Canadian P&C industry sees overall improved financial health in 2011, despite escalating claims in property lines

Federally regulated Canadian property and casualty insurers saw their profits increase by just over $1 billion in 2011 despite static net investment income and claims ratios in property lines that are up across the board.

Canada’s federal solvency regulator, the Office of the Superintendent of Financial Institutions (OSFI), posted the property and casualty (P&C) insurance industry’s 2011 Q4 results on Mar. 20.

P&C insurers reporting to OSFI made a collective profit of $3.55 billion as of the end of 2011 Q4. That’s up from a $2.44-billion result posted in 2010.

The result seems to be driven by an increased premium volume between 2010 and 2011. Canadian P&C insurers reported net premiums written of $35.7 billion in 2011 Q4, up from $34.5 billion in 2010 Q4.

Net investment income remained virtually static between 2010 and 2011. Canadian and foreign federally regulated insurers reported net investment income of $3.58 billion in 2010 Q4 and $3.55 billion in 2011 Q4.

Not surprisingly, given yet another year of sustaining more than $1 billion in catastrophe losses, property claims ratios are up in both personal and commercial lines.

Canadian P&C companies reported paying out $3.7 billion in personal property claims as of 2011 Q4. Their claims ratio increased from 64.14% in 2010 to 68.79% in 2011. Foreign P&C insurers saw their personal property claims ratios increase from 56.6% in 2010 to 60.7% in 2011.

Commercial property lines also saw claims ratios increase, with Canadian P&C insurers paying out $2.2 billion in commercial property claims in 2011 (up from $1.7 billion over the previous year). Canadian P&C insurers saw their commercial property claims ratios increase from 62.4% in 2010 to 72% in 2011, while foreign insurers saw their commercial property claims ratios increase from 57.4% in 2010 to 69.4% in 2011.

OSFI’s figures suggest auto accident benefits claims ratios are stabilizing, although claims ratios, as anticipated, have started to increase in auto liability lines.

On the personal accident side (which includes accident benefits), Canadian P&C insurers saw their claims ratios flip from losses in 2010 (i.e. a claims ratio of 119.86%) back onto the profitability side of the ledger in 2011 (69.9%).

Foreign insurers still took a loss in auto personal accident product in 2011, but they nevertheless managed to cut their auto personal accident claims ratios by more than half (from 262.6% in 2010 to 113.5% in 2011).

Insurers’ gains in auto personal accident lines have been offset by increasing claims ratios in auto liability lines. Canadian P&C insurers saw their claims ratios in auto liability creep up from 67.5% in 2010 to 79.4% in 2011. For foreign insurers, auto liability claims ratios have jumped from 83.7% in 2010 to 134.4% in 2011.