Auto insurance improvements offset by catastrophes in 2011

Somewhat encouraging results on the auto insurance front were offset by catastrophes that blighted the Canadian and global landscape in 2011.

“Auto results improved only in Ontario where the direct auto loss ratio dropped by 18.5 points following a disastrous 2010,” Joel Baker, president and CEO of MSA Research Inc., writes in the company’s fourth quarter 2011 MSA Quarterly Outlook Report.

On a direct basis, the overall loss ratio differential for auto last year was down 8 points, the report notes. For a few provincial jurisdictions, the differential decreased (by 18.5 points in Ontario, for example, and by 5.6 points in British Columbia).

In most other jurisdictions, it increased. The highest point increases were seen in Nova Scotia (13.1), Newfoundland (10.7), New Brunswick (8.9), Manitoba (8.8) and Saskatchewan (8.3).

If not for the rash of catastrophes, 2011 would have been a better year for Canada’s insurance industry, Baker noted. “CAT losses aside, most of urban Canada enjoyed a mild year which acted as a buffer, lowering non-CAT property losses and substantially benefiting auto results.”

The improvement in auto results, primarily in the troubled Ontario market, offset the property losses and helped personal line writers as a group lower their net loss ratios by three points, thereby narrowing their underwriting losses substantially over 2010, Baker wrote.

Results were less encouraging for commercial writers and reinsurers, who “saw their loss ratios deteriorate by two and nine points, respectively, resulting in a flat overall industry result showing a very narrow underwriting gain of $368 million in 2011.”

Commercial, personal/multi-line and reinsurers all experienced various degrees of underwriting loss on a 2011 accident year basis, the report says. However, reserve releases reduced losses and put the commercial and reinsurers sectors into underwriting profit on a calendar year basis.