The Canadian insurance market is likely going to see continued stability this year, although the industry could see modest rate increases in the second half of 2013, suggests an outlook report from Marsh.
Overall, the Canadian insurance industry outperformed the other markets in 2012, suggests the report, Canada Insurance Market Report 2013, which provides a breakdown of the insurance market in various industries.
“We expect these favourable market conditions to continue into 2013,” Alan Garner, Marsh Canada’s president and CEO noted in the report’s foreword. “However, depending on insurer financial results for 2012, we could see upward pressure on rates in the second half of the year.”
Renewal rates generally remained flat in the second half of 2012, a trend Marsh expects will continue, the report suggests. There may be some rate firming in catastrophe-exposed areas of the country, such as British Columbia and Quebec, which experience earthquake risk, the report suggests.
“Intense competition between insurers and brokers in the small and midsize enterprise (SME) market segment and improved Canadian property and casualty loss ratios are helping to keep the insurance market soft,” the report adds.
Last year was generally quiet in terms of catastrophes in Canada, although Hurricane Sandy had some impact here, Marsh notes. “A number of Canadian real estate companies will have substantial claims from their operations in the New York area, and these will filter down to some Canadian insurers,” the report says.
“In addition, some insurers may review their overall approach to flood retention levels, particularly in areas where there is perceived flood exposure from storm surge.”
Hurricane Sandy may also mean marine underwriters “who may not have paid attention to flood and earthquake accumulation risks in the past, may start taking a deeper interest in the location of risk, and the deductibles and sublimits that may apply to higher risk regions,” the report states.
Going forward this year, environmental coverage and cyber risk protection will be important in the Canadian insurance environment, the report notes. The changing litigation environment in Canada also remains a risk, it suggests.
Economic uncertainty in many major markets, such as China, the U.S. and Europe, may also create uncertainties for the Canadian manufacturing sector, the report says.
The full report for Canada, and for other regions, is available on Marsh’s website.