Sovereign Insurance is passionate about protecting Canadian businesses and the communities they serve. We strive to make a measurable impact. Here&rsquo;s what we achieved together in 2022!

Community Impact and Sustainability with Sovereign in 2022

In 2020, there was great promise of a reckoning on workplace diversity. Following a period of social unrest, companies around the globe pledged to diversify their teams and build a culture of equity and inclusion. However, almost three years into the workplace DE&amp;I movement, progress has stalled in many regards.&nbsp;&nbsp; In a global study by Randstad Sourceright, 86% of human capital leaders said DE&amp;I is embedded within their talent strategy, however only 43% said their hiring practices supported their diversity goals in 2021.1 Kantar found eight out of 12 major markets saw a decline in their inclusion score between 2019 and 2022, with Canada experiencing one of the biggest drops (-9%). While 71% of employees believe their organization is taking steps to be more diverse and inclusive, nearly half (46%) said their employer needs to do more.2 There are a variety of reasons why DE&amp;I may have been put on the backburner, including competing priorities in the C-suite, &ldquo;The Great Resignation&rdquo; and a difficult hiring climate, and employees feeling overwhelmed learning about DE&amp;I.3,4 While creating meaningful change is never easy, there are compelling reasons to keep the momentum going on DE&amp;I. Numerous studies have found diverse and inclusive workplaces perform better financially, have increased capacity for innovation, and have an edge when it comes to talent acquisition and retention.&nbsp; See: <a href="https://www.sovereigninsurance.ca/advice-and-tools/purpose-and-impact/can-an-organization-be-successful-without-addressing-diversity">Can an organization be successful without addressing diversity?</a> As we head into a new year, it&rsquo;s the perfect time for organizations to reset their DE&amp;I efforts and start reaping the rewards. Here are three ways to get &ndash; and keep &ndash; the momentum going. 1. Refine your definition of diversity When rebooting your efforts, start thinking more broadly about diversity. While much of the focus is on age and gender, diversity can also include factors such as age, education, sexual orientation, mental and physical abilities, life experiences, religious beliefs, and political views.&nbsp; Experts suggest reframing your definition of a &ldquo;diverse hire&rdquo; to account for underrepresented groups you may not see. For example, a study of 100 organizations by the co-authors of the book, &ldquo;Hiring for Diversity,&rdquo; fewer than half (47%) accounted for people with disabilities in their tracking and goal setting, and only 11% accounted for the LGBTQ+ community.5&nbsp; Making sure all these diverse voices are heard will also give your DE&amp;I efforts a shot in the arm. As <a href="https://www.getcanopy.com/blog/a-holistic-approach-to-diversity-canopy">Jina Etienne</a>, a consultant and speaker on diversity, inclusion, culture and belonging, writes: &ldquo;None of us like to be ignored. Letting everyone know that they are seen could be just the boost an organization needs to recharge their D&amp;I efforts. It might not only put them back on track, but it could help them pick up some momentum by gaining buy-in and increased support across the organization.&rdquo;6 2. Create a clear plan for accountability As well-intentioned as a DE&amp;I strategy may be, it likely won&rsquo;t go far without accountability. While every employee should contribute to your DE&amp;I goals, your strategy needs to have defined ownership and key deliverables &ndash; just as you would with any other business goal.&nbsp; <a href="https://www.forbes.com/sites/shereeatcheson/2021/03/22/inclusion-without-clear-lines-of-accountability-is-pointless-heres-why/?sh=6fa765ec1a33">Sheree Atcheson</a>, global diversity and inclusion leader and author writes: &ldquo;We see accountability embedded into organizations for finance, engineering, product delivery and more, but yet when we look at [DEI&amp;I] work, it so often has little to no accountability.