IBC says weather hit P&C insurers’ results hard in 2013

A turn in the weather last year proved enough to undermine the performance of the insurance industry, Gregor Robinson, senior vice president of policy and chief economist for the Insurance Bureau of Canada (IBC), said during Swiss Re’s 29th Annual Canada Outlook Breakfast in Toronto March 27.

“For 2013, results have been down significantly from 2012. How can we explain that? In one word: weather,” Robinson told a room full of senior insurance and reinsurance representatives.

Taking away reserve releases from prior years, he pointed out that 2013’s modest underwriting gain of $250 million becomes a loss of more than $900 million.

Overall, combined loss ratio rose to 99% from 95.4%, loss ratio was up to 68.3% from 64.9% (the result of claims growth of 8% and a 3.7% increase in premiums), return on investment fell to 3.2% from 4%, return on equity (ROE) fell to 6.6% from 10.7%, and comprehensive ROE fell to 6.2% from 10.2%.

“Despite a difficult year, MCT (minimum capital test) rose to 240.6% from 237.3%, demonstrating the continuing resiliency and capital strength of the Canadian property and casualty industry,” Robinson said.

That difficult year was led by severe weather. Canada saw $3.2 billion in insured losses from severe weather in 2013 – the lion’s share of which related to the severe flooding in southern Alberta (more than $1.7 billion) and flash flooding in and around Toronto (more than $900 million). 2013 was the costliest year for insured catastrophe losses since tracking began in 1983, Robinson said.

The record cat losses had a major impact on property lines, he noted, reporting that personal property claims grew by 31%, and the loss ratio went from 58% to 73%. For commercial property, claims grew by 31%, and the loss ratio went from 62% to 77%.

While, Canada saw astonishingly good weather, few natural catastrophe losses and generally low claims costs in 2012, that changed markedly in 2013. “It looks as though 2014 is picking up where 2013 left off,” Robinson told attendees, citing severe winter storms and record cold temperatures across the country.