Canada’s personal accident loss and LAE ratio could hit 120% by end of 2009: AM Best

It’s quite likely that Canada’s personal accident loss and LAE (loss adjustment expense) ratio will reach 120% by the end of 2009, said Charles Huber, senior financial analyst with AM Best Company.
Huber addressed delegates of the AM Best Company’s 2009 Insurance Market Briefing — Canada in Toronto on Sept. 10 during a panel on the country’s property and casualty industry.
The combined ratio (COR) for Canada’s property and casualty industry in the calendar year 2008 was 101%, Huber noted. For the accident year 2008, it was 105.7%.
“The reduction down for the calendar year to 101% was because of a Cdn$3-billion reserve release from prior accident years,” he said. “This would equate to 110% or more on the combined ratio for the accident year if those reserves had not been released from prior accident years.”
Increasing loss ratios, particularly in Ontario auto, are driving the CORs, he continued.
In 2008 the loss and LAE ratio was 70.8% for the entire industry, and in the first half of 2009 it was 69.9% he said.
In auto, on the other hand, the loss and LAE ratio stood at 116% at the end of 2008. Through the first half of 2009, that ratio has increased to 118.7%.
“This is not just Ontario, it is across the country,” Huber qualified. “But in Ontario, it is probably higher.”
Huber said he anticipated the loss and LAE ratio to go up by another point or two, so that the ratio would hit 120% by the end of the year.
“We are greatly hoping that a permanent stabilizing solution comes down the pike because this may affect companies’ ratings,” he said.