Canadian commercial lines writers see improved combined ratio in Q1 2015

The Canadian p&c insurance industry saw a combined ratio of 103.6% in Q1 2015, compared to 102.6% in Q1 2014, while commercial lines writers saw an improved combined ratio of 102.2% in Q1 2015 from 104.4% a year earlier, said Joel Baker, president and CEO of MSA Research Inc., during the opening presentation at the 6th annual Canadian Insurance Financial Forum 2015 on Wednesday.

Personal- and multi-line writers saw a combined ratio of 106.5% in Q1 2015 from 105.2% for the same period in 2014 and reinsurers saw a combined ratio of 91.9% in the first quarter of 2015, similar to the 91.2% in Q1 2014, Baker said during his conference session at the Metro Toronto Convention Centre, titled Review of Industry Results and Outlook.

He noted that the data captured about 96% of the market and excluded most Quebec companies, because the provincial regulator does not require Q1 filings.

The industry also saw a growth in premiums surpassing growth in claims last year, as well as an underwriting profit and a two-digit return on equity (10.6%, up from 7.7% in 2013), Baker said. “In terms of 2014, it was a pretty good year,” he told conference attendees. “It was a decent year for the commercial writers. The reinsurers had a wonderful year because of the lack of cats; the impact of cats didn’t hit the reinsurers.”

Calling it the “one billion dollar shrug,” Baker said that the $1 billion in cat losses in 2014 “didn’t really move the needle for the industry.”

Regarding new disclosures – liability breakouts, Baker stressed that these Q1 2015 results were “very preliminary” and to “take them with a grain of salt.” In particular, for commercial general liability insurance, which is nearly 55% of the liability line, the loss ratio in Canada was 68%, but 74% in Ontario. Professional liability (23% of the whole liability line) had a loss ratio of 47% in Canada, but 81% in Ontario. D&O (6% of liability line) had a 62% loss ratio in Canada, but 140% in Ontario.

The cyber line, which only has about $3 million in premiums and 0.2% of the liability line, had a loss ratio of 145% in Canada and 174% in Ontario. “The loss ratios are not encouraging,” Baker concluded.