&rdquo; She adds that accountability is key for many reasons: It enables decision-making, it embeds sustainability, and it prevents progress from stagnating.7 According to research, the number of organizations tracking accountability for DE&amp;I efforts is relatively low. The 2022 Global Leadership Monitor study found just 17% of global leaders said executives at their organizations are compensated on DE&amp;I outcomes.8 Research from Gartner found that to drive real change, organizations must adopt &ldquo;consequential accountability&rdquo; for leaders. For example, Gartner suggests monitoring and tracking leaders&rsquo; progress against DE&amp;I goals, and integrating DE&amp;I measures into the performance evaluation process.9 3. Communicate and celebrate the wins Communicating your company&rsquo;s progress and celebrating the wins are a great way to build momentum among employees. They&rsquo;ll be able to understand what&rsquo;s happening with your DE&amp;I plan, see real changes that are happening within the organization, and be encouraged to support initiatives where they can.10 Inclusive leadership expert <a href="https://www.forbes.com/sites/simonemorris/2022/07/31/how-to-continue-pushing-forward-when-unhappy-with-our-dei-progress/?sh=2324e3ac55b7">Simone E. Morris</a> advises leaders to go on a &ldquo;scavenger hunt&rdquo; to find wins on the DE&amp;I journey. &ldquo;Perhaps it&rsquo;s reflecting on the employee engagement survey and how answers have changed over time, or maybe it&rsquo;s noticing our leaders&rsquo; progress,&rdquo; she writes. &ldquo;Progress of note may include inviting multiple perspectives into conversations, building more connections, and demonstrating empathy. The wins are there for the acknowledgment. Our job is to find them and celebrate them along the way.&rdquo;11
&nbsp;
To learn about how Sovereign Insurance champions diversity and inclusion, and to find more resources on DE&amp;I, visit: <a href="https://www.sovereigninsurance.ca/diversityinclusionjourney">https://www.sovereigninsurance.ca/diversityinclusionjourney&nbsp;</a> Sources 1 Randstad Sourceright, &ldquo;<a href="https://insights.randstadsourceright.com/diversity-equity-inclusion-at-work/the-inclusion-imperative-taking-meaningful-action-on-dei-talent-navigator-series">The inclusion imperative: taking meaningful action on DEI</a>,&rdquo; Oct. 19, 2022&nbsp; 2 Kantar, &ldquo;<a href="https://www.kantar.com/campaigns/inclusion-index">Inclusion Index 2022</a>&rdquo; 3 Harvard Business Review, &ldquo;<a href="https://hbr.org/2021/09/the-great-resignation-doesnt-have-to-threaten-your-dei-efforts">The Great Resignation Doesn&rsquo;t Have to Threaten Your DE&amp;I Efforts,</a>&rdquo; Sept. 1, 2021 4 HR Brew, &ldquo;<a href="https://www.hr-brew.com/stories/2022/07/26/de-and-i-seems-to-be-slowly-falling-off-the-c-suite-to-do-list">DE&amp;I seems to be slowly falling off the C-suite to-do list</a>,&rdquo; July 26, 2022 5 Inclusive Leaders Group, &ldquo;<a href="https://inclusiveleadersgroup.com/maintaining-dei-momentum-during-the-great-resignation/">Maintaining DE&amp;I Momentum During the Great Resignation</a>&rdquo; 6 Canopy, &ldquo;<a href="https://www.getcanopy.com/blog/a-holistic-approach-to-diversity-canopy">A Holistic Approach to Diversity</a>,&rdquo; July 25, 2022&nbsp; 7 Forbes, &ldquo;<a href="https://www.forbes.com/sites/shereeatcheson/2021/03/22/inclusion-without-clear-lines-of-accountability-is-pointless-heres-why/?sh=6fa765ec1a33">Inclusion Without Clear Lines of Accountability is Pointless. Here&rsquo;s Why,</a>&rdquo; March 22, 2021 8 Harvard Law School Forum on Corporate Governance, &ldquo;<a href="https://corpgov.law.harvard.edu/2022/09/27/making-it-count-accountability-is-needed-to-fast-track-dei/">Making it Count: Accountability is Needed to Fast-Track DE&amp;I,</a>&rdquo; Sept. 27, 2022 9 Gartner, &ldquo;<a href="https://www.gartner.co.uk/en/articles/leadership-diversity-stalled-here-are-3-actions-to-take">Leadership diversity stalled? Here are 3 actions to take,</a>&rdquo; July 7, 2021 10 Together, &ldquo;<a href="https://www.togetherplatform.com/blog/diversity-and-inclusion-performance-goals-examples">Examples of diversity and inclusion performance goals: How to set and achieve them</a>,&rdquo; Feb. 17, 2022&nbsp; 11 Forbes, &ldquo;<a href="https://www.forbes.com/sites/simonemorris/2022/07/31/how-to-continue-pushing-forward-when-unhappy-with-our-dei-progress/?sh=2324e3ac55b7">How to Continue Pushing Forward When Unhappy with our DEI Progress?</a>&rdquo; July 31, 2022&nbsp;

