Press Release - AUGUST 30, 2018
Best’s Special Report: Canadian Property/Casualty and Life Insurance Sectors Remain Stable, As Economy Continues to Grow
FOR IMMEDIATE RELEASE
OLDWICK - AUGUST 30, 2018
The Best’s Special Report, titled, “Outlook for Canada’s P/C and Life Segments Remains Stable, as Economy Continues to Grow,” analyzes the recent performance and also details the challenges that face each industry segment, some of which have become all too familiar issues. The report was released in conjunction with A.M. Best’s 2018 Insurance Market Briefing – Canada event, scheduled for Wednesday, Sept. 5 in Toronto.
Canadian P/C insurers did not face the magnitude of the 2016 Fort McMurray wildfire in 2017, at least on a single-event basis, but did contend with 15 catastrophe events that impacted underwriting results. Every peril other than earthquake was represented last year, as most provinces felt the wrath of wind and water, and British Columbia was victimized by two large wildfires. In most cases, no individual event was severe enough to reach into insurers’ catastrophe reinsurance programs; most losses were net to each insurer’s bottom line. Despite the impact of weather events, the industry’s combined ratio improved by 1 point in 2017, to 97.1
“Because most of the Canadian P/C writers rated by A.M. Best provide coverage in a number of provinces and maintain comprehensive catastrophe reinsurance programs, they have been able to absorb these concentrated events, with small hits to earnings but without material impacts on their balance sheets,” said Raymond Thomson, associate director.
As for Canada’s life insurance sector, A.M. Best believes these insurers have done a commendable job of navigating the prolonged low interest rate environment. These actions have supported operating margins to date, although current margins many not be sustainable should interest rates remain low. The level of return on equity has declined with equity bases growing faster than earnings, leaving companies to strategically assess the deployment of capital.
“Overall operating earnings remain strong,” said Ed Kohlberg, associate director. “Underwriting performance has generally been favorable, and core earnings continue to grow through the expansion of wealth and asset management business sales in Canada and globally.”
Kohlberg also noted that counterbalancing factors include stubbornly low interest rates, economic uncertainty both in Canada and globally, and concerns about legacy blocks of business that could add to the volatility of earnings and capital. The Bank of Canada has raised its overnight rate three times since July 2017, to the current 1.25%.
To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=277476 .
To view a video related to this report, please visit http://www.ambest.com/v.asp?v=mbcanada918 .
For more information about A.M. Best’s 2018 Insurance Market Briefing – Canada event, please visit www.ambest.com/conferences/imbcanada2018/index.html .
A.M. Best is a global rating agency and information provider with a unique focus on the insurance industry.