Although catastrophe activity was manageable in the first half of 2024, Canada’s property/casualty (P/C) insurers encountered four major events in the third quarter, which are expected to lead to another record year for losses, according to AM Best.
Catastrophe losses in 2023 are estimated to have reached CA$3.1 billion, marking it as one of the five worst years for such losses on record. This figure follows inflation-adjusted losses from 2013 and 2016.
The Best’s Market Segment Report sees AM Best maintain a stable outlook for Canada’s P/C industry. Factors contributing to this outlook include risk-adjusted capitalization, operating results, combined ratios, insurance service revenue, and investment returns.
Rosemarie Mirabella, director of AM Best, indicated that the industry achieved strong financial results, with net income increasing from CA$4.0 billion in 2022 to CA$7.1 billion in 2023, a rise of 77.5%.
“Profitability was driven by growth in underwriting income and a resurgence in investment income, partly counterbalanced by rising finance expenses from insurance contracts, as well as general and operating expenses,” said Mirabella.
The P/C segment, however, continues to encounter challenges, including an increase in the frequency and severity of extreme weather events, rising costs for reinsurance coverage, and ongoing pressures within the personal auto lines market.
The Canadian P/C reinsurance sector is crucial in providing financial stability to primary insurers as weather-related events become more common. This market includes domestic reinsurers that are part of larger international entities.
Earlier this year, AM Best upgraded its market segment outlook for the global non-life reinsurance industry from stable to positive.
Mirabella added that the Canadian P/C market underwent considerable changes in the terms and structures of reinsurance programs during the 2023 renewal season, resulting in premium increases for primary insurers.
“Regional carriers have been disproportionately impacted by additional reinsurance rate increases,” she said.
AM Best is a credit rating agency and data analytics provider focused on the insurance industry. Based in the US, it operates in over 100 countries with regional offices in major cities worldwide.
How did the US P/C insurance industry perform in 2024? Read here.
What are your thoughts on the current state of Canada’s insurance market? Share them in the comments section below.
