Canadian Market (July 01, 2010)

CANADIAN P&C INDUSTRY DOUBLES PROFITS IN 2010 Q1

Canada’s federally regulated property and casualty (P&C) insurers slightly more than doubled their profits in 2010 Q1 compared to the same period of 2009.

Canadian P&C insurers fared better than their foreign counterparts.

Overall, Canadian and foreign P&C insurers totalled $835.8 million in profits in 2010 Q1, up significantly from their net income of $399.6 million in 2009 Q1.

But figures reported to the Office of the Superintendent of Financial Institutions (OSFI) show Canadian P&C insurers’ financial results are headed in a different direction than those of their foreign counterparts.

Canadian P&C insurers reported a profit of $729.6 million in 2010 Q1, a marked improvement over the $136.7-million profit they made during the trough of the market recession in 2009 Q1.

Foreign P&C insurers, on the other hand, made even less money ($106.2 million) in 2010 Q1 than they did at the height of the global recession in 2009 Q1 ($262.9 million).

One explanatory factor may be that Canada’s foreign P&C insurers are now officially losing twice as much as they are making in the automobile personal accident lines. Foreign insurers reported a claims ratio (claims costs divided by premium earned) of 216.5% in 2010 Q1, a 60-point bulge over the same period last year.

Canadian P&C insurers, in contrast, reported a claims ratio of 119.79% in the automobile personal accident category in 2010 Q1.

ALBERTA’S ACTUARY CALLS FOR ZERO INDUSTRY-WIDE RATE ADJUSTMENT

Preliminary industry-wide auto rate adjustment indications for Alberta in 2010 hover around 0%, according to the province’s actuary, Oliver Wyman.

The actuarial company estimates the required average auto premium to be $564 on the low frequency forecasts, $578 in the mid range (roughly the same as last year) or $592 on the high range.

The 2010 industry-wide adjustment (IWA) estimated street premium — the estimated average premium currently paid by consumers — is $583, compared to $610 last year.

“When we combine our estimate of the required average premium with our estimate of the street premium, we have three (3) preliminary IWA indications all hovering around zero percent,” Ted Zubulake, managing director at Oliver Wyman, said during a presentation to the Alberta Automobile Insurance Rate Board.

Underlying Oliver Wyman’s analysis is the assumption that no changes to the cap will be made by the Alberta government as a result of the reviews that are thought to be undertaken this year with respect to the cap.