How to maintain momentum on DE&I

A New Year is always a good time to look inward. But Sovereign Insurance is going strong into 2023 with a decidedly external focus.&nbsp; &ldquo;The strategic period that we ended last year was internally focused &ndash; and it needed to be as we strengthened our business infrastructure,&rdquo; explains <a href="https://www.sovereigninsurance.ca/our-team/calgary/dave-mckeen" target="">Dave McKeen</a>, Vice President, Commercial Solutions, Underwriting and Risk Engineering.&nbsp; As part of Sovereign&rsquo;s evolution, he explains, the company bolstered its talent development process, developed a new product suite, and invested in new technology to support its latest offering. &ldquo;Now, with much of that work under our belt, our new four-year strategy is about looking externally and deploying our new capabilities into the market,&rdquo; says Dave.&nbsp; All of these transformative developments have a key goal in mind: to be a stronger partner for Sovereign&rsquo;s brokers, managing general agent (MGA) partners, and end clients. &ldquo;The pace of business has sped up for them and there is greater need for an insurance company that brings more than just a piece of paper and a promise to the table,&rdquo; says Dave. &ldquo;They need a partner that brings expertise to help navigate issues and solve problems in the industries and client bases they serve.&rdquo;&nbsp; Fittingly, Sovereign named this approach &ldquo;partners in resilience&rdquo; &ndash; and this was before today&rsquo;s economic volatility and geopolitical unrest was front and centre. But these uncertain times make Sovereign&rsquo;s focus on the ever-changing needs of partners and clients more relevant and important than ever.&nbsp; &ldquo;We are focused on understanding the issues their businesses are facing, so that we are able to effectively navigate their changing insurance needs and be in a true partnership with them along the way,&rdquo; says <a href="https://www.sovereigninsurance.ca/our-team/toronto/colette-taylor" target="">Colette Taylor</a>, Chief Operating Officer. &ldquo;By building greater sophistication into our business, we can build a tripartite relationship and work together on the risk-management needs of our end clients.&rdquo; Ahead of the new strategy, Sovereign <a href="https://www.globenewswire.com/news-release/2022/09/30/2525924/0/en/Trisura-Acquires-Sovereign-Insurance-s-Surety-Business.html" target="_blank" rel="noopener">divested its surety business in Canada</a> in September 2022. &ldquo;Over the past couple of years, we have worked to strongly position Sovereign as a niche commercial and specialty insurer,&rdquo; says Colette. &ldquo;We made the decision to focus on our core property and casualty products, and the divestiture of our surety business will allow us to put all our resources into the space we&rsquo;re in.&rdquo;&nbsp; While the new product suite isn&rsquo;t on the market yet, Dave provides a hint of what brokers and clients can expect when it launches later this year. &ldquo;It&rsquo;s an integrated series of products that provide holistic, flexible solutions aimed at specific industries, such as construction, manufacturing, warehousing and others,&rdquo; he says. &ldquo;We have approached this offering from the lens of the client, with a suite of products relevant to their needs and tailored to their industry.&rdquo;&nbsp; To deliver its latest product suite, Sovereign is implementing a leading-edge policy administration system. The new system will enable Sovereign to tailor its products to end clients more consistently and accurately.&nbsp; Central to supporting these exciting initiatives is Sovereign&rsquo;s strong financial foundation. Sovereign is a wholly owned subsidiary of Co-operators General Insurance company, which (as of 2021) has $9 billion in assets and a net income of $512.4 million. Sovereign is also proud to carry an &ldquo;A&rdquo; (Excellent) rating from AM Best, a global credit agency specializing in the insurance industry.&nbsp;
&ldquo;We continue to grow and have solid financial results, and we now have a platform to grow even more in our specific areas,&rdquo; says <a href="https://www.sovereigninsurance.ca/our-team/toronto/matthew-campbell" target="">Matthew Campbell</a>, Vice President of Finance, Operations &amp; Claims. &ldquo;As a niche player, operating within our appetite for risk is very important, and it allows us the financial outcome that we want to support our purpose as an organization.&rdquo;&nbsp; As Sovereign continues to grow its business and support its clients, the company hasn&rsquo;t lost sight of supporting the community. A key focus for Sovereign is its community impact work focused on <a href="https://www.sovereigninsurance.ca/diversityinclusionjourney" target="">Diversity, Equity and Inclusion (DEI)</a>. While Sovereign doesn't proclaim to be experts in DEI, the organization is committed to learning, changing, and making a significant impact within the insurance industry. So far, they've focused on topics like mental health, Indigenous reconciliation, and 2SLGBTQ+ allyship. In addition to making monetary donations, Sovereign is learning how it can provide more support to various individuals and groups.&nbsp; &ldquo;We want to be very authentic in our community impact work,&rdquo; says Colette. &ldquo;We are not experts in these areas, but we are on a journey of learning and we have invited our partners to be on that journey with us. We are going to continue to shed light on areas where we could all be learning more.&rdquo;

