March 30, 2010 by Canadian Underwriter
More than 13% of the average cost to consumers of an insurance policy in Canada goes to fixed taxes and regulatory costs, said Barbara Sulzenko-Laurie, Insurance Bureau of Canada (IBC)’s vice president of policy.
Sulzenko-Laurie spoke about the state of the Canadian P&C industry at the Swiss Re–IBC Breakfast on Mar. 30, 2010.
She said IBC commissioned PricewaterhouseCoopers in 2009 to survey the regulatory and tax costs borne by insurers.
In its report (due to be released in April), PwC found that Canada’s P&C insurance sector has a total tax rate of 67%. This is much higher than the ‘Big Six Banks’ tax rate of 30% and major Canadian corporations’ rate of 27%.
“In fact, the property and casualty total tax rate is among the highest around the world,” Sulzenko-Laurie said.
The total tax rate is so heavy because the property and casualty industry is “forced to bear an extremely heavy load of fixed provincial taxes that are unresponsive to whether the industry was profitable or not,” she continued.
In 2008, a weak financial year, 85% of the taxes borne by the industry was unresponsive to industry conditions, she said.
Last year, IBC measured the regulatory costs borne by P&C insurers for the first time. In 2008, the industry incurred $84.7 million of these types of costs, nearly half ($44.7 million) of which were spent on assessments.
“After looking at the latest results from OSFI, it appears that base assessments for the industry from OSFI went up 40% over the past five years… It would seem that at our expense they are sparing no expense.”