Checking In on the Markets

Every spring, Canadian Insurance Top Broker publishes its Annual Statistical Issue, providing a comprehensive breakdown of how Canadian P&C insurers performed in the previous year. And for the last few Decembers, our year-end issue of the magazine has featured profiles of prominent insurers that we believe brokers should be paying attention to, based on what they have done in the past year.

This year, we decided to marry these two initiatives somewhat by providing you with an update on how some of the top insurers are performing as of the midway point of the fiscal year. Our goal throughout is to provide brokers with the leading market intelligence they need to grow their business, by identifying market leaders and market movers.

This year started off quietly, with an exceptionally mild winter and very little in the way of cat loss activity. Combine this with a slowly improving economy and the Canadian P&C industry showed “marked improvement” in the first six months of the year, according to the MSA Quarterly Outlook Report: Q2 2012.

“Commercial lines writers continued to exhibit impressive bottom line numbers despite continued erosion in top line revenue. The soft commercial market lives on. But, magically, the commercial sector is still able to generate reasonable returns in spite of this and in spite of low investment returns,” says the report.

Among the Top 20 insurers as measured by net written premium at the end of the second quarter, the most notable mover is the Lloyd’s group of underwriters, which finished 2011 in sixth spot but is on track to finish the year in third. Lloyd’s markets enjoyed over $355 million in premium growth compared to Q2 2011, the largest growth by actual volume and eighth largest by percentage with an increase of over 30%. This growth has occurred despite a slowdown in Canadian coverholder appointments and the deregistration of others without active binders.

While not a traditional P&C company, the other notable mover was Canada Guaranty, a mono-line mortgage default insurer that offers a case study in supply chain management. Formerly AIG United Guaranty Mortgage Insurance Company Canada, the company was purchased by the Ontario Teachers’ Pension Plan and National Mortgage Guaranty Holdings Inc., in 2010 and is now the only 100% Canadian-owned private mortgage default insurer. With over 117% premium growth since Q2 2011, the company is benefiting from tightened restrictions on Crown mortgage insurer Canada Mortgage and Housing Corporation (CMHC) and lenders’ diversification strategies.

Since the financial crisis, “[lenders] are very reluctant to put all their emphasis on a sole supplier if indeed that sole supplier, for whatever reason—be it public policy or internal decision making—is unable to accommodate all their needs,” said Canada Guaranty CEO Andy Charles about CMHC in an interview. “When [lenders] do spread [risk] around more evenly, clearly they look to the strength of the sponsorship that Canada Guaranty has. And that’s where Ontario Teachers’ Pension Plan comes into it with assets of $118 billion.”

We hope you find these charts informative and look forward to the full picture in our 2013 Annual Statistical Issue in the spring.

This story was originally published by Canadian Insurance Top Broker.