Combined ratio to climb slightly for Canadian P&C insurers as Ontario auto remains a challenge

The combined ratio for property and casualty insurers in Canada could climb to about 100.0% by the end of the year, depending on catastrophe activity in the fourth quarter, according to ratings firm A.M. Best.

At the company’s Insurance Market Briefing for Canada in Toronto last week, A.M. Best analysts noted that the industry is still doing well and retains a stable outlook, but some key challenges remain.

Ontario’s auto insurance industry is one of the hottest topics discussed, as the government’s mandate to reduce rates by an average of 15% over the next two years puts pressure on insurance companies.

“(The) major impact for us specifically will be Ontario auto,” Karen Higgins, vice president of finance for the Co-operators General noted in a video from A.M. Best. “We have for the most part priced in, or will by the end of 2013, the requirements of the proposed Ontario reform.”

Low interest rates are also hurting the industry overall, William Starr, CEO of Geneva Insurance Co. also noted in the video.

A public-private flood insurance program, and Canada’s lack of one, is also a hot issue for the industry here, especially after a summer of two major rainfall and flood events, in southern Alberta and the Greater Toronto Area.

While it’s not clear when such a program could be created, the federal government and some provincial governments are looking at mitigation plans and investing into infrastructure and other resources, Craig Harris, lead freelance writer on Canadian Underwriter magazine and editor of Claims Canada magazine, noted in the video.

Flood risk mapping and infrastructure investment, as well as building restrictions in high-risk flood zones areas will be needed for a flood insurance program to go ahead, he added.