Canadian commercial insurance market remains “mushy”: MSA Research Inc.

Canadian property and casualty commercial writers and reinsurers are still in a soft market phase, according to the MSA/Baron Outlook Report for 2010 Q4. “Commercial writers and reinsurers continued (and still continue) to compete in a mushy market,” the report notes. The report publishes data showing Canadian commercial insurers had a combined ratio (COR) of 90.1% in 2010, about a percentage point better than the 90.8% COR they posted in 2009. Reinsurers in Canada posted a dramatically better COR in 2010 (88.9%) than in 2009 (98.6%).Adding personal and multi-line insurers into the mix, overall, the industry’s combined ratio in 2010 was 101% (compared to 101.5% in 2009). Calendar-year results showed improvements in most lines while accident-year results betray the fact that both sectors are effectively running at an underwriting loss and, with low interest rates, substandard returns on capital, the report says. “Prior year reserve releases have again saved the day but the well is drying up. So our outlook for the commercial lines sector for the balance of 2011 is not rosy.”The report observes a Jan. 6 fire at a Canadian Natural Resources (CNR) oil sands upgrader, which caused a loss of approximately $1 billion, was “eerily reminiscent of the $1 billion January 2005 Suncor loss” in 2005. The fire may “stiffen some underwriting resolve,” the report notes, “but whether that or the tragic events in Japan, New Zealand and Chile will be sufficient to turn the global market is questionable.”Like other industry observers, the MSA/Baron Outlook Report says “an active U.S. hurricane season this fall may finally tip the balance and bring the prolonged soft commercial/reinsurance market to a close.”