Canadian Market (July 01, 2008)

IBC RECOMMENDS 36.9% INCREASE FOR AUTO PREMIUM GRID RATES IN ALBERTA

The Insurance Bureau of Canada (IBC) is recommending a 36.9% rate increase for auto insurance in Alberta, to be applied only to the province’s grid rates.

The suggested rate hike is to compensate for the court’s recent elimination of the province’s Cdn$4,000 cap on minor injuries.

The IBC presented its proposal to the Alberta Automobile Insurance Rate Board on June 17.

Ideally, the IBC noted in its submission, the adjustment should apply only to the province’s auto insurance grid rates and should not be an industry-wide adjustment.

But, as the IBC also notes, Alberta’s rate board does not have the authority to apply adjustments to the grid only and not to the rest of the industry as a whole.

For this reason, the IBC has asked the Alberta government to change its Premiums Regulation and public policy to allow the board to apply changes to the grid only.

In a separate actuarial report submitted to the rate board, consulting firm Oliver Wyman Ltd estimated bodily injury claims costs are expected to increase 29% — implying an estimated 10.8% increase in the basic auto insurance premium.

QUEBEC PROPERTY/ CASUALTY INSURERS WRITE 3.6% MORE PREMIUM IN 2007

Property and casualty insurers in 2007 wrote a total of Cdn$7.3 billion in premium in Quebec, marking a 3.6% increase from 2006’s Cdn$7.1 billion result.

The Autorit des march financiers (AMF) has reported that Quebec’s auto and property insurance premiums increased 3% last year, up nearly Cdn$172 million from 2006.

Total premiums in the auto class stood at Cdn$3.08; in the property class, it was Cdn$2.84 billion.

MPI RECOMMENDS 1% AUTO RATE REDUCTION

Manitoba Public Insurance (MPI) is seeking a 1% overall reduction in Autopac rates for 2009-10 based in part on declining auto theft rates.

In its application filed with the Public Utilities Board, MPI said the rate decrease is possible because of dramatically fewer auto thefts, and in spite of lower investment returns and higher expenses for the public insurer.

In Manitoba, vehicle thefts have fallen by 40% since 2004, MPI notes in a press release. This is expected to decrease another 40% by the end of 2009.

For the first five months of 2008, auto theft was down 43.9% in Winnipeg and 40.7% in the province overall.

CREDIT CRISIS PREDICTED TO BYPASS INSURANCE SECTOR

Insurers continue to emerge from the credit crisis in a strong position and are among the least affected of all financial institutions, a senior ratings agency official told the Casualty Actuarial Society (CAS).

Jeffrey Berg, senior vice president and group credit officer with Moody’s Investors Services, told the CAS “very strong current financial profiles will enable most insurers to handle these [subprime-related] losses, and few rating downgrades driven solely by credit market concerns are expected.”

But he cautioned insurers with outsized investment losses, combined with industry pressures, could prompt downgrades for weakly positioned firms, the CAS reported.

Rated property and casualty insurers’ exposure to nonagency-structured mortgage investments is moderate, with a median of 12% of invested assets and 47% of equity, he told the actuaries.

WILLIS DOUBLES NORTH AMERICAN REVENUES WITH ACQUISITION OF HILB ROGAL & HOBBS

Willis Group Holdings Limited has acquired the United

States’ eighth-largest insurance brokerage firm, Hilb Rogal & Hobbs Company (HRH), for a total of US$2.1 billion, effectively doubling Willis’ North America revenues.

The transaction is expected to close in 2008 Q4. It is subject to customary closing conditions, such as regulatory and HRH shareholder approval, according to a Willis press release.

The new organization in North America will be renamed Willis HRH upon completion of the transaction.