Canadian Market (April 01, 2010)

CANADIAN INSURANCE SECTOR UNLIKELY CANDIDATE FOR RAPID GROWTH

The Canadian insurance sector is unlikely to achieve rapid growth, reports companiesandmarkets.com, a United Kingdom-based online repository of market research reports.

In its first analysis of Canadian insurance, it noted the Canadian insurance market is “mature and competitive” and “unlikely to achieve rapid growth through our forecast period — this is in spite of its advantages and a generally favourable outlook for the Canadian economy.”

The report noted the nonlife sector is highly fragmented, with no single player appearing to have double-digit market share.

“One consequence of the fragmentation and lingering mutualization of the Canadian non-life segment is that the Canadian property and casualty insurers have had less desire and need than the life companies to seek challenges and opportunities in other countries.”

PERSONAL ACCIDENT AUTO RESULTS HIT CLAIMS RATIO OF 125% IN 2009

Auto lines for federally regulated Canadian and foreign property and casualty insurers continued to deteriorate, according to 2009 figures posted by the Office of the Superintendent of Financial Institutions (OSFI).

OSFI figures show Canadian insurers collectively reported a claims ratio of 125.72% in the auto personal accident category (which includes accident benefits) at year-end 2009. The figure climbs to 211.8% for foreign insurers (166% in 2008).

The net income for Canadian and foreign P&C companies reporting to OSFI totalled just over $2.5 billion in 2009, marking an increase from the $2.2 billion reported in 2008. While the net income continues to improve, it is still down considerably from the $4.9 billion profits the same companies reported in 2007.

ABOUT HALF OF 216 CANADIAN P&C INSURERS REPORT AN UNDERWRITING LOSS TO MSA RESEARCH

More than half (51%) of the 216 insurance companies reporting 2009 year-end data to MSA Research posted an underwriting loss for the year.

Eighty-eight of the 216 companies reported a combined ratio of 100% or more.

MSA Research has posted a summary of the 2009 yearend results on its Web site ( www.msaresearch.com).

The summary represents about 95% of the Canadian market.

Out of eight individual companies that reported more than $1 billion in net written premiums in 2009, only one, Intact Insurance Company, reported an underwriting profit ($4.9 million).

Seven reported an underwriting loss. They include Aviva Insurance Company ($92.6-million loss), Co-operators General Insurance Company ($31.7-million loss), Dominion of Canada ($144-million loss), The Economical Mutual Insurance Group ($111.8-million loss), State Farm Mutual Auto ($478-million loss), Security National Insurance Company (TD Assurance) ($59-million loss) and Wawanesa Mutual Insurance Company ($68-million loss).

NEW BRUNSWICK HOME INSURANCE PREMIUMS ARE ON THE RISE

New Brunswick’s Consumer Advocate is concerned the province’s home insurance market is showing signs of “instability.”

“One of the biggest issues is the fact that home insurance premiums are on the rise,” the Consumer Advocate says in its 2009 annual report. “This is due to increased flood claims and increased rebuilding costs.

“Under-insurance is another issue that has caused some required adjustments in coverage and thus resulting in adjustments in premium levels.

“There appears to be some signs of instability in the market and hopefully this will not result in issues of availability and affordability as we experienced in auto insurance, not too long ago.”

CANADIAN P&C INDUSTRY “BASICALLY GIVING AWAY WILDFIRE RISK”: ICLR

The insurance industry “dodged a bullet” in 2009 with wildfire losses, but it has its “head in the sand” when it comes to pricing this risk, said Glenn McGillivray, managing director of the Institute for Catastrophic Loss Reduction (ICLR).

McGillivray spoke at the Ontario Mutual Insurance Association’s conference in Toronto on Mar. 25.

“I think a lot of companies are basically giving away wildfire risk and not properly loading for it,” he said.

According to the Insurance Bureau of Canada (IBC), only four homes were destroyed in the 2009 fires in the Kelowna, B. C region. Wildfires in the region in 2003 caused $200 million of insured damages.

“We dodged a bullet last season in Kelowna, but I think if it weren’t for the ‘Big Burn’ in 2003 it would have been much worse,” McGillivray told delegates.