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One positive trend in the P&C industry’s third-quarter results


November 28, 2019   by David Gambrill


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Canada’s federally-regulated property and casualty insurers appear to be getting a handle on their property lines claims ratios, although auto lines are still in trouble, according to third-quarter industry results released by the country’s solvency regulator, the Office of the Superintendent of Financial Institutions (OSFI).

Claims ratios in liability lines showed an upward tick in the Comprehensive General Liability (CGL) line, as well as a swing into the realm of unprofitability for cyber liability in 2019 Q3, according to OSFI’s data. The cyber liability result should be taken with a grain of salt since the premium pool is relatively small compared to other lines. A big claim will have more of an effect on lines with smaller premiums pools.

One trend of note in OSFI’s third-quarter numbers included marginally improved results in property lines, both personal and commercial. Overall, in 2019 Q3, Canadian property insurers took in more than $12.1 billion in net earned premiums, and paid out $7.8 billion in claims, for a 64.6% loss ratio. That’s an improvement over last year when personal property home insurers reported a loss ratio for home insurance of 70.4% in 2018 Q3.

Home insurers collected $7.2 billion in net earned premiums and paid out $4.4 billion in claims, for a claims ratio of 61.1%. That’s down from a claims ratio of 66.6% over the same period last year.

Commercial property lines likewise improved during the third quarter of this year. Commercial property insurers took in $4.9 billion in net earned premiums in 2019 Q3, and paid out $3.4 billion in claims, dropping the claims ratio down to 69.8% this year from 76.1% over the same period last year.

However, although property lines showed an improvement this quarter over last, auto results did not. Claims ratios in the auto insurance lines continue to climb nationwide, led by an ongoing increase in personal auto claims payments.

Perhaps related to the re-balancing of portfolios caused by ongoing profitability issues in the auto market, Canadian insurers wrote $239.3 million less in net earned auto insurance premiums than they did during the same time last year. Overall, auto insurers collected $14.2 billion in auto insurance premiums in 2019 Q3, and paid out $11 billion in claims, for an ugly loss ratio of 77.5%. This was another step up from the 2018 Q3 claims ratio in auto lines, which clocked in at 74.2%.

Overall, liability lines were showing virtually the same claims ratios during this year’s third quarter (62%) as last year’s third quarter (61.5%).

Some specific liability lines took a bit of a hit this year that they didn’t see last year. For example, the CGL liability line saw its claims ratio bump up to 65.6% in 2019 Q3 compared to 59.3% during last year’s third quarter.

Cyber liability saw a huge spike in claims ratio from 22.3% in 2018 Q3 to 114.1% in this year’s third quarter. That kind of a sudden swing from profitability into loss isn’t likely cause for alarm unless it keeps happening over a long period of time. The relatively small premium pool in cyber liability lines means that the line is subject to more volatile fluctuations in claims ratios: a single large claims event will have a bigger, disproportionate impact on a small premium pool.