Facilities Association: market share of Alberta risk-sharing pools is high

The market share of Alberta’s risk-sharing pools is high by North American standards, standing at 11.5% on a written exposure count basis and 18.5% on a written premium volume basis, according to the Facility Association in a submission to the Alberta Automobile Insurance Rate Board (AAIRB).

That puts the market share for Alberta’s risk-sharing pool below that of only the Northwest Territories, Nunavut and North Carolina

Facility Association has told the AAIRB that it has concerns regarding the financial results of the risk-sharing pools (SRP) in the context of rate-setting, because of market attractiveness, rate subsidization and unique company impacts.

FA notes SRP “can be a useful residual market [but] ‘size matters’ and a balance needs to be struck between risk-sharing pools that are large enough to be useful in promoting market stability but not so large as to impair the longer-term health of a vibrant competitive market.”

In terms of market attractiveness, the overall risk is higher because 18.5% of a company’s revenue stream as it pertains to underwriting, is, for all intense and purposes, out of their control, according to Facility Association.

For rate subsidization, rates will be forced higher in order for companies to generate an acceptable return level.

Finally financial impacts will be unique across the board as the impact on each company will be different despite any uniform rate adjustments, according to Facility Association.