Canadian P&C industry’s 2009 operating results still not indicative of a post-meltdown recovery: OSFI

The operating results of Canada’s federally licensed property and casualty insurers still have not recovered to pre-financial crisis levels, Canada’s federal solvency regulator notes in its 2009-10 annual report.
“The operating results of the property and casualty (P&C) insurance sector have been significantly lower in the past two years compared to immediately preceding years,” the Office of the Superintendent of Financial Institutions (OSFI) says in its report, The Importance of Managing Risk. “Net income in the sector in 2009 was $2.5 billion, a negligible increase over the prior year, and still not recovered to pre-2008 levels….
“Industry return on equity was 7.6%, a reduction from 8% in 2008 and well down from the 16% recorded in 2007.”
OSFI notes the major underwriting challenges remain in personal lines – personal auto, (in particular, Ontario auto) and personal property.
On the plus side, OSFI observed, insurers’ investment income generated $3.3 billion in earnings in 2009. In tandem with the partial recovery of the markets and the continued low interest rate environment, insurers saw a further $1.7 billion in unrealized investment gains, which served to strengthen capital.
The industry as a whole scored 250% on its 2009 combined Minimum Capital Test (MCT)/Branch Adequacy of Assets Test (BAAT). This is a 12% increase over the 2008 score and well above OSFI’s minimum supervisory target of 150%.