Does retroactive insurance even exist? And, if so, can I buy it in Canada?
Hindsight is 20:20. If you are googling retroactive insurance in Canada it may because you are worried about your commercial insurance coverage. And a recent cyber claim example reported by Canadian Underwriter may be what’s got you thinking about updating or changing your coverage.
Here’s the situation. “Unbeknownst to a business, malware had existed in the organization’s computer system since November 2017. On Jan. 1, 2018, the company bought a cyber insurance policy. The company later discovered the malware, but coverage was denied because of retroactivity, meaning the malware was in the system before the policy was purchased.”1
An uncommon insurance solution that delivers retroactively…
It’s a fact that retroactivity isn’t built into standard insurance policies. However, a cyber risk expert with Deloitte Canada notes that, “if it’s a large enough policy,” insurers may be willing to insert a clause to support it. For example, a policy may state coverage is in effect retroactive two years from the date of signing.”2 In fact, “in terms of just being offered by default, retroactivity is the biggest thing that is missing.”3 For the reasons outlined above and more, where can I buy retroactive insurance in Canada may be on your mind. This post is designed to answer some of your questions about retroactive insurance.
How a retroactive insurance policy is built by insurance companies in Canada
Unlike virtually every other form of insurance coverage, retroactive insurance is purchased to covere a loss after it has occurred. A company that was once self-insured may buy retroactive insurance to cover incurred but not reported (IBNR) claims.
Retroactive insurance involves a different underwriting process. When a retroactive policy is being underwritten, a liability estimate is determined. This liability estimate adds up claim-generating events that have occurred but have not yet been reported to the insurer or self-insurer.4
Then the total amount of IBNR losses plus actual incurred losses are added together. These amounts add up to an estimate of the total eventual loss liabilities for a specific period.
Insurance company actuaries then work with underwriters to figure out an appropriate premium is for a retroactive insurance policy in Canada.5
Want to know where can I buy retroactive insurance in Canada? We can help.
ALIGNED brokers can help deliver options, choice and value for your Canadian commercial insurance coverage. Talk to us about situations where retroactive insurance may be available and advisable. We can help you get your business ALIGNED.