Canadian Market (February 01, 2009)

ONTARIO AUTO RATES ON THE INCREASE

The Financial Services Commission of Ontario (FSCO) approved automobile rate increases averaging 2.57% in 2008 Q4, based on the entire market.

For the 69.37% of the market that had rate changes approved in 2008 Q4, the average rate change was 3.71% when weighted by market share.

The rate changes approved in 2008 averaged to an increase of 5.59%, compared to an increase of 0.55% in 2007, a decrease of 2.43% in 2006, and a 10.6% decrease in 2005.

ALBERTA AUTO INSURERS GRANTED RATE INCREASES

The Alberta Automobile Insurance Rate Board (AIRB) has released its 2008 Q4 decisions report, with the majority of insurers applying for rate increases.

Four insurers applied for increases in base premiums, which on average would result in an estimated 5% increase on premium level for additional coverage.

These insurers include Alberta Motor Association Insurance Company (3.4%), Aviva Insurance Company of Canada (7.7%), AXA Canada (5.4%) and Traders General Insurance Company (3.5%).

Seven insurers applied for increases in premium level for additional coverage. On average the estimated increase amounted to 7.5%.

CANADIAN INVESTMENT LOSSES OCCUR AS CAPITAL DWINDLES

Investment and capital losses associated with Canada’s economic recession are happening at a time when the country’s industry is in need of capital to offset claims costs, a Swiss Re online newsletter reports.

In its report, Implications of the Financial Crisis on the Canadian P&C Industry, Swiss Re figures show that as of nine months’ end in 2008, the average yield on invested assets declined to 4.2%, down from 5.1% last year.

Year-to-date invested assets grew by only 1% through the first nine months of 2008, significantly down from 7% growth in 2007.

The reinsurer also observes that Canadian P&C insurers reported realized and unrealized net investment gains of Cdn$1.1 billion during nine months’ end in 2008, resulting in a 3% decline in industry capital funds.

“With only few public companies, the Canadian P&C industry generally has little access to capital, and a declining capital base therefore raises more concerns at a time of rapidly rising claims costs,” Swiss Re notes. “Declining share prices and widening spreads have increased the cost of capital for insurers and made it harder to raise funds.”