Swiss Re forecasts higher growth in Canadian non-life insurance industry

Swiss Re released Wednesday a report that predicts higher growth in Canada in direct premiums written in the non-life insurance market.

The report, dubbed Global insurance review 2012 and outlook 2013/14, includes a table depicting real growth of direct premiums written in non-life markets in 10 western countries, plus the growth in both advanced and emerging markets.

In Canada, real growth was 3.9% in 2010, 1.8% in 2011 and projected at 2.2% this year.  In Canada in 2013 and 2014, Swiss Re forecasts real growth of 3.9% and 4.9% respectively.

Worldwide growth in non-life direct premiums written is forecast at 2.2% in 2013 and 3.1% in 2014.

“Underwriting profitability is likely to improve slightly in most markets and segments in 2013 and 2014,” Swiss Re says.

Growth in non-life insurance “further accelerated” in 2012, Swiss Re said, noting the “main driver of advanced market growth” was “moderate rate increases in some markets.”

However, in the non-life primary market, “underlying underwriting profitability continued to erode due to rising claims and several years of softening rates,” Swiss Re said. The firm defines underwriting result as the difference between premiums and the sum of expenses plus claims costs.

In the non-life reinsurance market, the industry worldwide had “good, though not strong” performance for the first three quarters of 2012.

“However, the fourth quarter will be significantly impacted by the multi-billion-dollar Hurricane Sandy claim,” Swiss Re stated. “It is too early to predict Hurricane Sandy’s exact impact on the reinsurance industry, but based on the assumption that there will not be another major catastrophe event in 2012, a combined ratio of between 103% and 105%” is expected for the reinsurance industry this year.

The report was published by Swiss Re’s economic research and consulting unit, with an editorial deadline of Nov. 15, two weeks after Hurricane Sandy made landfall (after being downgraded to post-tropical storm status) near Atlantic City, N.J.

Total catastrophe losses, including Hurricane Sandy, “are expected to produce a negative underwriting result and subdue overall profitability,” the report stated, noting the outlook “assumes that the estimates for losses from Hurricane Sandy are consistent with recent forecasts from the major cat modellers.”

In early November, EQECAT Inc. estimated insured losses from the storm would be US$10 billion to US$20 billion. Several individual firms have also released estimates. For example, on Dec. 7 American International Group stated its preliminary estimate of after-tax losses related to Hurricane Sandy, net of reinsurance, will be about US$1.3 billion.

The Swiss Re report was co-authored by Kurt Karl out of Zurich, Thomas Holzheu of the Armonk, N.Y. office and Clarence Wong, based in the Hong Kong office. It was co-edited by Jessica Villat out of Zurich and the managing editor was Kurt Karl, head of Swiss Re Economic Research and Consulting.