Canadian Underwriter

When can insurers expect the hard market in personal property to go down?

January 28, 2022   by Alyssa DiSabatino

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The hard market in personal property won’t be going down anytime soon, said P&C experts in a Canadian Underwriter webinar on Jan. 25. 

“It’s going to be an interesting time in personal property over the next number of years, particularly looking into next year. There’s been a number of trends that I would say are putting upward pressure on [personal property],” Andy Taylor, CEO at Gore Mutual, says.  

Taylor lists climate change as one of the factors that are affecting the hard market.  

“If we think of last year alone, in 2021 the industry, again, saw close to $2 billion in Cat losses,” he says. 

As of early January, the total insured catastrophic loss for 2021 sat at $2.04 billion (later updated to $2.1 billion), marking it as one of the five biggest loss years for the country. Insured losses were $2.3 billion in 2020, making this two years in a row that insured losses exceeded $2 billion.  

Canada saw many severe weather events this year. The industry has taken a hit everywhere, from hailstorms in Calgary in July, which resulted in $247 million in insured losses, to tornadoes in Southern Ontario in the same month that resulted in $100 million in insured losses, to the provincially historic floods in Southern B.C. which resulted in $515 million in insured losses. 

“I think these costs of climate are not yet fully reflected in pricing for personal property across the country. We’re starting to see some of the pressure in the reinsurance pricing, carriers are starting to look at it through modeling, but I don’t think it’s fully reflected yet,” Taylor explains.  

Carol Jardine, EVP and president of Canadian P&C operations at Wawanesa Mutual Insurance Company, comments that property reinsurance has been affected by global weather events.  

“Reinsurers are really focused at a global level on personal property,” Jardine says, quoting a global insured losses figure.  

Aon reported roughly $130 billion in 2021 in globally insured losses and a total of $343 billion in economic losses, most of which were caused by climate-related events. This is the fourth time in five years that insured losses have topped $100 billion and is an 18% increase from 2020.  

“When the global market is hit with the largest Cat losses ever, in frequency and severity, we’re going to have to pay our fair share,” Jardine says.  

“We were told by our reinsurers that even though we might not have impacted our treaties this year for Cat, that everybody’s got a climate risk loading in their pricing of about 5%,” Jardine explains. “So, if we’re all seeing a 5% hit from our reinsurers on personal property, I think we can only anticipate that we’re going to have to pass those costs along for climate risk to our end customers.” 

Taylor also lists pandemic-related builds as a driving factor for the hard market. 

“Through the last two years, people have been home, renovating and upgrading their homes, and increasing replacement costs. We’re now seeing also historic level inflation, supply chain issues,” he says.  

According to a report from RatesDotCa, home insurance policyholders should expect an average 5% rate increase in 2022. The report also lists climate change and pandemic renovations and rebuilds as reasons for the increase. 

“I think the general direction also, for the industry overall we’ll be looking at, how do we build resiliency into our products and support our customers navigating through this chain?” Taylor adds.  


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