Canadian P&C insurers managing underwriting expenses well

Canadian property and casualty insurers have done a good job of keeping operational expenses in check, but are losing money on the claims side of the business, said Joseph Burtone, an assistant vice president at AM Best.
Burtone spoke about the state of Canada’s property and casualty market at AM Best’s ‘Market Briefing: Canada’ seminar in Toronto on Sept. 8, 2010.
“Companies are doing a nice job of towing the line on expenses,” Burtone said. “It’s the other side of it, the net loss and LAE [loss-adjustment expense] ratio, that is driving the underwriting ratio up.”
The underwriting expense ratio represents the percentage of an insurer’s net premiums written that went toward operating costs.
Since 2006, the Canadian property and casualty industry (excluding Lloyd’s of London, the Caribbean and ICBC markets) has reported underwriting expense ratios that hover around 30% (29.5% in 2006; 29.8% in 2007; 30.5% in 2008; and 30.2% in 2009).
Loss ratios, on the other hand, remained around 54% between 2005 and 2007 and then jumped to 61% in 2008 and 60.5% in 2009.