Ratio @ October 31, 2015
Ontario
25
7664
45
112
134
109
191
227
63 58
43
139148
186
56
20
48 48
63
43
0
50
100
150
200
250
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
The combined operating ratio for all vehicle types in the Ontario
residual market was 43%. This highlights the phenomenon I
mentioned earlier showing the impacts changes to the loss ratios for
older years of larger volumes can have on the current fiscal year. For
example, we had approximately 225,000 private passenger cars in 2003
compared to the less than 2000 we have today; in 2002 we had close to
$700M PPV written premium compared to the approximately $12M we
have today.
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Slide 26
Ontario Risk Sharing Pool Market Share @ December 31, 2015
Exposure Count Basis 26
3.5
2.7
1.7
1.3 1.31.6
1.9 2.0 2.0 2.02.2
2.5 2.52.7
2.9
2.5 2.62.3 2.3
1.9
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
The market share of the Ontario Risk Sharing Pool declined to 1.9%
last year, the lowest level since 2002.
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Slide 27
The Ontario risk sharing pool loss ratios continue to be relatively high,
indicating that ceding companies are accurately assessing the risks to
be ceded to the pool.
This slide also illustrates the dramatic year-to-year changes in loss
ratios that we can see in RSPs. From 2010 to 2011, the loss ratio
dropped approximately 70 points. Those kinds of sudden, large changes
make the actuarial work with respect to these pools extremely
challenging.
Again, the business in the RSPs is written at member companies’ own
rates.
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Slide 28
Ontario Risk Sharing PoolFiscal Year Combined Operating Ratio @ October 31, 2015
28
87
45
108
73
96
163
185
138
98
141
119
139
169
202
229
182
146133
118
73
0
50
100
150
200
250
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
The combined operating ratio for the Ontario risk sharing pool was 73,
showing the impact of reserve releases from prior years.
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Slide 29
Residual Market - Private Passenger Market Share @ December 31, 2015
Alberta
Exposure Count Basis 29
2.8
2.3
1.61.2
0.9 1.01.3
3.23.0
1.3
0.3 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.2 0.10.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
The residual market’s private passenger market share in Alberta
declined from 2 tenths of 1% where it had been for four years in a row,
to 1 tenth of 1%. Alberta has a very stringent “take all comers” market.
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Slide 30
The PPV accident year loss ratios for the residual market in Alberta
have been relatively moderate and stable in recent years. More than
90% of the FARM PPV business in the province is written at rates
capped by the premium regulation there.
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Slide 31
Residual Market – All Vehicle TypesFiscal Year Combined Operating Ratio @ October 31, 2015
Alberta
31
95
82 8173
92
10499 95
88
7567
72
95
43
6168
81
103 9990
0
50
100
150
200
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
The Alberta residual market combined operating ratio for all types of
vehicles improved from 99 to 90.
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Slide 32
Alberta Grid Risk Sharing PoolMarket Share @ December 31, 2015
Exposure Count Basis 32
11.6
8.6
7.1
6.1
5.0
4.2 4.0
3.3
2.6 2.72.3
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
The market share of the Alberta Grid Risk Sharing Pool, a risk sharing
pool for private passenger vehicles subject to the regulated maximum
premium in the province, resumed its declining trend and ended the
year at 2.3%, its lowest level ever.
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Slide 33
The accident year loss ratios for the Alberta grid risk sharing pool have
been relatively stable over the years.
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Slide 34
Alberta Grid Risk Sharing Pool Fiscal Year Combined Operating Ratio @ October 31, 2015
34
135
97
70
125
6862
94101
110
128
100
0
50
100
150
200
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
The Alberta Grid Risk Sharing Pool combined operating ratio for 2015
was 100.
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Slide 35
Alberta Non-Grid Risk Sharing PoolMarket Share @ December 31, 2015
Exposure Count Basis 35
3.13.4
3.2
2.7
2.3 2.4 2.42.6
2.4 2.42.2
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
The market share of the Alberta Non-Grid Risk Sharing Pool (a pool
for private passenger risks which are not subject to the regulated
maximum premium but which insurance companies are required to
accept under the take all comers rules in the province) was down
slightly to 2.2%, its lowest level ever.
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Slide 36
The Alberta Non-Grid Risk Sharing Pool accident year loss ratio has
been quite stable over the last four years.
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Slide 37
Alberta Non-Grid Risk Sharing Pool Fiscal Year Combined Operating Ratio @ October 31, 2015
37
250
144
114
139
113102
123 127
147 149
121
0
50
100
150
200
250
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
The combined ratio for the Alberta Non-Grid Risk Sharing Pool moved
down to end the year at 121.
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Slide 38
Residual Market - Private Passenger Market Share @ December 31, 2015
Northwest Territories
Exposure Count Basis 38
14.715.8 15.8 16.1
13.115.4
17.8
24.4
28.830.9
32.430.9
25.8
22.921.3
18.4 17.616.3
15.013.7
0.0
10.0
20.0
30.0
40.0
50.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
With regard to the northern territories, I will not comment on each one
individually other than to say the volumes here are very small and the
results are somewhat volatile. We continue to see positive, declining
market share trends for private passenger vehicles in all three territories
in recent years. The Territories are unique in that their financial results
are shared by all automobile insurers in the six provinces that we serve.
In the provinces, results are shared within each individual jurisdiction.
