Canadian Underwriter
News

AMF could limit insurance M&A after market concentration raises concerns


October 3, 2012   by Canadian Underwriter


Print this page Share

The head of Quebec’s financial regulator sees little opportunity for more merger and acquisition activity in the province’s property and casualty insurance industry, after recent moves have caused more market concentration.

The consolidation level in the Quebec P&C market is reaching a critical point, Mario Albert, president and CEO of the Autorité des marchés financiers (AMF), told an industry crowd during the National Insurance Conference of Canada Oct. 2.

In general, the P&C market in Quebec is doing well, he said, but increased concentration is a concern, in terms of consumer choice and competitiveness.

Since 2011, the regulator has analyzed three major deals- Intact Financial’s acquisition of AXA Canada and more recently, Jevco, and RSA Canada’s purchase of L’Union Canadienne. “The impact of all these transactions is fairly significant,” Albert noted.

Five main players in the industry now represent 59% of market share in Quebec (when measured by direct premiums written), which has risen from 52%, he said.

That means the province’s industry is reaching an important point in its level of competition. Albert pointed to the Herfindahl-Hirschman Index (HHI), a measure of market concentration where for the Quebec market, a level of 1000 or below represents an acceptable unconcentrated market. Quebec is currently at 1050, so is above the threshold and getting to a concentrated level, he said.

The majority of brokers in Quebec are now selling products of no more than three insurers, he went on to say. 

While he couldn’t say for certain, concentration is getting to a level where the AMF is concerned, and may need to more carefully consider whether certain deals be approved going forward, depending on size and circumstances, Albert said.

Albert also noted that another challenge for AMF going forward will be efficiently regulating insurance distribution online, especially with its potential for security problems and fraud.

In Quebec, strong security practices do already exist in many cases. Banks also have best practices that could be applied to other companies, he said. The major challenge will be moving the regulatory framework quickly enough and not be in a situation where “we’re putting the toothpaste back in the tube,” he said, or creating regulations to correct problems later.

Having licensed agents maintain their important role when more insurance business in done online will also present a challenge for the AMF, and it will work to create a compromise for industry professionals who feel their incomes are threatened by the online world, he noted.

*Editors Note: This story originally referred to an HHI market concentration “level of 1500” as representing a market concentration limit for the Quebec market rather than a “level of 1000” and has since been corrected.


Print this page Share

Have your say:

Your email address will not be published. Required fields are marked *

*