Risky Business

May 7 2012

Intact Financial’s recent $530-million takeover of Jevco Insurance Company could have a far-reaching effect on motorcycle insurance in Canada.

Said to be Canada’s largest property and casualty insurer, Intact Financial’s purchase of Jevco has moved the company into more volatile insurance markets that include taxis, driver-training cars, ATVs, snowmobiles, tow trucks, and of course, motorcycles. At the time of the takeover, Jevco was Canada’s largest writer of motorcycle insurance.

The deal, which is expected to be finalized this fall, is a part of the recent trend in which the largest insurers gobble up smaller players to fuel their need for growth.

Jevco, which is currently owned by Westaim WED-T, was bought from Kingsway Financial Services in 2010 for $261.4-million. Kingsway sold the company that specializes in insuring risky drivers because it needed cash, mostly due to its U.S. ventures that have been suffering during the recession.

Since its business involves higher claims and losses compared to standard insurance policies, Jevco charges its customers higher premiums. However, charging more isn’t a guaranteed safeguard; in 2011 Jevco claimed losses insuring motorcyclists because unusually warm weather had extended the riding season and led to more claims than expected.

How Intact Financial will handle the complex issues surrounding motorcycle insurance remains to be seen. One thing is certain: A lot of riders will be affected should the company decide to radically alter the established business model.

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