(Reuters) – Canadian hospitality companies, already plagued by the downturn caused by the coronavirus pandemic, face another existential threat when insurance companies nail premiums or leave space, citing losses and sector risks.
Even before COVID-19, insurance companies globally declined from risky companies to improve performance. Pandemic's profit hits have accelerated the trend and led insurers to leave or raise premiums in selected categories.
Hospitality companies, especially those in need of coverage for accidents caused by alcohol-damaged customers, were already seen as a higher risk, said Karen Ritchie, vice president of Baird MacGregor Insurance Brokers and president of the Toronto Insurance Council. Coronavirus made it worse.
"It's a perfect storm," she said.
Many hotel companies were already working on razor margins before pandemic-driven locking. An inability to access affordable insurance can spell the end for them, given that they barely manage to keep their distance from restrictions.
Although these companies carry the same risks as elsewhere, the Canadian hotel industry has faced a major hit due to a much smaller insurance market dominated by Lloyd & # 39 ;s of London Syndicate, Ritchie said. Many more domestic insurance companies cover the space in countries like the United States and spread the risks, she said.
Lloyd's business volumes decreased by 8.6% during the first half of 2020, reflecting a deliberate reduction in several syndicates exposed to malfunctioning business segments. , the group said in a statement
Lloyd's market lost 438 million pounds ($ 569 million), compared to a profit of 2.3 billion pounds a year earlier, mainly driven by coronavirus ̵
Erik Joyal, co-owner of the Ascari Hospitality Group in Toronto, was told last month that his Hi-Lo Bars policy would not be renewed as his insurer, part of Lloyd & # 39 ;s, moved away from restaurants and bars.
His broker found insurance through another insurance company more than three times his current $ 9,000 Canadian ($ 6,855) annual premium, even though the restaurant had never claimed.
"I would close the business before I signed it," said Joyal, who continues to search for an affordable smile policy.
Insurance companies, like other companies, need profits, says Pete Karageorgos, Director of Consumer and Industry Relations at Canada Insurance Agency.
And there is still capacity and affordable coverage available to companies that can demonstrate measures to minimize risks, he added.
Arron Barberian said his Harry & # 39 ;s Steak House in Toronto was dropped by his insurance company, Groupone Insurance Services, even though he paid premiums when the business closed.
Groupone did not comment.  Mr. Barberian found a policy through Intact Financial Corp., which insures his second Toronto restaurant, Barberian & # 39 ;s Steak House. Although cheaper, it offers narrow, possibly insufficient coverage, he said.
Intact's insurance criteria for restaurants have not changed, and it continues to renew policies and write new ones, a spokeswoman said via email.
A Nova Scotia hotel owner, who said he was quoted a 50% higher premium for renewing his policy, also found more affordable coverage through Intact.
Nevertheless, the owner, who refused to be identified when negotiating the return of certain premiums paid during the shutdown, said he supports thousands of dollars in extra expenses, as a change in insurers is accompanied by an inspection and often demands for changes.
His former insurer, Wawanesa Insurance, attributed premium increases to higher fire and storm-related losses even before the pandemic.
Despite the limited ability to operate, "many bars and restaurants still had contractual obligations and real risk that needed to be insured and insurance had to be made intained," said Andrew Clark, CEO of insurance broker ALIGNED Insurance.
"The unfortunate reality is "Insurance companies are not willing to insure certain companies right now and they do not really have many options other than to close," said Clark.