2003 a far cry from 2002 for Canadian insurers: A.M. Best

The massive turnaround effected by Canadian insurers, who turned the worst-ever performance of 2002 into the very profitable 2003, is examined in a new A.M. Best statistical study.With the industry posting a combined ratio of 98.4%, return on equity of 12.4% and an underwriting profit of $524 million, 2003 will be remembered as a year of strong underwriting. “The hard market’s higher rates drove much of the improvement, but it was also the industry’s ongoing efforts to return to business basics, i.e. sound underwriting guidelines, more conservative claims practices and attention to expense management,” the report notes. On top of its underwriting success, investment income and capital gains were up 30% collectively. And the industry weathered several extreme loss events last year successfully, including the B.C. forest fires and Hurricane Juan, not to mention more than $500 million in losses from the Facility Association the industry’s pool for high-risk drivers.Auto insurance remains the bane of the industry still, as A.M. Best notes, “with no real relief in sight”. The below average performance of insurers such as State Farm and Kingsway General points to the lingering problems in the auto insurance segment.But all underwriters will face the challenge of the looming soft market, the report concludes. “The big question looming is how long the industry can maintain the positive momentum and underwriting discipline, without falling into a competition for market share?”