CLIA Board Chair Report 2023

I am once again putting pen to paper (fingers to keys actually) to reflect on the year that has just passed at CLIA and to brag about our successes, apologize for our failures and generally whine about the things that annoy me!

The Board held its final meeting of the year on December 5th, 2023. It was a wild one because weather and airline nonsense made it a travel nightmare. People were delayed, some sat on tarmacs for hours only to have the flight cancelled entirely and several folks had the joy of arriving well past midnight. Are there really people on the streets of Toronto at 4:00 AM Dave?

The Board met four times in-person, and once virtually in 2023; the virtual meeting was held on February 23rd, 2023, and the in-person meetings were held on March 31st, June 15th, September 14th, and December 5th. The Annual General Meeting was held May 10th and 11th in Toronto. 

Board agendas and supporting documents are all posted on the CLIA website for anyone wanting more comprehensive information on any topic (if you know the secret password). You can also contact Dave Jackson or me with questions or for more details. For example, I would be happy to provide full details of my 12 hour delay on the way to Toronto, followed by 4 hours sitting on the tarmac on the way home because the meals were getting stale. I told you there would be whining!

Governance

After completing nine consecutive years on the CLIA Board, we said goodbye to Su Forbes. I miss Su’s wit and wisdom, and eye for detail but feel lucky that Subscribers selected a great person to fill the vacancy, At the June Board meeting we welcomed Maria de Michele to the Board. Maria was the former Executive Director of the Professional Insurance Liability Fund of the Quebec Bar (she retired in 2022). She has a wealth of experience and knowledge about professional liability insurance and she is a great fit for our Board in terms of temperament and personality (i.e. she is a lot of fun!)

In January of 2023 the College of Patent Agents and Trademark Agents (CPATA) appointed a new Chief Executive Officer and contacted CLIA to discuss the impact that the CPATA insurance requirements were having on private practice lawyers. He asked for an opportunity to meet with the CLIA Board. He provides a presentation to the Board at the March 31st, 2023 meeting.  The Board felt this information should be presented to all Subscribers, and he was invited to present at the CLIA AGM in May. This matter was referred to the CLIA Policy and Underwriting Committee who recommended to the Board that lawyers who also act as patent and or trademark agents should be covered under the CLIA policy.  The Board approved a recommendation from the Policy and Underwriting Committee to add a carefully worded endorsement to provide coverage under the CLIA policy.

Investment Management performance is always on the radar for the CLIA Board because as an insurer we carry a large investment portfolio and in good years, revenue and growth from that portfolio can be a big factor in reducing premiums to Subscribers. Of course, the opposite is true as well and frankly, 2023 was not a banner year for our investments. Now nobody expects great results when markets are floundering, but we do expect our investment performance to do slightly better than the markets in both good years and bad ones. We set benchmarks and monitor the performance of our investment advisors as against those benchmarks.

I’m sorry to say that those numbers didn’t look great (I told you there would be apologies for failures!) We retained the services of AON to provide their assessment of the performance of our Investment Manager. We also invited our Investment Manager to present and comment on their performance at the September 14th Board meeting. After discussing the results of the AON report and meeting with the Investment Manager, the Board concluded that it was a tad premature to take any action and that we would continue to monitor performance for the next few quarters.

We are continuing to provide orientation sessions for Law Society CEO’s who are new to their role and or interested in learning more about CLIA. As part of our stakeholder communications plan, we initiated a CEO roundtable session for CEO’s and CLIA staff to meet virtually and discuss common issues and concerns. The first session was held on November 8th.

Claims

CLIA claims have been trending upwards in 2023 primarily due to an increase in estimates for claims settlement costs (reserves) on existing claims in the Mandatory program. Most of the reserve increases came from high-value claims related to commercial real-estate work.

Work began in 2023 updating the Claims Management System. Subscribers were advised late in 2022 that the platform built to support the Claims Management System was aging and soon would be unsupportable. It is anticipated that the updating project will be completed by the end of 2023. OK now here’s the bragging part! The Board agreed to pay for the project (the original system was built and paid for by Subscribers). We decided that there was significant value in doing these kinds of projects collectively so we could move toward common data entry practices that would permit us and our subscribers to do more meaningful analysis of data from across the CLIA jurisdictions.

Financial

The Board was provided with the results of the 2023 Q3 financial position at the December Board meeting. 

CLIA's investment portfolio experienced a negative return of 2.39% in the third quarter of 2023, resulting in a decrease in surplus by $0.81 million. The adverse performance of the investment portfolio can be primarily attributed to the rise in government bond yields, which had a diminishing effect on the value of CLIA's fixed income holdings. The equity performance in the third quarter concluded in negative territory.

CLIA reported net revenues of $1.07 million. The net revenues consist of gross revenues of $2.42 million, which were offset by premium discounts of $0.21 million and premiums ceded to reinsurers totaling $1.14 million. CLIA is forecasting expenses to come in on budget this year primarily due to lower Annual General Meeting costs and lower travel expenses than budgeted. 

