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Logging and Sawmilling Journal October/November 2011

December/January 2012

On the Cover:

The District of Mission, B.C.’s Forestry Department recently installed Olofsfors Eco-Wheel Tracks on its Cat 525 grapple skidder, and the tracks have been steadily delivering exceptional traction in some extremely steep west coast ground. (Photo by Paul MacDonald)

Spotlight

B.C.’s Central Interior Logging
Association has launched a training
and job placement initiative that will help meet a shortage of operators in
the bush and drivers on logging trucks.

Tackling steep slopes on the B.C. Coast

The District of Mission’s Forestry
Department has found that using
Olofsfors Eco-Tracks allows it to more easily tackle skidding in the District’s Tree Farm Licence 26.

Tigercat tilter buncher takes on slopes in the B.C. Interior

Veteran B.C. steep slope logging
specialists Dennis and Brian Hoobanoff are praising the productivity of their new purpose-built Tigercat LX830C tilter feller buncher, which anchors the company’s logging equipment fleet.

Canada's newest sawmill starts up

The town of Midway, B.C. has teamed up with sawmilling savvy Vaagen Bros. to re-start an idled mill in the town, working on a very tight $8 million budget—but with lots of enthusiasm.

The Logging and Sawmilling Journal CEO Interview: Ken Shields
of Conifex

LSJ talks with Conifex CEO Ken Shields to get some insight on the reasons why he chose to set up a new forest company in the midst of an industry downturn, what they’ve done to improve operations at their two mills—and what improvements are still to come.

Winter tips for log haulers

From doing your pre-trip to figuring out how to manage the weather, Logging and Sawmilling Journal has some solid tips on how log haulers can best deal with winter weather.

Balanced strategic approach to management

What’s in …The Edge!

Included in The Edge, Canada’s leading publication on research in the forest industry, are stories on Canadian Wood Fibre Centre /Natural Resources Canada, Alberta Innovates - Bio Solutions and FPInnovations research projects.

Slow but steady sawmill growth

B.C.’s Bruce Andrews had an intriguing start to being a sawmiller—he traded a boat for a Wood-Mizer mill—but his export driven cedar business has steadily grown, to the point that he is now looking at installing some lumber drying equipment.

The dramatically changed insurance picture for the forest industry in 2012

Tech Update

class 8 trucks

Supplier Newsline

The Last Word

Jim Stirling talks about how the downturn has claimed a number of sawmills, but there are some feisty independent sawmillers in B.C. who are still standing.

 

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The dramatically changed insurance picture for the forest industry in 2012

By Larry Grant

Having been involved in the insurance industry for more than two decades, it is safe to say that 2011 was by far the most challenging year that our team faced in terms of insuring the needs of our clients and the overall insurance picture for the forest industry.

Educating our client partners on the short term and long term challenges being faced in this sector of the industry has been a focus for our National Forest Practice Division—and it will form the basis of a number of articles for Logging and Sawmill Journal, of which this is the first.

To understand where we are today, we need to be aware of three key events that occurred in the past 15 months that were the catalyst for the increased rating that the forest industry is now experiencing.

In September 2010, Lumberman’s Underwriting Alliance (LUA) announced that they would be reducing their capacity (total dollars available to insure for any one client), and would no longer insure 100 per cent of the total insured values required on larger sawmill operations. LUA cited a high three year loss ratio (in excess of 140 per cent) and increased reinsurance costs as the reason for this significant change.

By reducing capacity, LUA preserved their reinsurance costs and could provide a stable platform for future renewals. As an example, a sawmill operation with a total insured value of $100 million that had been insured 100 per cent by LUA, would now be insured by LUA for 40 per cent. Additional underwriters would be required to “subscribe” to the risk and make up the remaining 60 per cent.

Insuring the needs of operations involved in sawmilling or the manufacture of wood products presents one immediate challenge for insurance brokers: there are only a small number of insurance companies (or markets) that have any interest in this class of business. Over the years, large, high profile losses have been seen by the entire underwriting community.
This, of course, has diminished their interest in working in this class of business, limiting the number of markets to a single digit percentage of the overall insurance industry.

During the first quarter of 2011, there were a number of sawmill fires in Western Canada that not only impacted LUA, but another company in the market, ACE INA. ACE INA was a strategic partner and key underwriter that had been willing to work with our team in providing subscription capacity on the LUA program. Our excitement about this partnership, however, was short-lived.

In April, 2011, we were advised by ACE INA that they were withdrawing from this class of business in its entirety, citing losses as the primary reason. The effects of this news had an immediate impact on rating. The remaining markets understood that ACE INA had pulled out of this sector due to losses, which in the simplest terms equated to poor rating. One less company in the market = higher rates.

In November 2011, the most shocking news of the year took place. LUA announced that they would be winding down their Canadian business operations entirely. Policy renewals would be provided until December 31, 2011 and all polices expiring in 2012 would be lapsed.

December 31, 2012 will mark the last day that LUA will transact insurance business in Canada. Poor loss ratio and downgrading by the industry watchdog AM Best were key factors in LUA making this difficult business decision. It should be noted that the LUA operations in the U.S. will continue operating and be unaffected.

With two major underwriters withdrawing from the industry, citing poor loss ratio as the reason, the effects have been immediate. Supply and demand dictate that with lower supply and stable demand, higher prices are inevitable. Combine this with the industry loss ratio average of 150 per cent and it is obvious that the remaining interested underwriters will participate at rates that are not remotely close to what we have seen in the past five to ten years.

The moment that our HUB International team in British Columbia heard the announcement that LUA were winding down their Canadian business operations, we took action. Jacques Gagnon, the former vice-president of LUA Canada, with over 25 years’ experience, was hired to head our National Forest Practice Division. Our President of Canadian business operations, Jim Barton, immediately began meeting with our underwriting partners and forging proprietary exclusive relationships, allowing our team to work more effectively in providing long term, stable insurance solutions to our clients and prospects. We have enhanced our Loss Prevention and Risk Control Department by hiring three employees from LUA, and expanding our Risk Control Practice to provide more services and solutions to our clients in minimizing and managing risk.

Our team at HUB International is working on a number of solutions and has a plan in place that is assisting our clients in fully understanding the markets and their renewal process. As the largest insurance brokerage in Canada, and a company that works with the most respected sawmill operations in the country, we welcome the opportunity to discuss the HUB Advantage with your company.

–––––––––––––––––––––––––––––––––––

Larry Grant, CIP, is vice-president
of the Forest Practice Division at
HUB International. He can be reached
at larry.grant@hubinternational.com
250-377-2330 www.hublarrygrant.com

 

 

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