September 15, 2021 by Greg Meckbach
Despite the ongoing COVID-19 pandemic and increasing cost of weather catastrophes, the industry-wide combined ratio still improved 3.7 points last year and the pandemic is part of the reason, A.M. Best Company Inc. suggested in a report released Wednesday.
The combined ratio in the Canadian property and casualty insurance industry was 96.6% in 2020, down from 100.3 in 2019 and 101.4 in 2018, said Oldwick NJ based AM best in the paper, “Canada Insurance: P/C Segment Remains Resilient, L/A Segment Outlook Turns to Stable.”
This includes the impact of ongoing favourable reserve development in the auto and property lines.
“The improvement is also due to COVID-19, given the decline in auto frequency as a result of fewer miles driven, as well as a drop in property losses, the latter of which can be ascribed to more people at home during the pandemic,” said A.M. Best.
“The decline in commercial property losses can be attributed to temporary business closures during the pandemic. The improvement in the loss ratio also runs counter to the increase in catastrophic weather losses, further testament to the strength of underwriting fundamentals.”
In Canada there were six catastrophic weather events occurred in 2020, including the June hail Calgary hailstorm. A.M. Best pegged the industry-wide loss at Cdn$1.3 billion.
A couple of months earlier, floods in Fort McMurray resulted in Cdn$560 million in insured losses.
2020 was the fourth worst catastrophe year in Canada since 1983, said A.M. Best.
“For a third straight year, no catastrophe losses were incurred due to fires, but this is more an indication that fires did not make their way into populated areas.”
Severe weather and the ongoing COVID-19 pandemic are among the challenges facing the industry.
“Canada’s P/C insurers have shown that they have not only the capital, but also the agility and capabilities to meet these challenges head on. Nevertheless, they will need to continue to evolve and adapt to changing market, weather, and societal conditions, particularly those brought by COVID-19, over the near and longer term,” said A.M. Best.
Feature image via iStock.com/stellalevi