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2010 a “mixed bag” for P&C industry: OSFI


May 17, 2010   by Canadian Underwriter


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The Office of the Superintendent of Financial Institutions (OSFI) says it believes 2010 will be a “mixed bag” for the Canadian property and casualty financially, with capital levels improving, but the introduction of enterprise risk management (ERM) still lagging behind that in other sectors.
OSFI notes the industry has bulked up its capital base since the worst of the global recession in 2008.
“The Minimum Capital Test/Branch Adequacy of Assets Test (MCT/BAAT) ended up the 2009 year at 250%, an increase of 12 points from a year earlier, which we hope will be the low point of this cycle,” Mark E. White, the assistant superintendent of OSFI’s regulation sector, said in a speech to the Property and Casualty Insurance Invitational Forum on May 13 in Cambridge, Ontario.
White cited two reasons for this strengthened capital position.
First, he noted, the underwriting performance of P&C insurers was better in 2009 than it was during the hard market era of seven or eight years ago.
Second, “during this underwriting cycle, we observed an overall improvement in the level and quality of capital management across the industry,” he said in notes for the speech.
Still, he added, the property and casualty industry in Canada remains slow in implementing risk management strategies such as enterprise risk management (ERM).
“While the P&C industry has perhaps been ahead of the other sectors in the management of specific risks or perils (e.g. development for certain catastrophic models), it is fair to say the establishment of Enterprise Risk Management (ERM) — and related processes to assess risk across the entire organization — has been slower to develop in the P&C industry,” White said. 
“While the identification and management of risk specific to each business line is important, the next level of risk management means that the institution has to have a process to collect its individual risks to form a view of its aggregate risk.
“ERM permits an entity to have the vision to chart its course through troubled waters, and to make the most of good sailing weather.”


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