17 September 2019 11:30
Photo : Freepik
The insurance will remain stable despite a decrease in the performance of canadian policyholders, considers the rating agency a.m. Best in its latest report Canada Insurance : Still profitable amid growing challenges.
The solid capitalization and risk-adjusted, continuous refinement of underwriting capacity and distribution, operating performance, cost-effective, special attention to the risk management of the companies and the underwriting results that are balanced, in spite of the markets under pressure, in addition to weather conditions that accentuate this pressure, have contributed to the rating awarded by the agency.
Capitalization robust risk-adjusted
“The stability of the canadian market of insurance of damage is the result of a capitalisation, persistent, and robust risk-adjusted, characterized by positive operating earnings and underwriting results generally favourable, explain the analysts at AM Best. This stability is reflected by the minimal number of changes in the rating that have taken place in recent years. Even the forest fires in Fort McMurray, which had a heavy impact on the industry in 2016, have not affected the rating. “
According to the report, any rated entity, to the exclusion of the canadian branches of u.s. companies, currently has development outlook negative.
In the report, which examines all sectors of activity, investment in the sector, mergers and acquisitions, information technology, and a host of key issues ranging from cannabis to the cyber security, AM Best believes that the industry of property and casualty insurance in Canada was cost-effective in 2018. The profits from the growth in investment income offset the slight technical loss recorded during the year.
Analysts have added that the subscription had been influenced by weather conditions and by the mixed results in persistent automobile insurance. All of this led to a combined ratio of 101.4 % in 2018, a deterioration of 4.3 percentage points compared to the previous year.
“The decline in the operating result before income tax that resulted was quite significant, from 17 %. After capital gains minimal, associated with fair value losses and the impact of the tax on the income, the net income decreased almost by half compared to 2017, to reach $ 1.6 billion canadian dollars “, they said.
The impact of the weather
In 2018, 12 weather-related disasters have hit Canada, from the Maritimes to the Prairies. The resulting losses have reached about 2 billion canadian dollars, making 2018 the fourth year the most expensive ever recorded. However, in most cases, no individual event was not serious enough to affect the reinsurance programs of insurers.
The report from AM Best indicates that the major business segments have registered growth in premiums for mild to moderate to 5 % to 8 %. The growth of most sectors is primarily attributable to pricing initiatives and other underwriting operations designed to mitigate the loss.
For AM Best, the evidence suggests that underwriting performance of the industry have not been good in 2019, according to early indications, particularly due to the increase of losses caused by the weather, emerged earlier in the year.
“The large segments, i.e. automobiles, personal property and commercial property have suffered losses caused by the weather. In total, the technical loss in the first quarter of 2019 was superior to that of the first quarter of 2018, the report says. A positive point to remember for 2019 is that the investment earnings have increased in the beginning of the year. Capitalization in the sector as a whole remains strong, even if the insurers need to remain vigilant as to the results of the subscription to be negative. “