Canadian Market (October 01, 2008)

CANADIAN P&C INSURERS’ RESULTS IMPROVE FROM Q1 TO Q2 IN 2008, BUT DECLINE OVER 2007

Canadian and foreign property and casualty insurers licensed by the Office of the Superintendent of Financial Institutions (OSFI) reported better financial results in 2008 Q2 than they did during the first quarter of 2008.

But they were still well off the pace established during the second quarter of 2007.

OSFI figures for 2008 Q2 show Canadian and foreign insurers licensed by the federal regulator reported a quarterly profit of about Cdn$1.4 billion.

That result shows a marked improvement over the Cdn$628-million profit the industry recorded in 2008 Q1. But it is still well off the mark of the Cdn$2.044 billion profit the industry posted during the second quarter of 2007.

Of particular note is the continuing increase of claims ratio numbers for personal accident auto insurance.

Canadian companies licensed with OSFI saw a huge jump between their overall claims ratio for personal accident auto insurance reported in 2007 Q2 (74.78%) and that reported in 2008 Q2 (99.43%).

Similarly, foreign companies licensed by OSFI saw their auto insurance personal accident claims ratios go from 107.72% in 2007 Q2 to 112.39% in 2008 Q2.

A. M. BEST PREDICTS CONTINUING SOFT MARKET FOR CANADIAN P&C INDUSTRY

Canada’s property and casualty insurance sector is stable, “but strong capitalization and profitability provide the ingredients for continued softening in the market,” according to a recent market report by A. M. Best.

In its special report, Canadian P/C Insurers See Profits Shrink, Watch Softening Market, A. M. Best observes that in the Canadian insurance market, pricing is down across major commercial lines, returns are diminishing and profits are expected to continue falling until rates recover.

Net income for 2007 was about Cdn$4.6 billion, down 3.5% from 2006, the report notes.

“Numerous and severe summer and winter storms marked 2007, and harsh weather continued into the first half of 2008, affecting property and automobile claims,” the report says.

Auto insurers’ 2007 net loss ratio increased to 70.8% from 67.5% the year before.

CSIO TO SWITCH SERVICE PROVIDER, INDUSTRY MUST UPDATE IP ADDRESS NOV. 21

The Centre of the Study of Insurance Operations (CSIO) will switch service providers for its upload/download system, CSIOnet, on Friday, Nov. 21, 2008. All insurance brokers, companies and vendors that use the network must change their IP address setting on that date to ensure business continues uninterrupted. The change will improve service for approximately 1,800 broker offices across Canada, a CSIO release says.

“We are very excited about providing a robust network that will deliver improved services and continue to exceed members’ requirements and needs,” said CSIO president Steve Kaukinen. “On Nov. 21, users will need to make a very simple change to their computers. CSIO staff will be available to answer any questions and help implement the changes to ensure that this transition happens easily.”

Instructions on making the change can be found at www.CSIO.com or by calling toll free 1-800-463-2746.

COMPETITION BUREAU GIVES ICBC SEAL OF APPROVAL ON OPTIONAL AUTO INSURANCE

Insurance Corporation of British Columbia (ICBC)’s policies related to optional auto insurance do not contravene the Competition Act, a federal Competition Bureau investigation has concluded.

The bureau initiated its inquiry after receiving a complaint alleging that ICBC’s policies were anti-competitive and had prevented and substantially lessened competition in the optional auto insurance market in British Columbia, a Competition Bureau release says.

The inquiry focused on policies that: • prevent brokers affiliated with competing insurance companies from selling optional auto insurance from both their affiliate and ICBC; and

• prohibit screen scraping by brokers, which means not allowing brokers to capture customer data from ICBC’s information system in order to process transactions on behalf of another insurance company.

The bureau found that although ICBC’s actions and policies restrict how its competitors conduct their business, reasonable alternatives are readily available, the release continues.

“Consequently, any resulting impact on competition from these policies is unlikely to be substantial.”