Canadian P&C market not as disciplined as U.S. market: McKinsey research

The Canadian property and casualty insurance marketplace is not as disciplined as its U.S. counterpart, according to information compiled by McKinsey & Company and presented at the National Insurance Conference of Canada in Montreal on Sept. 20. In the United States, there is a strong correlation between growth and underwriting performance, said Peter Walker, director of McKinsey & Company. He further noted undisciplined capital is exiting the U.S. market.In the United States, companies’ growth is based mainly on organic growth, rather than growth through mergers and acquisitions, which drove only 8% of the growth in the United States market, Walker noted.But in Canada, the correlation between growth and underwriting margin is weaker, said Walker’s colleague, Sacha Ghai, a principal based in McKinsey’s Toronto office. In Canada, fewer insurers are performing well in both growth and margin. “There is still significant capacity that isn’t performing,” Ghai said.Walker and Ghai were observing trends and differences in the Canadian and U.S. property and casualty insurance markets.One similarity between both markets is that there is a big spread between “winner” companies with good underwriting results – i.e. companies in the top quintile of return on equity (i.e. an ROE of 11% or higher) – and the “non-winner” companies with poor underwriting results (ROE of -10% or worse).