Insurance in flux: Navigating risk in 2026

Most of the data that's out there suggests that Canadian insurers are quite profitable. I've seen a few insurers recently that's posted their Q3 for 2025 and 2025 numbers as a whole, and they're looking at some of the most profitable numbers they've had in over a decade. And the market continues to remain soft. Chubb announced they're going to cut 20% of their workforce globally, driven by their strategy to automate 85% of their major underwriting and claims processes using AI. So let's meet our panel. We have Natalie Chan, Senior Risk Advisor, Specialty Commercial Insurance at Navicord. Alex Ilkos, Client Executive, Professional Services at Pervs Redmond. And joining us for the first time, Christopher Greer, Vice President, Professional Lines at Hub International. So welcome everyone, and let's start with a bit of a scene setter. Social inflation and adverse litigation trends are, of course, pushing up commercial liability costs globally. Forecasts are actually showing commercial liability combined ratios moving above 110 in recent projections. So I'd love to know, how are you adjusting your approach to DNO and ENO renewals in light of this extreme claim severity environment? Alex, what are you seeing? Yeah, thanks, Paul. I think generally speaking, it's logical to warn our clients. On this front, kind of set the standard of what renewals will look like this year, next year, and into the future. But generally speaking, I would challenge this concept as a whole. I think the market globally might be looking one way. I think Canada is quite different right now. Most of the data that's out there suggests that Canadian insurers are quite profitable. Seen a few insurers recently that's posted their Q3 for 2025 in 2025 numbers as a whole, and they're looking at some of the most profitable numbers they've had in over a decade. So at the moment, I don't think Canada is necessarily following along with that global indication. It's naive to think that it won't go there in the future, but at the moment, we're not, we're just, I don't think we're there. So there's a lot of competition in Canada, and the market continues to remain soft. So I don't think that the global standard is what's I would challenge that. When it comes to the E&O and D&O front, we do know that the exposure there is more of a longer tail exposure. So it might not be this year, it might be two years, three years before a claim can come to light. And then insurers might take another couple of years to even figure out how large a claim might be. So seeing this globally as a trend, I'm sure it will affect the Canadian market in the future. But from E&O and D&O perspective, I still think we're in a pretty comfortable spot for our clients, at least in Canada. Some interesting points raised there by Alex, Natalie. He's describing the Canadian market specifically as having some soft market conditions. But even amid soft markets, we have to prepare for the hard market, don't we? Yeah, we do, Paul. And thanks again for having me back. I'm going to be a little bit more conservative than Alex there. And I will say that although we're still currently experiencing very soft market conditions, it's prudent to prepare ourselves for the inevitable hard market that's going to come due to these claims being continually more expensive and severe. So now is the time to buy more capacity as D&O and E&O pricing is still very low and there's ample availability. So we should stock up for when the hard market comes, when it's difficult to secure coverage so that we could dial back the program for our clients and still have sufficient coverage. Speaking of that ample availability, Christopher, we have seen new entrants into the market. Do you think that they're having an impact? Absolutely. Paul, thanks for having me. Nice to meet you, Alex and Natalie. I do think that we're seeing more competition in the marketplace. We're seeing new entrants. What I'm seeing on the E&O side, especially in the A&E broker and lawyer space, is that there are a lot of new entrants or competition that are driving price down. And competition's good. It allows us to make sure that the clients are getting the best price for the coverages that they're purchasing. But with that, we have to have some of the added value. So we've engaged our risk services teams to go in and help with risk mitigation and create some corporate compliance structure within these organizations. We've developed carrier panels rather than single carrier solutions for programs. So we're really trying to be proactive, get out early and make sure that we're able to retain our clients, but as well to win new clients based on the services that we're providing. On that subject of the increased capacity in the market, Mosaic recently announced that it would increase its cyber risk capacity in Canada to $40 million Canadian dollars per risk effective from January the 1st. So of course, that's specifically to meet the rising demand and close those capacity gaps with offerings that include tech errors and omissions and broader professional liability coverages. So from your perspective, and Natalie, I'll start with you this time, how is this influx of specialty cyber and professional capacity, how's it changing the way that you structure towers, negotiate terms and indeed position cyber and E&O for Canadian clients? Well, I think Mosaic is a great