Canadian P&C market “stable,” but earnings pressure will continue: A.M. Best

Although global financial markets have improved substantially since March 2009, earnings and capitalizations in the Canadian property and casualty insurance market are expected to remain under some pressure, according to a special report by A.M. Best.The full report, Canadian Insurers Face Significant Challenges Following Difficult 2008, will be made available on A.M. Best’s Web site on Sept. 4.Improving market conditions since March might represent “a bright spot, potentially, for investment income,” the report reads. “Still, it may be difficult for the industry to experience a rebound in profits from investments alone, as rising claims costs, competitive pricing pressures and expenses will weigh on underwriting results.”Lower excess capital levels and higher claims costs — driven by losses in the auto and personal property lines — are beginning to force rate increases, A.M. Best notes. “Insurers have stepped up rate reviews since year-end 2008 and already have taken increases on auto and personal property,” the report notes. “It is still unclear, though, whether insurers will opt for greater underwriting discipline to control claims costs and protect profitability.”Now does not appear to be the time to revert to competitive pricing to retain and grow market share.”Despite its concerns about increased cost pressures, particularly in Ontario auto lines, A.M. Best says the overall outlook for Canada’s P&C industry is “stable,” finding further that strong financial results prior to 2008 have resulted in the industry being adequately capitalized.