In an evolving business landscape, mid-market companies face growing uncertainties that affect their insurance needs. Economic shifts, supply chain disruptions, and emerging cyber threats reshape risk assessment for insurers and businesses alike.
Speaking to Insurance Business, Dean Grigoruk (pictured), vice president, commercial mid-market at CNA Canada, notes, over the past year, several defining factors reshaped the sector – driving changes in coverage terms, underwriting processes, and even premium adjustments.
“Inflationary pressure and supply chain disruptions created a more volatile business environment,” he explained. “As a result of fluctuating interest rates, insurers become more cautious, adjusting premiums to account for increased risk exposure, particularly in sectors that rely heavily on global supply chains.”
Post-pandemic, insurers are still very much trying to recover from these issues – particularly around supply chains and subsequent business interruptions. Many mid-market businesses remain exposed to risks stemming from global supply chain disruptions, with Grigoruk adding, this in itself leads to inventory shortages and production halts.
“As such, insurers are more selective in providing business interruption coverage, especially when companies struggle to properly mitigate these risks or have limited contingency plans,” he told IB.
Cyberthreats are another risk to consider. According to data from NordVPN, Canada ranked third globally in cybercrime victims per capita in 2023, behind the US and the UK. What’s more, the average cost of a data breach in Canada reached $7.3 million in 2023, up from $6.75 million in 2022.
“The frequency and sophistication of cyberattacks continue to rise,” added Grigoruk. “What was once more prevalent - that larger corporate companies were the main targets of cyberattacks - is no longer the case. Mid-market businesses are increasingly targeted. Cyber criminals seem to be shifting their focus from the large corporations to smaller, potentially more vulnerable targets. As a result, this led to changes in underwriting practices and cyber liability policies, with some insurers limiting coverage for businesses deemed high risk.”
CNA Canada also made changes. As Grigoruk explained, the insurer has a cyber extension on the commercial mid-market policy as well as in its specialty underwriting segment.
“It’s a class of business we consider, but we continue to be very diligent about the underwriting and the limits we provide,” he said.
Another key element reshaping the sector is climate change and the rise in natural disaster coverage across Canada. Research from the Insurance Bureau of Canada suggests that, in 2024, natural disasters in Canada cost $8.5 billion – with the summer being deemed the most destructive season for insured losses.
“2024 was the worst year on record in Canada with respect to nat cat losses according to the Insurance Bureau of Canada,” added Grigoruk. “There were extreme weather events across the country, including floods, wildfires, hailstorms, convective storms. These events are more frequent and more severe. Mapping of set exposures is critical from our perspective to ensure Canadian businesses have the appropriate coverage in place and are adopting risk mitigation strategies such as resilience planning and investments in disaster recovery.
Factor into this already complex environment the talent wars in the sector, as well as regulatory changes, and insurers are set for an interesting 12 months. As Grigoruk points out, there is also rising political risk and cross border tension to contend with.
“Geopolitical tensions in general, such as those arising from conflicts or trade wars, increase the uncertainty of international operations,” he said. “Companies that operate in foreign markets or have global operations are facing new political risk challenges, prompting insurers to revise terms for foreign exposures, especially in high-risk regions."
As a result of these challenges, mid-market businesses may experience increased premiums and more restrictive coverage terms. However, companies that take proactive steps - such as strengthening cybersecurity practices, implementing disaster preparedness measures and ensuring compliance with evolving regulations - are more likely to secure favourable terms from insurers. CNA Canada, for example, placed significant emphasis on risk control to help businesses navigate these challenges.
"Risk control at CNA Canada has always been an essential part of the underwriting process," added Grigoruk. "Our risk control consultants, or specialists, have expertise in their own individual field, which varies from manufacturing, construction, real estate, auto and more; driving a program of systematic, sustainable solutions designed to help manage operational risk and improve efficiency." This may even be a contingent factor. For example, in the construction industry, risk control consultants are expected to possess specific areas of expertise and skillsets to gain the trust of insureds.
"At CNA Canada, we bring three strong disciplines, that differentiate us in the market,” he said. “This includes a dedicated team of construction specialists, a dedicated team of risk control specialists, and claims experts with expertise in the construction segment. This brings strong value to our brokers and insureds."
For brokers advising mid-market clients, risk management is critical. As Grigoruk told IB, there are several important steps insurance brokers can communicate in the commercial market space.
“Conducting a comprehensive risk assessment is key,” he said. “Brokers have the responsibility to encourage their clients to regularly assess for risk exposure, considering both internal and external factors." Here, he stresses the importance of reviewing business operations, supply chains, and market conditions to identify vulnerabilities – as well as employee training.
“Emphasizing the importance of training employees on safety protocols, regulatory compliance, and risk management procedures can help from an underwriting perspective when looking at casualty, workers’ compensation, or employer's liability."
When it comes to actually selecting the right coverage, brokers must look beyond price – after all, a one-size-fits-all plan doesn’t work in today’s increasingly complex environment. As Grigoruk warns, businesses often make the mistake of cutting coverage to reduce costs, which can expose them to greater risks.
"In this current marketplace, oftentimes the primary concern is price differentiation, with coverages being removed as a result,” he said. “However, brokers should focus on coverage, to ensure the business is adequately insured; broad wording and coverage extensions, especially with respect to property, equipment breakdown, business interruption, and general liability, are important.” As the landscape continues to shift through growing uncertainties, businesses should keep their changing needs in mind and communicate with brokers to ensure they are appropriately covered.