market. Obviously, when any market is able to offer higher capacity, the need to have additional insurers on the structure towers will lessen. This will likely drive down the pricing, both on the primary and excess placements. We still would like to prepare our clients to have additional participants on the tower for the hard market cycle, so that if the market leaves the space, there are others that are going to be readily and available to fill the void. And I guess it's increasingly important, Christopher, as well, isn't it, to sort of get a full and complete set of information from the clients ahead of time. Cyber over the years, it has been very difficult to get clients to purchase it. And then now it's difficult to get them to purchase the higher limits. But with claims that have hit the marketplace recently or have been in the media recently, the Canadian Investment Regulatory Organization, for instance, 750,000 Canadian investors' information was leaked. There's a huge cost to that. IBM says that the cost of data breaches in 2025 increased by 10.4% to about $6.98 million per breach. So we're seeing that the media is showing that there are these larger claims, and that there is a need to purchase the limits, which is great, because it's nice to see that put in a position where they should purchase it or understand that they should purchase it versus us trying to sell them those increased limits. So with that comes having all the right underwriting information and getting out to the market early. It is so great to have capacity on a primary line with Mosaic. On top of that, you're still going to have to build the towers. And to have that, you're going to have to have all the right information to go to market. Basically, you've got to have all the right information in place, Alex. And I imagine there's got to be a little bit of a focus on strategic marketing as well. Yeah, Chris makes a good point. The claims are coming in the space, but there's also ample capacity. So I think our focus has been a lot on strategic marketing, as you mentioned. So using competitive insurers that are good to work with both from our perspective and from the client's perspective, ones that know the space, know how to handle claims and how to deal with that, maybe it's going to involve a little bit less blanket marketing or just chasing down the cheapest price. Focus on strong insurers, ones that offer primary terms as well, even when building a tower, ones that understand the underwriting info and they have the claims data support. That's the ones that we know are going to be around for a long time. So even if you've expanded your limits or the coverage itself, we're comfortable with the insurers they're with. And then from the technology side, I think that on the E&O front, I personally have been very interested or focused on what I call the technology-esque exposure for professional service firms. So a lot of your standard professional service clients, like your engineers and lawyers, they don't necessarily have that tech E&O exposure. A majority don't. They do have a cyber exposure, but it's different than their E&O. But there's a lot of technology being used in their day-to-day professional service. So a lot of my focus has been ensuring that we're going to be covered from that perspective. So there's no exclusionary language around their traditional E&O coverage, while they're introducing more technology-based services in their day-to-day work. I think the most notable one is probably going to be AI, but that can be really any technology tool. Well, from cyber to another hot topic, a January survey suggests that 58% of mid-market executives and private equity firms expect M&A volumes to climb in 2026, after a year dominated by large-cap deals. So I'd love to know, how are you recalibrating D&O and transaction-related E&O management liability solutions for those Canadian mid-market companies in anticipation of more deal-driven exposures? Christopher, what changes are you making? I've started to engage other teams that have specialties within the reps and warranty space that are helping for some of those larger transactions, mid-to-large-size transactions. We are looking at moving our approach from static annual renewals to transactionally aware liability planning. So we're looking really at how we can help clients navigate either the acquisition, acquiring or being acquired, what that looks like post-transaction, what types of coverages are going to be needed, deal-specific D&O or management liability that overlays for transactions involving recapitalization or roll-ups or management buyouts for those types of transactions, and carefully coordinating between the reps and warranties and the D&O and the professional liability to avoid coverage gaps or unintended overlaps. And Alex, from your perspective, are there a couple of different sides to consider here? Yeah, looking at it from both the sell-side and buy-side perspective, any transaction would be very different, but a lot of our focus has been on preparing either side before the transaction even happens. So when we focus on the sell-side, our biggest aspect we focused on is being more cognizant of the actual predetermined ERP factors that are built into a policy. Absent of the large IPO premiums that might have been available in the D&O world, as M&A is a bit down right now, markets have been a lot scrappier when it