Aon releases Canadian insurance market report for 2020

Aon has released its 2020 Canadian Insurance Market Report, revealing an “acceleration of existing trends in the last year.”

According to the report, the first quarter of 2020 saw a continuation of the risk and insurance market shift seen in 2019. Insurance pricing continues to rise, capacity is being withdrawn in some lines of business, terms are being tightened, and the underwriting process has become more difficult, Aon noted.

Key findings of the report include:

• The profitability and stability of the Canadian insurance industry continues to make it an attractive option for capital deployment; the Canadian industry operates with a 98.3% cumulative net combined ratio. By comparison, the US operates with 98.6%, and the UK with 99.7%.
• The top risks for Canadian insurers include cyberattacks and data breaches, damage to reputation/brand, business interruption, regulatory changes, weather/natural disasters, and an economic slowdown.
• Q1 2020 total global reinsurance capital stood at US$590 billion – a year-over-year decrease of US$35 billion (or 6%). The quarter ended with US$499 billion in traditional reinsurance (reflecting a year-over-year 6% drop) and US$91 billion in alternative capital (another 4% drop).
• Most commercial property carriers said that they will be looking for rate increases, and, in most cases, reduced capacity. Commercial property carriers are also targeting increased client retentions, particularly those clients that have a frequency or severity issue or undesirable risk quality.
• Most insurers plan to enhance their core systems, add capability, and improve the customer experience through AI, digitization, and other innovations. Many are even financing innovations that would facilitate fundamental business changes.
• The D&O market is hardening each month; publicly-listed companies are seeing the highest rate increases.
• Professional liability insurers are cutting down capacity and looking at rate increases for professions in perceived higher risk classes (such as architects and structural engineers).
• Property capacity in the energy sector is tightening, and rates are rising.
• The COVID-19 pandemic has affected every sector of the Canadian economy, and insurers continue to adapt to a hardening market.

“It is vital that clients, brokers and insurers alike properly evaluate risk exposures to confirm that coverage and limits remain sufficient,” commented Aon chief broking officer Russell Quilley. “With the breadth and depth of our global expertise, spanning both the insurance and reinsurance marketplace, we continue to be well positioned to challenge the marketplace and develop industry-leading solutions in collaboration with our insurer/reinsurer partners.”