September 1, 2017 by Staff
Canada’s P&C insurance sector continues to demonstrate stable operating performance in 2017 following a financially challenging 2016, states a report from A.M. Best.
The report, entitled “Canadian property & casualty and life remain stable as economy rebounds, while housing market bears watching,” notes that the industry continues to face market pressures such growing weather and fire catastrophes and a persistently low interest rate environment. Seismic events, economic volatility and regulatory changes also remain factors worth watching, according to the report.
Canada is currently in the middle of another heavy wildfire season, particularly in British Columbia, parts of which have been consumed by wildfire since the beginning of the summer.
The Fort McMurray wildfires of 2016 continue to be the largest natural catastrophe in the country’s history. Reinsurers covered approximately 70% of insured losses, a figure in line with similar-sized events worldwide, says Greg Williams, senior director at A.M. Best, in a statement.
In 2016, the overall combined ratio for the Canadian P&C sector increased by 2.7 points to 98.2. The loss and loss adjustment expense ratio rose by 2.4 points and the underwriting expense ratio increased by 0.3 points.
The steady rise in the expense ratio over the last several years is partially reflective of ongoing investments to improve and upgrade policy administration and claims systems, as well as continued efforts to leverage data analytics in the underwriting process, states the report.
Pre-tax operating income declined 26.5% in 2016. The significant decline in underwriting profits resulting from catastrophic events was partially offset by additional investment income, which benefitted from an increase in investment yields. Realized capital gains dropped approximately 55% from the prior year, while net income was down approximately 30%.
“Most Canadian P&C writers rated by A.M. Best maintain geographic spread at least through multiple provinces, as well as comprehensive catastrophe reinsurance programs,” says Raymond Thomson, associate director at A.M. Best, in a statement. “They have been able to absorb the Fort McMurray fire losses and other concentrated events without material impacts to their balance sheets.”
This story was originally published by Canadian Insurance Top Broker.