A.M. Best predicts further softening in Canadian P&C market

Canada’s property and casualty insurance sector is stable, according to a recent market report by A.M. Best, “but strong capitalization and profitability provide the ingredients for continued softening in the market.”
In its special report, “Canadian P/C Insurers See Profits Shrink, Watch Softening Market,” A.M. Best observes that in the Canadian insurance market, pricing is down across major commercial lines, returns are diminishing and profits are expected to continue falling until rates recover.
Net income for 2007 was about Cdn$4.6 billion, down 3.5% from 2006, the report notes.
“Numerous and severe summer and winter storms marked 2007, and harsh weather continued into the first half of 2008, affecting property and automobile claims,” the report says.
Auto insurers’ 2007 net loss ratio increased to 70.8% from 67.5% the year before.
In comparison, the personal property net loss ratio held relatively steady at 66.7% in 2007, compared to 66.4% the year before. Commercial property insurers’ net loss ratio jumped 4.1 points, up to 56.2%.
Overall, net underwriting income in 2007 was Cdn$2.3 billion, down 18.1% from 2006, and the combined ratio increased to 93.2% from 91.5%.
Return on equity was 15% in 2007, down from 17.1%.
Net investment income was up 12.6% in 2007, but growth was slower than in 2006.
A.M. Best projects further declines in profits through 2008 amid challenging underwriting and investment conditions.