What's ahead for Sovereign in 2023 and beyond with Colette Taylor, Dave McKeen, and Matthew Campbell

What's ahead for Sovereign in 2023 and beyond

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As accountability in corporate leadership continues to broaden across a wider range of issues, legal challenges remain a significant concern for businesses. In Sovereign Insurance&rsquo;s annual Q&amp;A series, <a href="https://www.sovereigninsurance.ca/our-team/toronto/eduard-lecker" title="" target="">Eduard Lecker</a>, Senior Underwriter, &nbsp;Management Liability, shares his insights on key loss trends and exposures in this area in 2024 and what organizations should be aware of in 2025 as new risks take shape.&nbsp;
What were the key loss trends and exposures you saw in 2024?
The key loss trend in 2024 remained consistent with the previous year: an increasing number of claims focused on environmental, social and governance (ESG).1 These legal actions&mdash;which can be initiated by consumers, shareholders and investors, and environmental advocacy groups&mdash;are typically centred on allegations related to greenwashing and climate change. For example, a company might make misleading claims about its environmental strategies or fail to disclose climate-related risks, which can expose them to significant legal and financial risks.&nbsp;
What are some emerging risks to keep an eye out for in 2025?&nbsp;
One emerging risk is claims related to artificial intelligence (AI). As more companies use AI, there&rsquo;s a growing risk of misrepresentation about what these systems can do. Some tech companies may overstate AI&rsquo;s capabilities. Companies using AI for hiring, financial reporting, or ESG decision-making are especially vulnerable, as they could face legal action if the technology doesn&rsquo;t live up to expectations. For example, AI systems that filter job applicants can have unintentional biases, and companies may claim that AI can replace human decision-making&mdash;when, in reality, there&rsquo;s still a lot of human oversight involved. If AI tools generate inaccurate reports&mdash;like pulling up the wrong numbers&mdash;and those figures influence critical decision-making, legal claims can arise. Similarly, when companies use AI to track their environmental impact, inaccurate data could also expose them to risk.
There are a couple of emerging issues in the U.S. to keep an eye on, as developments there often follow suit in Canada. Under the new U.S. &nbsp;leadership, there are rollbacks in climate policies and diversity, equity and inclusion initiatives. For example, the U.S. has pulled out of the Paris climate agreement, which could prompt companies to scale back their own sustainability effects. This could expose them to legal challenges from groups that feel misled by these changes.&nbsp;
With the current trade war between the U.S. and Canada, there&rsquo;s growing sentiment around &lsquo;Buy Canadian,&rdquo; but labelling what qualifies as Canadian-made is complicated. For instance, a product might contain American apples processed in Canada but is labelled as being made in Canada. If a product doesn&rsquo;t meet legal definitions of terms like &lsquo;Product of Canada&rsquo; or &lsquo;Made in Canada,&rsquo; this could lead to claims. &nbsp; For example, if incorrect labels lead to misrepresentation of a product or its origin, it could lead to claims of misrepresentation or breach of contract.&nbsp;
We&rsquo;re also keeping an eye on U.S. cases in which directors and officers are facing personal liability in lawsuits. Holding directors personally liable for their decisions could lead to more legal challenges and impact decision-making at the top level. &nbsp;
How can organizations mitigate these risks?&nbsp;
For AI, it really comes down to transparency. Don&rsquo;t overstate, misrepresent, or overpromise what AI can do, and understand the legal consequences of any claims you make. It&rsquo;s similar to how companies should approach environmental strategies&mdash;be transparent about your actions and results. Like the saying goes, &lsquo;understate, overperform.&rsquo;
For the developments that we&rsquo;re watching in the U.S., it&rsquo;s difficult to say how to mitigate against them because there are still a lot of unknowns. When it comes to labelling Canadian products, it&rsquo;s important to be aware of the legal requirements. Transparency is key here, too&mdash;if there&rsquo;s any uncertainty, you can direct customers to your website where you outline your process, which some companies are starting to do. If you&rsquo;re not misrepresenting your actions, you&rsquo;re far less likely to face legal issues.&nbsp;
Sources 1 Jan. 31, 2025: Moodys, &ldquo;D&amp;O series &ndash; Evolving risks in the boardroom: A new era of D&amp;O liability &ndash; Part 3&rdquo; 1 Aug. 22, 2024: McCarthy Tetrault &ldquo;Greenwashing and AI Washing: Emerging Trends in D&amp;O Claims Across North America&rdquo; 1 Oct. 22, 2024: &ldquo;The Insurer: Greenhushing &ndash; An emerging D&amp;O liability?&rdquo;

