Global economic turmoil may create acquisition opportunities for Canadian insurers

Given that the Canadian property and casualty insurance industry is owned to a large extent by foreign entities that have been adversely affected by global financial turmoil, there may be opportunities for financially sound Canadian insurers to acquire assets or blocks of business.
Many of the foreign parent companies have experienced large losses in their home countries due to economic turmoil, making them ripe to sell off subsidiary operations, suggests PricewaterhouseCoopers (PwC) in its recent Canadian insurance review, The economic turmoil: Managing risks and opportunities.
PwC notes that Canadian property and casualty insurers have managed their investments conservatively. It cites the Minimum Asset Test for common stocks as one of the contributing factors to this conservatism.
“We are not insinuating that fire sales will occur, but foreign head offices may be more amicable to the notion of repatriating capital deployed in Canada, especially since paid-up capital may be repatriated without Canadian tax consequences for Canadian subsidiaries of foreign insurers,” the report says.
“From a buyer’s standpoint, the insurance market is in the soft part of the cycle and acquiring assets may be less expensive than competing in the retail market to gain market share.”