Capital abundance, competition represent biggest challenges now facing Canadian P&C insurers: CEO

Capital abundance and intense competition are the biggest challenges now facing Canada’s property and casualty insurance industry, according to Ellen Moore, president and CEO of Chubb Insurance Company of Canada.
Canada’s marketplace has roughly $2.5 billion to $3 billion in capital “overcapacity,” Moore told attendees of the Toronto Insurance Women’s Association (TIWA) in Toronto on Jan. 19.  This is allowing companies to undercut others’ premium rates – sometimes by as much as 30% to 40% – which is fueling a soft market, particularly in commercial lines.
Moore said the Canadian P&C industry has shown poor underwriting results for the past four years. And yet, in part because of the overcapacity, “who knows how long it will be” before the market turns? she said.    
Intense competition in Canada’s P&C marketplace is exacerbating the situation.
“In three different environments in which I’ve worked – in Canada, the United States and Europe – we have the most competitive landscape right here, right now, versus any environment on the globe,” Moore said. “I’m all for competition, but the ease of entry and the ease of exit [into the Canadian marketplace] – and some of the capital requirements that were given to some of our offshore markets, versus some of the onshore markets – are compelling reasons for people to come into Canada.
“It’s a pretty crowded place to be… In the past 18 months, we’ve had 10 new entrants come into Canada. It’s a small spot to try and divide all of that [premium] up. It creates some very interesting market dynamics for those of us who are here already.”
Increased competition means competitive pricing is necessary to grow premium and market share, but this has hurt companies’ underwriting margins for the past four years. Intellectually, Moore said, company executives know they need to hold the line on pricing. But, “if you don’t market your business, you are potentially at risk for someone else coming in.”
Moore said it’s not like company CEOs don’t already know about the financial risks inherent in a protracted soft market. “We get that,” she said. “I think everyone in this industry gets how the cycle works, gets how the dynamic is. Intellectually we get it: we know it’s probably not the best way to run our business, but it’s hard to stop….
“When prices get cut by 30% to 40%, that’s not uncommon, it’s not healthy for our industry, it’s not logical, it’s not intelligent. It’s a pattern that we allow ourselves to get into year after year. That marketing certainly comes with very predictable and unwarranted results, and clearly the premiums decline….
“Why aren’t we able to see the reading on these tea leaves?”