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Slide 39
Slide 40
Residual Market – All Vehicle TypesCombined Operating Ratio @ October 31, 2015
Northwest Territories
40
89
46
115
73
51
110
216
279
67
25
10087 84
68
49 4761
53
96
48
0
50
100
150
200
250
300
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
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Slide 41
Residual Market - Private Passenger Market Share @ December 31, 2015
Yukon
Exposure Count Basis 41
6.8 7.06.6
6.9
6.2
5.55.2
6.3 6.56.2
5.6 5.6
4.4
3.2
2.4 2.2 2.42.0 1.9 1.7
0.0
2.0
4.0
6.0
8.0
10.0
12.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
Slide 42
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Slide 43
Residual Market – All Vehicle TypesFiscal Year Combined Operating Ratio @ October 31, 2015
Yukon
43
33
85
70
30
55
197
105
7367
33
105110
119
7769
56
145
86
100
143
0
50
100
150
200
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
Slide 44
Residual Market - Private Passenger Market Share @ December 31, 2015
Nunavut
Exposure Count Basis 44
12.915.9 15.5 15.3
18.7
24.9
28.9
20.718.3
49.8
46.1 44.9
40.5 40.8
31.0
27.1
22.5
0.0
10.0
20.0
30.0
40.0
50.0
60.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
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Slide 45
Slide 46
Residual Market – All Vehicle TypesCombined Operating Ratio @ October 31, 2015
Nunavut
46
72
60
74
51
6267 64
59 60 61
85
42 40
119
74
52
0
50
100
150
200
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
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My focus today has been on private passenger vehicles, and I would also like to point out that, consistent with our mission, we have seen declining volumes across most lines of business in most of the jurisdictions we serve over the last couple of years, especially with respect to motorcycles, snow vehicles and ATVs. I encourage member companies and intermediaries to contact us to find out where there might be further opportunities for depopulation.
The Chair highlighted our activities under the first of our four priorities in our three year strategic plan.
With respect to our second priority, Enhance analysis, communication, and reporting capabilities:
- we investigated opportunities to use both telematics and predictive modeling last year and this year we will further pursue opportunities to use new technologies and analytical techniques in our depopulation efforts.
- we developed key messages for specific audiences to integrate into a comprehensive communications strategy in our Enterprise Risk Management Framework.
- we also surveyed our members’ for their reporting requirements and are currently reviewing ways that we can improve our Outlooks to better meet member company needs.
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With respect to our third priority Enhance operational efficiency and the control environment:
- following work done last year we are now accepting electronic signatures on new applications and endorsements;
- we made significant progress in conducting a comprehensive review of our control environment; and
- we developed a recommendation to replace our accounting software after carefully evaluating a number of accounting software packages.
With respect to our fourth priority: Review and Strengthen the Enterprise Risk Management Framework:
- we performed a comprehensive review of our ERM framework and developed a structured approach to better detect emerging risks.
On behalf of the Board and staff I would like to recognize the following volunteer committee members who moved on to other things since our last Annual General Meeting for their services to the Association:
Bob Hillman of AMA. Bob served as Chair of the Accounting Committee and is now a Director on our Board.
Carolyn Mitchell of Desjardins and Andy Taylor of Gore Mutual have also left the Accounting Committee.
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Denis Cloutier of Intact and Michel Trudeau of Echelon General have resigned from the Actuarial Committee. Denis served on the Committee for 14 years, most recently as Deputy Chair.
Joan Bagnell of RSA and Lisle George of Unifund have resigned from the Rates and Rules Committee.
Ron Schenk of State Farm, Johanne Desloges of Aviva and Sharon Clark of TD Insurance have resigned from the Claims Committee.
Blair Coady of RSA, Gord Enders of Direct-Line Insurance, and Howard Firth of T.A Firth & Son Limited have resigned from the Alberta Operating Committee. Howard served on the Committee for 13 years.
Mary Conroy of Unifund left the Newfoundland & Labrador Operating Committee after serving for over 15 years.
Joan Bagnell and Gordon Rose have resigned from the Operating Committees for Nova Scotia, New Brunswick and Prince Edward Island. Gordie served on the Nova Scotia Operating Committee for over 15 years.
It is with very mixed feelings that I note our Vice President of Underwriting and Claims, Jill Hepburn, will be retiring on June 30th of this year after 16-1/2 years of service with Facility Association. Jill and I have worked very closely for almost 15 years, and I have enjoyed every minute of it. She’s a true leader, and continues to be a mentor to many of our employees. Our vision statement says, in part, that our goal is to be an: “…administrator of automobile insurance residual
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markets, whose objective opinion on residual markets and related issues is respected and sought by stakeholders”. Jill lives that vision every day and is frequently sought out for her opinion by people at member companies, IBC, and the regulatory community. Her retirement will therefore be a loss not only to Facility Association but to our entire industry. She will leave us with the respect, gratitude, and best wishes of everyone on staff, especially me. Thank you Jill.
Thanks also to our outgoing Chair, Bob Tisdale. Bob is a true statesman of our industry—last November he was elected Chair of the Board of Governors of the Insurance Institute of Canada—and he always takes a broad perspective on the issues facing Facility Association. He is always careful to make sure all of the views around the Board table are heard at our meetings, and has always been thoughtful and responsive whenever I have consulted him for guidance. It’s great that Bob is staying on the Board to continue to contribute his insights as Immediate Past Chair. Thank you Bob.
I also thank the Board of Directors, the Facility Association staff, our many volunteers, and our business partners for their hard work, dedication, and support over the past year.
I enjoyed working with, and learning from, everyone. And, as I always do, I am looking forward to doing more, and doing it better, in the year ahead.
Mr. Chairman that concludes my remarks.