PACICC unpacks industry-wide P&C financial results

The industry made a record profit in homeowners’ insurance and overall premiums are up, but 20 Canadian insurers are losing money while dozens recently lost market share, an economist with Property and Casualty Insurance Compensation Corporation observes.

“The healthy insurance market has allowed insurers to focus on expanding their businesses,” wrote Grant Kelly, PACICC’s vice president, financial analysis and regulatory affairs, in the most recent edition of Solvency Matters.

When looking at recent financial results of PACICC’s 178 member insurance carriers, Kelly divides them into three broad groups. The first group, of 44 carriers, reported growth in direct written premiums (DWP) of higher than 20% over the past 18 months.

“At the end of 2020, these insurers held a cumulative market share of 13.3%,” Kelly wrote in Many insurers making hay while the sun shines, an article published in the Solvency Matters edition released Sept. 27.

PACICC monitors growth in direct premiums written because PACICC findings “show that excessive growth is a common early symptom of future insurer failures.”

Thirty-seven PACICC member insurers reported a drop in direct premiums written over the past 18 months, wrote Kelly. A third group, of 41 PACICC member insurers, reported growth in direct written premiums of between 10% and 20% during the same time, Kelly wrote in the Solvency Matters article.

In its latest Solvency Matters, PACICC reported Canadian P&C industry results, from the first six months of 2021 and 2020, quoting from MSA research. The combined ratio was 82.7% in 2021, down from 103.6% during the first six months of 2020.

“Buried within these consistently strong results, there were still 20 individual insurers that reported losses. These are among the insurers that PACICC will continue to monitor closely in the quarters and years to come,” Kelly wrote.

Net premiums earned, for the industry, rose from $27.6 billion in the first six months of 2020 to $30.2 billion during the same period this year, PACICC noted, quoting from MSA Research.  Industry-wide claims dropped from $19.9 billion in the first half of 2020 to $15.5 billion between Jan. 1 and June 30, 2021.

For the first six months of this year, the loss ratio for homeowners’ insurance was 48.3%, which is the lowest national homeowners’ insurance loss ratio reported in any quarter available in PACICC’s database, Kelly wrote.

The loss ratio for commercial property was 43.8% in the first half of 2021, down from 77.9% in 2020 while the loss ratio for commercial liability was 58.0%, down from 86.5% one year earlier, Kelly wrote.

Toronto-based PACICC is set up to protect eligible policyholders from undue financial loss in the event that a member insurer becomes insolvent. Not all Canadian P&C insurers are PACICC members but P&C insurers licensed in a province or territory of Canada are required to be members of a guarantee fund.

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