Staff #2 – 2021 – 2022 General Insurance Program Renewal

Staff Report #2

June 30, 2021

To All Commissioners

Re: 2021 – 2022 General Insurance Program Renewal


That the Commission:

1. APPROVE the general insurance program for the period of July 1, 2021 through to June 30, 2022 at a total annual cost of $2,580,343 exclusive of applicable sales tax and deductible costs, the particulars of which are as follows:

Coverage Premium Insurer
Automobile $ 1,992,227 Zurich
Additional Liability ($10 mil) 275,000 Catlin Canada / QBE
Property 254,816 Zurich
Travel Insurance 750 Industrial Alliance
Boiler & Machinery 2,241 RSA / XL Catlin
Directors & Officers 22,700 AIG
Environmental 32,609 Chubb

2. APPROVE the broker services for the period of July 1, 2021 through to June 30, 2022 with Marsh Canada at a cost of $95,000.


In February of 2021, administration began the process with Marsh Canada Limited (the Commission’s broker) for the renewal of the general insurance program for the period of July 1, 2021 to June 30, 2022. After discussions commenced with the incumbent insurers, Marsh determined it would be prudent to test the market given a period of transition with rates consistently rising across the industry. Similar to last year, they expected the renewal to be a very challenging placement. This is true of the industry both domestically and globally. As well as increasing rates, capacity has been limited as insurers continue to restrict the limits they provide and classes of business they will insure.

The most challenging part of LTC’s insurance program remains the fleet policy. Due to the size and nature of the fleet, there are a limited number of insurers who have an appetite for this class of business. Current market conditions are making accounts with an active claims history even more difficult to place. During the renewal, Marsh did receive interest from Aviva to review LTC’s insurance needs and provide an indication of terms and premiums. Both Marsh and LTC administration worked with Aviva to provide information required for the review, including a thorough risk assessment interview. Although the non-binding indication (or initial premium estimate) was comparable with Zurich’s renewal for the fleet policy, a few key issues remained outstanding with Aviva. Most significant was the difference in philosophy on the handling of claims as well as Aviva’s limited capacity in placing the full insurance program. As such, proceeding with discussions with Aviva for this year’s renewal was not an option however Marsh has indicated that the exercise with Aviva was extremely beneficial in beginning to cultivate a potential future relationship with an alternative insurer.

Zurich has come in with a modest increase on the auto side of 3.5%, contrasted to a 32.5% increase during our last renewal. Last year’s renewal also saw the effects of the tough market on the property and general liability categories, but consistent with the above, slightly more modest increases (approximately 5%) were presented for 2021-2022 with no impacts on coverage levels.

Marsh is requesting a significant increase in their annual broker fees from $77,250 to $95,000. Over the last several renewals they have indicated a desire to increase their rates, but have not pressed the matter given the significant premium cost pressures LTC was facing. Marsh became LTC’s broker in 2006 and at that time set the annual fee at $75,000. Since that time, Marsh’s broker fees have been adjusted once in 2017 by 3%.

The recommended renewal results in an annual premium increase of $117,796, the details of which are set out in the following table.

Coverage 2020-2021 Premium Increase (Decrease) Explanation for Increase/Decrease
Automobile $ 1,924,597 $ 67,630 3.5% increase in rate
Additional Liability ($5 mil) 262,000 13,000 5.0% increase in rate
Property 243,907 10,909 4.5% increase in rate
Environmental 27,301 5,308 19.4% increase, premium increase due to progression of open claim
Travel Insurance 750 0
Boiler & Machinery 2,742 (501)
Directors & Officers 19,000 3,700 19.5% increase
Broker Fees 77,250 17,750 23% increase, noting $75,000 was fee established in 2006
Total $ 2,557,547 $ 117,796 4.6% overall increase

The assumptions for the insurance program costs included in the Commission-approved 2021 operating budget are sufficient to cover the negotiated increases detailed above. These increases impacting 2022 will be worked into the 2022 Budget, set to be tabled in August.

In addition to the premium costs, LTC historically pays on average between $600,000 and $700,000 annually in deductible costs relating to accident benefits (as required under no-fault insurance) and public liability claims cost. For 2020, deductible costs totaled $572,482. Note this was a significant decrease compared to the past four years, and also noting during the latter half of the year, deductibles increased from $50,000 to $100,000. It is too early to assess the impact of the deductible increase, as the nature of claims can take months to years to fully be realized. 2020 also witnessed a significant ridership decline due to the pandemic, which would directly impact the number of claims incurred.

Deductible Payout History

Year Liability Accident Benefit Total
2015 415,554 108,151 523,705
2016 444,083 282,828 726,911
2017 510,351 134,166 644,517
2018 708,368 146,115 854,483
2019 603,588 79,783 683,371
2020 456,340 116,142 572,482

The roles of adjuster and legal representation have significant influence on the level and extent of deductible payments made, and as such, an understanding of the nature of claims experienced by a transit provider is imperative in order to mitigate payouts to the greatest extent possible. The Commission has a long standing relationship with ClaimsPro with respect to insurance adjusting services and McCall Dawson Osterberg Handler LLP for legal representation relating to claims. There are no recommended changes to either the adjuster or legal representation associated with this renewal.

Deductibles included within the table from 2015 to June 2020 were set at the level of $50,000 per claim. The move to a $100,000 deductible may place increased pressure on the Public Liability Reserve Fund as claims costs paid by London Transit will increase. The level of the claims will be monitored and the contribution to the reserve (via operations) may need to be modified as options to do so are available.

During last year’s renewal discussion, administration mentioned the possibility of the Ontario Public Transit Association undertaking a review of the impacts of insurance renewals on transit systems in the province, in an effort to identify any best practices or potential strategies that could be utilized in an effort to reduce the costs for transit fleet insurance going forward. This program has not yet been undertaken given other priorities, however it remains on the workplan for 2021. Any information resulting from this review can be considered as part of the 2022 renewal.

Recommended by:

E.P. (Ted) Graham, Manager of Accounting

Mike Gregor, Director of Finance

Concurred in by:

Kelly S. Paleczny, General Manager