Hard market in Canadian P&C industry is not likely in 2012: CEO

A hard market cycle will not likely happen in Canada’s property and casualty insurance industry in 2012, according to Philip Cook, president and CEO of Omega Insurance Holdings.
Hard insurance markets are characterized by reduced capacity for insurers, resulting in higher premium pricing and a narrower range of coverage options for consumers,
Cook talked about market cycles and a number of other hot topics in the insurance industry at the 2012 CIP Society Industry Trends Breakfast. He observed that in light of a high number of global catastrophes in 2011, many industry analysts are talking about whether the losses re/insurers sustained were enough to turn the market from its current “soft” state (characterized by surplus capacity for insurers, resulting in lower premium pricing and a broad range of coverage options).
“The $64,000 question is: Have we reached the turning point and will we see the hard market starting in 2012?” Cook asked. “I stick out my neck and say, ‘Absolutely not.'”
Cook said the soft market in Canada may have ended in 2011, but that doesn’t necessarily mean that a hard market will follow directly on its heels in 2012.
“We tend to graph [market cycles] as ‘Vs,'” Cook said. “That is, we reach the bottom and it goes up again….
“But I’m going to suggest to you that for the insurance industry, the graph is going to look like the bottom of a bucket. It’s going to come down, it’s going to be flat, and then it’s going to go up again. And that flatness, I think, is going to hold for at least the next two to three years [2012-14].”
Cook observed that there is a tendency in the industry to think that market cycles are relatively short. In fact, he said, Canada has seen only three hard markets over the past 45 years – 1975-78, 1984-87 and 2001-04.
“We’ve had only three hard market cycles in Canada over the last 45 years,” he said. “That’s nine years out of 45. That means either 36 years out of the 45 have either been soft or softening years.”