comes to actual runoff terms. We've seen brokers of the purchasing side even try to wedge in on the selling companies program when runoff terms are very strong. So helping prepare the sell-side with strong language on their ERP factors I think has been our focus. What we've liked to do recently has been a no more than XYZ percentage on the front end of a policy. So it gives the sellers a ceiling confirmation of what that cost might look like, but then we still have the ability to negotiate downwards. That kind of helps protect the selling side pre-transaction just so they're ready when that might come or inevitably does come. And then from the buy-side, the key has really been to prove you aren't overpaying. So it's less so an insurance risk, but that's a risk management aspect we've been deep in conversations with our clients, ensuring that our clients are doing the proper due diligence and having third parties provide their expert opinions when they arrive at a certain valuation number. This is a bit more anecdotal, but the transactions we've seen, especially just on a regular D&O front, they've been, I would say, astronomical at times. Things that have shocked me for sure, and maybe that's just due to M&A being down. Perhaps as that grows and continues to increase, maybe the numbers become a bit more normal, if that's the right word. But when they are large, as I'm seeing right now, you really have to focus on the buy-side as proof that you aren't overpaying and proof to your shareholders that you've made a good decision when purchasing here. Yeah, and on top of that, Natalie, as well, you've really got to have the right home here, haven't you? Yeah, I would agree with Chris and Alex's point here. Having the right home for the policy placement is crucial. With these companies experiencing deal-driven exposures, they really need to be with an insurer who understands these exposure right from the get-go to be alongside with them on their journey. You don't want to be dealing with replacing your insurer when you're busy in the middle of your transaction. So the insurer needs to have the underwriting expertise to properly assess exposures, and more importantly, a really strong, experienced claims team to handle any claims throughout the process. I can't remember who it was earlier, but somebody dared to mention the letters AI. So I'm going to pick up on that with you all if you don't mind. Professional services firms and indeed corporate management terms are rapidly, of course, deploying AI tools across advisory, underwriting, legal, financial functions, often ahead of clear regulatory or case law guidance. So over the last quarter, Alex, how have you seen AI-related practices start to influence underwriting questions or coverage wording or indeed claims handling in Canada? Yeah, I think the short answer is I don't think it's really affected the market here in Canada too much at the moment. I think some insurers are asking more AI-related questions on renewal applications just to get a better sense of what's going on. But the actual coverage, I haven't seen it affected too much, maybe a little bit more in the cyber world where we're getting specific language on whether addressing AI exposures, but not necessarily exclusionary language. Where I really see the discussion going with insurers as a whole is how AI affects your typical E&O risk. So instead of AI maybe being its own insurance policy, and maybe that will come down in the future, I think the big conversation is AI is a tool or an instrument that's going to help your professional service. So our job is to ensure that as a tool, that same E&O risk that should be picked up on your traditional E&O policy is covering how that instrument or how that AI tool is going to be used in everything. That makes a lot of sense. And I guess it might not be impacting coverage directly yet, Natalie, but certainly impacting insurers. Some have even cut some jobs. Yes, Paul. Recently, Chubb announced they're going to cut 20% of their workforce globally, driven by their strategy to automate 85% of their major underwriting and claims processes using AI. Unfortunately, this will likely to be continually a trend with other companies as well, and we anticipate that to be coming. But at the present time, we haven't seen too much of that effect just as of yet. Okay. Is that something that you agree with as well, Christopher, that we haven't seen too much of a change so far? We haven't seen too much of a change, but where we're seeing some really good development is within the corporate governance and within the organizations themselves that are taking the time to create their own policies and understand how they're going to use that tool and how it's going to affect their business. And then they can articulate it to us when we're trying to put together that marketing for them as to how they're using the tools, how it's impacting their work and their workflow. And the insurance companies can then make a decision, I think, on how it's going to impact the coverage. But where we're not seeing a lot of current impact, we are seeing that a lot of insurance companies are in one case with a survey done by the Lloyds Managers Association last year that they're looking at how potential risks are going to affect it in the future. So they're asking the right questions, they're getting out to the market, they're talking to underwriters and