Canadian Underwriter

Why Intact CEO predicts more rate increases for homeowners

September 16, 2021   by Greg Meckbach

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Despite a significant industry-wide drop, over three years, in home insurance loss ratios, the CEO of Canada’s biggest carrier is predicting rate increases.

“In home insurance, our perspective is that we will see a mid- to upper-single-digit rate increase environment,” said Charles Brindamour, CEO of Intact Financial Corp.

During an online conference, Scotia Capital equity analyst Phil Hardie asked Brindamour to comment on pricing dynamics in property and casualty insurance.

Rate increases in home insurance are “supported by the burden of natural disasters, which continues to increase, which we anticipated,” Brindamour said Sept. 8 during the Scotiabank Financial Summit Conference.

“The inflation related to the cost of reconstruction that is also much talked about – we don’t see it as very significant at this stage when we look at our claims in the current environment. It is a bit higher in Quebec where the housing stock has a greater proportion of wood frame homes. There is a bit of residual inflation, beyond what we are pricing for, but it’s not very significant.”

Separately, the federal Office of the Superintendent of Financial Institutions released its second-quarter financial data for the P&C insurers that OSFI regulates. This data tallies the year-to-date statistics, meaning the first six months of 2021.

In personal property insurance, the loss ratio was 47%, with industry-wide net claims and adjustment expenses of $2.61 billion. Of that, $2.49 billion was reported by Canadian insurers while the other $118 million was reported by foreign insurers. Net premiums earned in home insurance, for the first six months of 2021, were $5.536 billion. Of that, $5.205 billion was reported by Canadian insurers while the other $331 million was reported by foreign insurers.

In 2018, 2019 and 2020, the personal property loss ratios, for the first half of those years, were 68%, 60.8% and 55.7% respectively.

In May of 2018, a southern Ontario wind storm cost the industry $680 million.

OSFI divides the industry into three categories: Canadian P&C, foreign P&C, and Canadian mortgage insurers.

The personal property figures come from adding the totals for Canadian and foreign P&C insurers but not adding in the figures for mortgage insurers.

Some of the carriers that OSFI places in the “Canadian P&C” category are, nonetheless, Canadian branches of companies based outside of Canada.

In early 2021, IBC provided its data – on what it calls “Natural disasters — major multiple-payment occurrences” – to Canadian Underwriter. That included totals for every year from 1983 through 2019.

From 1983 through 2009, there were only two years (1998 and 2005) in which the total annual cost to the industry, of the major multiple payment occurrences, was above $1 billion. Without adjusting for inflation, the figures were $38.4 million, $39.1 million and $100.3 million in 1983, 1984 and 1985, respectively. In the 10 years from 2010 through 2019, there were only two years (2014 and 2015) in which the total was less than $1 billion.

Although those figures are not adjusted for inflation, the numbers increased over time even if you account for increases in population and consumer price index. Using Statistics Canada data on population, gross domestic product and inflation, Canadian Underwriter adjusted IBC’s data each year for inflation and then expressed it per capita. That figure is $3.70 in 1983 and $39.03 in 2019. There were five years (1998, 2011, 2013, 2016 and 2018) in which the inflation-adjusted loss per capita exceeded $50.

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