What brokers think of the Definity-Travelers Canada deal

Canadian property and casualty insurance brokers are expressing general support for Definity’s proposed acquisition of Travelers Canada that was announced Tuesday.

Definity is offering to acquire most of the assets of Travelers Canada for $3.3 billion.

“Both Travelers Canada and Definity are strong broker-friendly companies, with great people, that are extremely supportive of the broker channel,” Insurance Brokers Association of Canada CEO Peter Braid tells Canadian Underwriter. “Given the respective strengths of each company by business line, this is a very complementary fit.

“And while brokers always prefer more choice for their clients, they will also welcome an even stronger Canadian company they know will always be there for them and their clients.

“The communities that Definity serves, and the country at large, will benefit from the merging of these two great companies.”

Adam Mitchell, CEO of Mitch Insurance, says he is struck by Definity’s bold moves to become a Top 5 player in the Canadian P&C insurance market.

“My first reactions were ‘Wow,’ quickly followed by ‘awesome’ and ‘cool,’” Mitchell says, asked for his reaction to Definity’s proposal to buy Travelers Canada. “Intact has been a runaway success story as one of the dominant publicly traded Canadian P&C insurance companies.

“This move creates space for another leading player to take a big step forward as a proud Canadian company with real momentum.”

Definity’s proposed acquisition of Travelers Canada is expected to add about $600 million in annual commercial insurance premiums to Definity’s balance sheet, an increase of 40% from current levels.

“Acquiring Travelers Canada’s operations will accelerate the transformation of Definity’s commercial insurance platform, while adding additional capabilities in marine, professional liability and other lines of business,” Definity says.

In personal lines, Definity will add about $1 billion in additional annual premiums to the company ledger, or 30% from current levels.

“The acquisition elevates Definity Financial’s market position to fourth overall within Canada’s property casualty insurance industry, which has been its strategic corporate goal,” ratings agency A.M. Best says of the deal. “Travelers will retain its Canadian surety, home warranty, and U.S.-related businesses.

“Furthermore, Travelers will retain its Canada branch, St. Paul Fire and Marine Insurance Company, and business not being retained will be executed through reinsurance.”

Subject to regulatory approvals, the deal is expected to close in 2026 Q1. The devil will then be in the details of how the integration between the two companies will be done.

Related: Definity to acquire Travelers Canada

“Brokers will have questions about the overall timelines and major milestones, the steps for regulatory approval, and ultimately how technologies and systems will be integrated,” Braid tells CU. “From a broker perspective, the key requirement and expectation will be frequent and effective communications.

“Given the strong relationships that both companies have with their broker partners, we know that both companies will place a high degree of importance on this issue.”

Other things brokers are watching for is how the deal may affect regional market concentration, although IBAC doesn’t see this as a major issue in the context of this particular deal.

Nationally, Definity Insurance Company had a 4.28% market share for total business in 2023, as cited in the Canadian Underwriter 2024 Stats Guide, which uses figures provided by MSA Research. That put the company in sixth place overall in the market by total insurance revenue in 2023.

Travelers Canada had a market share of 1.85% in 2023, ranking twelfth in Canada.   

“From a national perspective, given the respective market share of each company, I don’t see [market concentration] as being an issue,” Braid says. “Over the coming months, we will ensure that we are hearing the perspective from our member associations from smaller jurisdictions in Canada in this regard.”

Consolidation does concern a number of Canadian P&C insurance brokers, however.

In a LinkedIn post, Aly Kanji, CEO at InsureLine, observes: “Everyone is chasing size and scale. It’s happening in every industry. Excess capital is chasing roll-up strategies to create economies of scale, with the objective of increasing enterprise value or driving up stock value.”

Kanji notes Definity’s corporate objective to grow through acquisition has been well-publicized. But one consequence of the Definity-Travelers Canada deal is a loss of choice.

“Many brokerages lost an insurance market today,” he writes on LinkedIn. “Economical Insurance and Travelers Insurance have very different cultures, different product offerings, and different approaches to service. Now two become one.”

Mitchell agrees the downside of consolidation for brokers is losing a market — which would hit smaller brokerages harder. But in an indirect way, the Definity-Travelers Canada deal will promote competition at a top-tier level.

“The downside is we’re losing another competitor, but Travelers hasn’t been competing at the same level as market leaders in recent years,” Mitchell says. “By joining forces with Definity – and with a clear strategy and aligned teams – this should create another major player to challenge the likes of Intact, Aviva and others. And that kind of competition is healthy for the marketplace.”