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Rapid global warming, slow economic growth, increased regulatory attention will challenge Canadian P&C industry: IBC


March 29, 2012   by Canadian Underwriter


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Canada’s property and casualty insurers can expect to be challenged in the near future by the rapid pace of global warming in Canada, slow economic growth and increased attention from regulators, the Insurance Bureau of Canada (IBC) observed at the Canadian Insurance Outlook Breakfast in Toronto on Mar. 29

Canada has been warming at an average rate of .24 degrees Celsius per decade over the past 62 years, according to research commissioned by the IBC.

“That’s about twice as fast as the global average, because we’re a northern country,” said Gregor Robinson, senior vice president of policy and chief economist at IBC, in his presentation at the breakfast. “Higher temperatures mean increased intensity, frequency and duration of precipitation, and more extreme weather.

“Canada now experiences on average 20 more days of rain than in the 1950s.”

Not surprisingly, this had led to record losses due to weather-related events, said Robinson. “In fact, for the first time since we started keeping records, we’ve had three consecutive years of insured losses from natural catastrophes at close to or over the $1 billion mark, with losses exceeding $1.7 billion last year.”

As for the slow economy, it is likely to result in a weakened demand for insurance, Robinson said. He noted that between the late 1960s and 2007, average annual GDP growth in Canada was 3.6% For the period 2011 to 2013, it’s expected to average 2.4%

“Slower economic growth and higher unemployment generally mean weaker demand for insurance,” Robinson said. “For personal lines, the effect is somewhat muted because of the relative inelasticity of demand for these products. But for commercial lines, fewer businesses and lower profits exert a drag on premium growth.”

And as for the increased regulatory activity globally and in Canada, solvency and capital regulations aimed at solving issues that arose in the global banking sector may have unintended consequences for the Canadian P&C industry.

“For example, the increased cost from changes to the Minimum Capital Test in 2012 and 2013 is estimated to be in the hundreds of millions of dollars,” Robinson said.


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