Canadian insurance industry posts “very strong” results in 2006

Overall, 2006 has been a very strong year financially for the Canadian property and casualty industry, the Insurance Bureau of Canada observed at the Swiss Re Canadian Insurance Outlook Breakfast in Toronto.
If there was only one cloud in the silver lining, it was reserve trends, which suggest the countrys softening insurance market might soon be eating away at some of those gains.
Summing up the industrys performance in all lines of business and investments in 2006, we find that, despite the variability in returns across lines, and from one insurer to the other, Canadas home car and business insurers saw a result in 2006 come in only slightly changed from 2005, Jane Voll, IBCs vice president, policy development and chief economist, concluded at the Swiss Re breakfast. Overall, this shows a remarkable stability in terms of fundamentals
Most industry leaders commented on how, in 2006, they have noticed a surprising new underwriting discipline and surprising new efforts and ability at managing capital. This is different from prior cycles. Its different from prior years.
Overall, the Canadian P&C benefited from the relative absence of catastrophes witnessed in 2006. Total insured claims in 2005 totalled Cdn$900 million, whereas in 2006 they amounted to only Cdn$130 million.
Insurers took advantage of the lull in cat activity to increase direct written premium growth by 3.8% and post total earnings of Cdn$4.8 billion in 2006.
In the areas of commercial risk, commercial property and personal property, the industry collectively improved its loss ratios.
But despite the good results in 2006, reserve trends may be masking the effects of soft market rate reductions going forward into 2007.
Voll observed, for example, the industry released Cdn$878 million in reserve funds in 2006, which helped decrease its overall loss ratios in 2006.
Keeping in mind last years [results], and the impact of reserves in 2006, I would not be too quick to conclude that weve excluded cyclicality out of the industry, Voll cautioned. In the absence of these extraordinary items, the fundamentals would indeed show a period of weakening over last year.