Declining premium growth, diminished auto returns cited as obstacles for 2008

Lack of premium growth nationwide and diminished results in the Ontario auto segment have constrained results for Canadian property and casualty insurers in the past year, according to a recent report published by Standard & Poor’s Ratings Services.
Although 2007 results were generally good, a number of factors will play a part in dragging down industry results throughout 2008 and beyond, says the S&P’s commentary, “Industry Report Card: Canadian Property and Casualty Insurers Face Deteriorating Results Due To Ontario Auto Segment.”
Such factors include declining premium growth rates, deteriorating results in Ontario auto, increasing weather-related conditions and intense pricing pressures in commercial lines.
In addition, Ontario auto insurers face obstacles from regulations that govern the pricing and availability of the product, S&P’s says.
“Due to legislation, even if costs are rising, insurers must get approval for any rate increases,” the ratings agency says in a press release. “Not being able to control pricing more freely continues to be a huge negative for this industry. Moreover, they must also provide availability for all consumers, no matter what their risk profile is.”
Since the auto product accounts for about 27% of total industry premiums, the “success or failure of this product will weigh heavily on the direction of the industry,” said Standard & Poor’s credit analyst Foster Cheng.