A new report released by Morningstar DBRS has indicated that Canadian property and casualty (P&C) insurers have endured a year of unprecedented challenges, with four major natural catastrophes in the third quarter of 2024 contributing to the highest-ever insured losses from weather-related events.
The report highlighted the stability shown by insurers, bolstered by strategic pricing increases and improved investment returns.
The summer of 2024 saw a series of catastrophic events that resulted in over $7 billion in insured losses. The losses include the destruction caused by wildfires, flooding, and hailstorms, which struck multiple regions, including southern Ontario, Alberta, and Quebec. This figure surpasses the previous record of $6 billion set in 2016, primarily due to the Fort McMurray wildfires.
The scale of the damage in 2024 was exceptional, with flooding from Hurricane Debbie causing Quebec’s largest-ever insured loss of $2.5 billion, and Calgary’s hailstorm adding $2.8 billion in claims.
These catastrophic events sent shockwaves through the P&C sector, contributing to widespread underwriting losses. Yet, Canadian insurers have shown remarkable stability, supported by earlier premium increases and strong performance in the first half of the year, the report noted.
Insurers with diversified portfolios, such as Intact Financial Corporation, Definity Financial Corporation, and Fairfax Holdings Limited, fared better, as their exposure to Canadian property insurance was offset by performance in other business lines like auto and commercial insurance.
The Morningstar DBRS outlook for 2025 suggests continued pressure on the insurance market. Insurers are expected to respond with strategic adjustments, including potential increases in personal property insurance premiums, higher reinsurance prices, and more conservative risk management approaches. Analysts noted that investment returns are anticipated to contribute less to overall earnings, further challenging the industry’s financial stability.
The commercial insurance segment presents a contrasting narrative. Unlike the turbulent personal property insurance market, commercial and specialty lines are experiencing more moderate conditions. Some niche segments are even seeing price declines, with global cyber and professional lines experiencing notable price reductions in the third quarter of 2024.
Auto insurance remains particularly challenging, especially in Alberta, the report noted. The provincial government has increased the premium price cap to 7.5% for 2025, up from 3.7% in 2024, to create a more sustainable market after significant hailstorm-related damages.
Despite these challenges, Morningstar DBRS expects credit ratings for Canadian P&C insurers to remain stable in 2025, assuming no extraordinary loss events occur.
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