Claims frequency the issue for Canada in 2014: A.M. Best

2013 and 2014 reflect stories in severity versus frequency for the property and casualty industry in Canada, Joel Silverthorn, a senior financial analyst for A.M. Best Company Inc., said during the company’s 2014 Insurance Market Briefing – Canada held in Toronto September 4.

With events such as ice damming, frequent storms and continued water events, this frequency “crept in below retentions,” Silverthorn said.

A.M. Best’s special report – released in advance of the briefing – notes the overall p&c industry combined ratio deteriorated to 99.8% in 2013, a 3.6-point increase from the prior year. Over the last five years, the combined ratio was 100.9% in 2009, 100.7% in 2010, 99.1% in 2011, 96.2% in 2012, and 99.8% in 2013.

Unlike what was seen when the combined ratio was about 99 at the end of 2013 – which Silverthorn calls “just barely break even” – when the industry starts seeing “the 103, this is all being kept. It’s not going off to the reinsurers,” he says.

“This is all part of what’s happening at this moment, because the industry itself is taking on this burden, because it’s a frequency event, not a severity event,” Silverthorn added.

Also emerging is the prominence of water as a peril. Noting that two of the largest-ever Cat losses occurred in 2013, he told delegates that water has now taken over fire as the largest peril.

“In view of the significant financial obligations and potential reputational risk associated with water claims, insurers have taken decisive actions, the impact of which will play out over the next couple of years,” notes the A.M. Best report.