Loss trends and emerging risks in 2025: Management liability 

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As businesses continue to rely on essential machinery and equipment, the risk of damage and breakdowns remains a significant concern. These incidents can disrupt operations, lead to costly repairs and result in extended downtime. &nbsp; As part of our annual Q&amp;A series, <a href="https://www.sovereigninsurance.ca/our-team/calgary/razvan-ionescu">Razvan Ionescu</a>, Manager, Equipment Breakdown Underwriting, Large Accounts &amp; Operations at Sovereign Insurance, shares insights into key loss trends from 2024 and emerging risks that organizations should be aware of in 2025.&nbsp; What were the key loss trends and exposures you saw in 2024? If we were to look for trends in the equipment breakdown insurance industry, the most notable phases would be the heating season and the cooling season. In colder months when heating systems are activated, for example, boilers that are used for heating buildings might experience breakdowns. This happens because they haven&rsquo;t been used for an extended period and when they&rsquo;re restarted, can fail due to improper shutdowns or lack of maintenance during the off-season. Similarly, with cooling systems, a lack of ongoing use and maintenance can lead to mechanical failures. In addition to seasonal concerns, we continue to see typical breakdowns of production machinery, transformers, and other equipment that businesses rely on day in and day out. This can be caused by issues like aging equipment, wear and tear, and lack of preventative maintenance.&nbsp; What are some emerging risks to keep an eye out for in 2025? One emerging risk I&rsquo;ve seen is a shift from traditional generators to electric or lithium-ion batteries as backup power sources or to reduce the on-peak service use. While generators have been in use for a long time, some businesses are turning to electric batteries. This shift brings new risks, especially when it comes to maintenance and exposure. With traditional generators, you typically need a mechanical specialist on-site to keep things running smoothly. But with electric batteries, the high-capacity maintenance is usually handled by the OEM (original equipment manufacturer), who monitors the battery&rsquo;s performance in various ways, for instance, through remote monitoring. So, the whole approach to upkeep is different. A big concern here is fire risks. Batteries are prone to something called thermal runaway, which is a chemical reaction inside the battery that causes it to overheat and potentially catch fire. This can happen without the presence of oxygen, which makes it more dangerous than other types of fires. If a thermal runaway event happens, it could damage the entire battery system, which might cost a company hundreds of thousands to replace. And of course, there are significant human safety risks with any type of fire. In contrast, if something in a backup generator breaks down, it&rsquo;s typically a mechanical issue that can be fixed &ndash; similar to how you would repair a car. How can organizations mitigate these risks? To keep machinery and equipment running smoothly and safely, the best approach is to follow the OEM recommendations. For example, if the OEM advises performing thermal scanning on batteries on a regular basis, it&rsquo;s important to stick to that schedule. There&rsquo;s a well-known saying: &ldquo;If you don&rsquo;t schedule maintenance, your equipment will schedule it for you.&rdquo; By regularly scheduling maintenance, you can ensure it&rsquo;s completed on time and reduce the chances of delays in sourcing spare parts. When it comes to batteries, there are also specific best practices to follow around proper use, storage, transportation, and disposal. Organizations should familiarize themselves with these guidelines to minimize risks. For any type of equipment, preventative maintenance is essential. Although insurance policies are designed to cover profit losses during downtime, the key is to maintain uninterrupted service to customers.

