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HUB International 2021 Outlook

High Net Worth

 

Transforming Uncertainty into Opportunity

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Catastrophic Claims Threaten Lifestyle and Legacy

High net worth families must address wide-ranging risks from natural disasters, rising home replacement values and cyber crime.

There’s more to lose than ever before.

It’s not uncommon for high net worth (HNW) individuals to have multiple properties in desirable, high risk locations.

Sub-Zero refrigerators and European textiles, not to mention a fluctuating exchange rate, mean higher costs for labour and material when rebuilding after a flood or fire. Together, with a rise in catastrophic (CAT) claims due to increasingly severe weather events across the country, homeowner’s and auto insurance rates have risen significantly.

“Comprehensive insurance coverage needs to be top of mind ahead of a new home purchase.”

Since 2013, severe weather-related claims in Canada have averaged $2.1 billion. That figure is expected to double in the next ten years. For many properties, this could mean premiums increases to offset claims activity. For homes in high risk zones, this number could be much more significant.

The days of buying a home and then calling one’s insurance broker to run a quote are gone. Instead, comprehensive insurance coverage needs to be top of mind ahead of a new home purchase. In fact, more HNW homeowners are reaching out to their insurance advisor before signing a contract. If insurance coverage is cost prohibitive or unavailable, many are even prepared to walk away from the deal.

Here is more on the current state of the HNW individual and family office insurance market and how it will be further impacted through 2021.

“CAT claims on HNW homes have led homeowner’s insurance costs to rise beyond what has previously been seen.”

“Reaching out to an insurance broker ahead of property renewals is critical to reducing risk and preserving the bottom line.”

1. Catastrophic claims continue to increase premiums.

According to the Canadian Climate Change Report, Canada’s climate is warming twice as fast as global climates. This means catastrophic or CAT events — a flood, wildfire, major wind or storm — are the new normal here, and homes are adversely impacted. If the CAT-affected home is a second property that’s unattended for longer periods of time due to the COVID-19 pandemic, additional losses may ensue as well.

CAT claims on HNW homes have led homeowner’s insurance costs to rise beyond what has previously been seen. More comprehensive policies further contribute to this inflation. For example, many policies include additional living expense (ALE) which provides coverage for the additional costs of living if temporarily displaced due to a loss.

In other cases where costs have risen beyond what is economically feasible or capacity in a specific geography is of concern, insurance carriers are simply not renewing coverage, or worse — they’re opting out of the homeowner’s insurance market altogether.

HNW homeowners will want to think twice before purchasing a property in high-loss areas such as British Columbia. Reaching out to an insurance broker ahead of property renewals, or prior to purchasing additional property, is critical to reducing risk and preserving the bottom line. For example, a HUB broker will help HNW individuals understand the potential total cost of ownership for the desired property. This will include the insurance rates, future cost of replacement, potential safeguards that will have to be included to prevent major losses and earn favourable coverage pricing, limits and more – all specific to the area in which the HNW individual is looking to purchase.

Since 2013, severe weather-related claims in Canada have averaged $2.1 billion. That figure is expected to double in the next ten years.

“The problem often starts with their Millennial or Gen Z children who have a social media presence.”

2. HNW and Family Office Remain a Popular Target for Cybercriminals.

HNW individuals and their families are often in the public eye. The problem often starts with their Millennial or Gen Z children who may have a social media presence that can expose them -- and their parents -- to real threats. Because personal information on social media is more accessible to the masses than ever before, more than a quarter of international HNW individuals, family offices and family businesses with an average of USD$1.1B in assets have been targeted by a cyber-attack. Through phishing, malware and social engineering, cyber criminals are searching for bank and investment information, personal emails, Social Insurance Number, DOB, passport number and even personal photos and videos.

Cyber insurance could be a sensible purchase to aid in post-breach response and covers any defence costs that arise out of litigation based on a breach. It may also provide training and risk mitigation for the family in an effort to prevent a breach scenario.

3. Travel Coverage Still Critical for HNW Individuals and Families.

Travelling both for business and personal interest can present multiple risks. In addition to trip insurance to help defray the costs of a planned trip not taken, HNW individuals need to consider additional services, such as security sweeps, background checks on personnel, and pre-arranged evacuation services – all set in advance of the travel date.

More than a quarter of international HNW individuals, family offices and family businesses with an average of $1.1B in assets have been targeted by a cyber-attack.

2021 Growth and Beyond

There’s no doubt that seeking alterative options and opportunities when it comes to safeguarding family and valuable assets will be key to surviving this unique period.

For the HNW individual and their family, this will require working alongside your HUB broker to determine your options — both for your most immediate, upcoming renewal and your long-term risk management plan.

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