In September the CLIA Board approved an increase in the 2023 operating budget as a result of the new Policy and Communications Advisor position. Accountants debate the need to amend the Budget mid year in these circumstances (the Board had encouraged the creation of the new position) but there didn’t seem to be any downside to doing the amendment.

The 2024 CLIA operating budget was presented to the Board at the December 5th Board meeting. The Board approved the 2024 operating budget of $2,697,000. This is an increase of 4.5% from 2023. The increase is primarily due to increased office salaries with the addition of a Policy and Communications Advisor, higher governance expenses from increased hotel and air travel rates, and increased premium taxes.

Policy and Underwriting Committee (PUC)

In 2023 the Committee was involved in discussions related to coverage for lawyers who are also Patent and or Trademark Agents. The Committee determined an endorsement to Part A was the appropriate approach to achieve the coverage sought by CPATA. The Committee further agreed on criteria to be applied to future requests from other groups that will allow for a consistent approach with the ability to provide a reasoned and rational response on the merits of each request. The CPATA endorsement was approved by the Board at the September 14th meeting.

Voluntary Excess Program (VEP)

We want to grow our Voluntary Excess Program. We initiated a Request For Proposals for Broker Services in November and December of 2022. For the first time since the inception of CLIA, a competition was conducted for Insurance Broker Services. A subcommittee of the Board was created to participate in the process. Seven invitations were sent to global and domestic brokers and four responded. Interviews were conducted in December and Marsh Canada was selected to provide Broker Services for CLIA effective January 1, 2023. The Board is monitoring the transition throughout the year.

Positive outcomes from the 2023 VEP renewal were reported to the Board in September. There was a 5% increase year over year in the number of applications that were submitted, a 6% increase in lawyer count and the number of firms insured, a 95% increase in new applications, a 118% increase in coverage for retired lawyers, and a 24% increase in the CLIA Cyber Stand-Alone product.

Audit and Conduct Review Committee

The Audit and Conduct Review Committee (Committee) met on October 31, 2023. The agenda included a review and approval of the 2023 Audit Plan. CLIA’s auditor (PwC) also provided an update on the pro-active IFRS 17 audit.  The Committee approved the 2023 Audit Plan.

CLIA successfully implemented IFRS 17 in 2023. CLIA’s Auditor (PwC) conducted a one-time audit, focusing on changes in actuarial liability valuations, accounting policy decisions, and internal processes and controls. No issues were identified during this transition. The approval of the 2023 financial statements by the Board in February 2024 will officially conclude the IFRS 17 project.

Claims and Loss Prevention Committee

The Claims Committee continues to review and provide settlement authority to subscribers who have claims that are in the CLIA limits.

Loss prevention was added to the Terms of Reference for the Claims Committee in 2022. The Committee met virtually on October 4th, 2023, to review the strategic plan for loss prevention and discuss the principles, priorities and the work that has already been completed. There was discussion about having representation from the Territories, as Glenn Tait was a representative before he retired. Linda Doll was asked to be the representative from the Territories, and she agreed to participate on the Committee as it develops loss prevention.  

Policy work

As a Board we regularly review our own performance individually as well as the performance of the Board collectively. We also do an annual performance review of our CEO based on a set of performance outcomes we establish at the start of each year. For a while now the Board has noted a gap in CLIA’s capacity in the areas of communications, policy development and loss prevention and asked Dave as one of his performance objectives, to come up with a plan to address that gap.

Dave did more than plan, he acted. He hired Melanie Hodges Neufeld as CLIA’s first Policy and Communications Advisor. Melanie has a great background in professional regulation and policy work. She is also a lawyer and that expertise will also be an asset in her work. Melanie has already developed an ambitious work plan and is well on the way to filling some key gaps in CLIA’s organizational capacity.

The last word

This is going to be my last annual report to subscribers because my term ends in June 2024, both as Board Chair and as a Board member as well. CLIA 1.0 had a bad habit of keeping Board members around for a very long time. They were fine folks but every organization needs to change and to refresh its governing body regularly. I am happy I spent nine years on the CLIA Board and am happy our terms of reference have term limits (9 years and out the door).

Mostly though I am proud and sad. I like the people who work for CLIA a lot. One of Dave’s great skills is hiring really talented people who are high performers and also lovely to hang around with. Dave himself is everything we hoped to find in a CEO when we created CLIA 2.0 and made the decision to build in-house capacity. He is energetic, knowledgeable and good natured. I want to thank Dave and his team for their support this past year to the Board. Our jobs were made a lot easier by having them have our backs!

I am amazed by the people on the CLIA Board. They get paid nothing and spend a fair bit of volunteer time working for the good of the public who rely on legal services. They take on the tough issues, operate strategically and collegially. Thanks to you all for your commitment and great governance.

So…I’m proud that during my time on the Board we built a vibrant effective organization the is cost effective and strategic. I am sad because I really like the CLIA people I got to know and love. Best regards to everyone for a happy holiday season.

Allan