managers. And what they're really saying is that they anticipate that E&O is going to be the big driver of the risk within AI and how professional service firms are using AI and what the impacts might be. So I think that it's coming, it just hasn't really affected the applications or the claims process yet, but I think that it's coming down the pike. Okay, so it's on everybody's radar. And of course, boards have a lot to consider right now, they are facing growing scrutiny over cyber resilience, data privacy governance, climate related disclosures as well. All of course, while the markets remain more volatile. So I'd love to know from each of you, what new D&O and management liability risk themes have you seen emerge perhaps in late 2025, or indeed early here in 2026 in Canadair? And how are you practically helping clients to adjust retentions, program structure, risk management priorities in response to these? Natalie, what are you seeing? I think we're still seeing with cyber risk, we're finding board members are already keenly aware of these issues. There's at least some sort of cyber program in place, generally speaking, there's more board accountability for having cyber resilience and data privacy governance. This has led to more D&O and cyber insurance placements to have to be coordinated. Retentions will be at a lower attachment points for the companies that demonstrate they have some maturity in their cyber response planning, and conversely, the opposite. We're also seeing with climate risk, insurers are focusing on the material impact of disclosures from potential litigations if there are companies that are in environmental sensitive sectors. So there's going to be this type of information that's requested on a submission to the insurers, which of course, retention will be reflecting the quality of their governance and disclosure as well. I guess, Christopher, just to go back to a point that you made a little bit earlier on, it's becoming increasingly important with this in mind to get out there early with clients. Yes, we need to get the information we need to get out earlier, and we really need to drive down into what the boards are doing, the decisions that they're making, and what impact that could have on certain coverages. For a long time, the focus was on the finances and how they were utilizing the funds that were given to them or a part of the organization. Now, we're looking at the other impacts and purchasing the right coverages, like cyber, like DNO, like ENO, making sure that they have a full breadth of insurance coverage to transfer that risk away from themselves, and the increased scrutiny of how it's going to look if they don't purchase the right coverage or the limits that they should be covering. So what impacts is it going to have on myself as a board member if we buy a 1 million limit versus a 5 million limit, and there's ultimately a claim, and how is that going to come back on us? So we're getting out to get the underrating information, but at the same time, going back to some earlier comments about risk management, helping the clients, educating, making sure that they are fully aware of the potential impacts that that might have on them and personally in the organization. So education is key, but getting out and getting the information and going out to market is the right thing to do. It does sound like there's been a bit of a breakthrough overall, would you say? Alex, would you agree that cyber is now very much a boardroom discussion? Definitely, and looking at it from the cyber perspective itself, now, I think Chris and Natalie both mentioned this, but the market and the capacity for cyber insurance is huge right now in Canada. So now it's time to purchase that additional limit. You can expand your coverage from a cyber perspective when it's actually available at a good price, adjust your attention to just improve the program as a whole. I even have clients with very limited controls that can still get something in place right now in the cyber world. And what I like about that is the cyber policy is now snowballing into the boardroom discussion area. A large benefit of actually having a cyber policy or at least engaging the discussion around a cyber policy has led to clients that now have great control starting to use the cyber insurance resources to tighten those controls up in their security. They focus on it more and now it's just more of an emphasis in the boardroom for hygiene and what you can do to make sure you're secure. So I've had clients who in the end they don't even buy cyber insurance, but the boardroom discussion has picked up. They're cognizant of where they're at compared to their peers, what they might be lacking, what resources are out there. So even if they didn't buy cyber insurance itself in the end, the conversation has moved its way into their office that I would argue it's even even better for the client from a risk management perspective that they now know what risks are there, how they can improve, even if they don't end up going down the cyber insurance route, the boardroom aspect and the DNO risk and that conversation has really gone a positive way in that front. Yeah, some really good insights though and some fantastic tips. Huge thanks to you all for your time today. Remember this panel will be back each quarter, so for all the insights and expert guidance keep it right here on Insurance Business TV.