Paolo Taruc
The Canadian non-life insurance industry will likely return to an underwriting profit this year, Fitch Ratings said in a new report. This would mark a rebound from the market’s underwriting loss in 2016.
The expected recovery may come as 2017 pricing fundamentals ‘remain steady,’” Fitch Ratings managing director Jim Auden said. However, he pointed out that “medium-term economic uncertainty could dampen insurer revenue and earnings expansion.”
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Canada witnessed its largest natural catastrophe loss when a wildfire burned out of control in Fort McMurray, Alberta in May 2016. Estimated insured losses from the incident reached $3.8bn.
The Government of Alberta said the fire covered approximately 589,995 hectares. About 9.6% of Fort McMurray’s buildings were torched, Premier Rachel Notley said.
Although the wildfire was the largest loss event in Canada’s history, Fitch said an earthquake is the “single largest” insurance modelled risk for the country. This would particularly be the case if one strikes off British Columbia, and to a lesser extent the Ontario or Quebec regions.
“The Canadian insurance regulatory environment is a key factor in overall market stability, with prudent capital standards and an evolving oversight emphasis on sound corporate governance and enterprise risk management practices,” the credit watcher explained.
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Fitch said Canada’s non-life insurance market historically posts better and less volatile underwriting results compared to its US counterpart due to differing competitive dynamics, less severe catastrophe experience and less underwriting exposure to longer-tail casualty business.
Looking ahead, it expects continued consolidation in Canadian non-life insurance.
“Potential future transactions may emanate from strategic shifts within foreign-owned insurers and Canadian financial institutions that own insurers,” it said.
Investments in data analytics and more sophisticated modelling techniques could marginalize smaller players, and fuel market consolidation.
Last year set a record for insurable damage in Canada at more than $4.9bn, the
Insurance Bureau of Canada said. This smashed the previous annual record of $3.2bn set in 2013.
“Severe weather due to climate change is already costing Canadians billions of dollars annually,” said Don Forgeron, President and CEO, Insurance Bureau of Canada (IBC).
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