Loss trends and emerging risks in 2025: Equipment breakdown

From distracted driving on busy highways to the explosive rise of quick e-commerce deliveries on city streets, the landscape of risk is rapidly shifting for the transportation sector. As part of Sovereign&rsquo;s 2025 Q&amp;A series, Kevin Dutchak, Senior Risk Specialist, Commercial Auto, provides insights into the key loss trends of 2024 and offers practical advice on how businesses can mitigate risks to protect their operations this year and beyond.
<h4>What were the loss trends and key exposures you saw in 2024?</h4>
Distracted driving is still a big issue and it&rsquo;s becoming even more significant with the growing use of technology in the industry. Technology can be great, but it can also be distracting. For example, some drivers try to map out routes on the fly, and in the e-commerce delivery space, drivers are constantly looking at addresses along residential streets. These kinds of distractions may lead to a lot of loss incidents.
Additionally, traffic seems to get busier all the time. During rush hour and with ongoing construction, it&rsquo;s like that old video game, Frogger, with drivers switching lanes back and forth, speeding, suddenly cutting in front of other drivers, and trying to get ahead of everyone. Statistics show that road travel continues to be the riskiest form of transportation, from property loss and minor fender benders to serious injuries and fatalities. When you add distracted driving and traffic congestion into the mix, it can increase the risk significantly.
Driver controls are another ongoing issue. For example, there are cases where drivers took short cuts to try to save time. But that winding two-lane highway with limited passing lanes, for instance, can put you more at risk, especially in winter conditions.
<h4>What emerging risks should businesses be aware of in 2025?</h4>
Climate change and severe weather events are becoming more of an issue for the transportation sector. We&rsquo;re seeing more frequent storms and extreme temperatures, which can cause delays and put drivers in unsafe situations.
While cybercrime is becoming more of a risk in many industries, I don&rsquo;t see much of that in trucking yet. But as more companies integrate artificial intelligence into their operations, they should ask what they&rsquo;re doing to protect themselves so people can&rsquo;t hack into that and use it to their advantage.
<h4>How can organizations effectively mitigate these risks?</h4>
When it comes to distracted driving, the key to mitigation is the constant reminder that driving is your job 100% of the time. You can&rsquo;t afford to compartmentalize your thinking&mdash;you have to concentrate on the road because it&rsquo;s such a fluid situation.
Sound defensive driving practices are also critical. I&rsquo;m surprised at the number of fleets that don&rsquo;t provide that training, assuming that because their drivers have a licence, they don&rsquo;t need it. But despite our best efforts, we can all become complacent, distracted and forgetful. So, companies need to get the focus back on training. It&rsquo;s an investment in your drivers that can pay dividends.
In terms of driver controls, trip management programs can mitigate risks. Managers should have discussions with drivers to outline expectations: Here is when we expect you to be on the road, this is the route we expect you to take, here&rsquo;s when we expect you to stop. When there is an interruption to the plan due to situations such as poor road and weather conditions, traffic delays on route and driver fatigue, protocols should be in place for drivers to communicate with dispatch and operations staff to keep them advised, which in turn can be communicated to their clients. The safety of drivers and other road users is always the top priority. Telematics can also be used to monitor drivers&rsquo; routes and ensure drivers are following the proper procedures, such as speed limits and safety protocols.
If a driver does have a significant loss event, it&rsquo;s critical for companies to take effective corrective action, such as retraining or a driver interview. Often, a lack of corrective action can lead to further and more significant losses.
For weather events, fleet operations should focus on forecasting models, if they aren&rsquo;t doing so already. When severe weather conditions are imminent, companies should consider shutting down operations in the affected areas; all drivers should find the first safe place to park, advise dispatch of their status and stay in place until the shutdown order is lifted.

Community Impact and Sustainability with Sovereign in 2022

Community Impact and Sustainability with Sovereign in 2022

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