At a recently held Canadian Insurance Accountants Association meeting, rating agency A.M. Best described 2001 as likely to be a “rough ride” for Canadian insurers. Although several markets are experiencing price hardening, the benefits will only feed into earned premium growth in 2002, the agency notes.
Coupled with this, the industry is unlikely to achieve the same level of earnings support from capital gains and investment income – which played a significant role in financial returns for 2000. What is notable, A.M. Best says, is that reinsurance rates within the Canadian marketplace are rising faster than primary ones, which will add further discipline to the market. Reviewing the industry’s 2000 financial year return, the rating agency points out that reserve redundancies are at their lowest level since 1995, equal to 1.7% of net premium earnings (NPE) versus 3.3% and 4.7% for the two years prior. Overall, the industry produced a meager 6.4% return on equity (ROE) for 2000 compared with 6.6% for 1999, and 13.2% for 1997. In particular, direct writers achieved the lowest rate of growth in net premiums written for 2000, and made only 6.5% pre-tax ROE for the year compared with a 10.7% return for broker companies. Canadian stock companies also bested their mutual brothers in performance by almost double pre-tax ROE. The generally poor results of insurers last year are largely attributed to deterioration in the Ontario auto market, and the Maritimes, the rating agency says.
13.2
28%
7.8
-44%
6.5
-21%
10.7
10%
4.6
-17.2
6.4
-3.0%
105.9
+1%
112.2
+12.6%
108.6
+2.5%
108.0
+2.7%
113.9
+3.5%
108.2
+2.6%
Source: A.M. Best
At a recently held Canadian Insurance Accountants Association meeting, rating agency A.M. Best described 2001 as likely to be a “rough ride” for Canadian insurers. Although several markets are experiencing price hardening, the benefits will only feed into earned premium growth in 2002, the agency notes.
Coupled with this, the industry is unlikely to achieve the same level of earnings support from capital gains and investment income – which played a significant role in financial returns for 2000. What is notable, A.M. Best says, is that reinsurance rates within the Canadian marketplace are rising faster than primary ones, which will add further discipline to the market. Reviewing the industry’s 2000 financial year return, the rating agency points out that reserve redundancies are at their lowest level since 1995, equal to 1.7% of net premium earnings (NPE) versus 3.3% and 4.7% for the two years prior. Overall, the industry produced a meager 6.4% return on equity (ROE) for 2000 compared with 6.6% for 1999, and 13.2% for 1997. In particular, direct writers achieved the lowest rate of growth in net premiums written for 2000, and made only 6.5% pre-tax ROE for the year compared with a 10.7% return for broker companies. Canadian stock companies also bested their mutual brothers in performance by almost double pre-tax ROE. The generally poor results of insurers last year are largely attributed to deterioration in the Ontario auto market, and the Maritimes, the rating agency says.
13.2
28%
7.8
-44%
6.5
-21%
10.7
10%
4.6
-17.2
6.4
-3.0%
105.9
+1%
112.2
+12.6%
108.6
+2.5%
108.0
+2.7%
113.9
+3.5%
108.2
+2.6%
Source: A.M. Best
At a recently held Canadian Insurance Accountants Association meeting, rating agency A.M. Best described 2001 as likely to be a “rough ride” for Canadian insurers. Although several markets are experiencing price hardening, the benefits will only feed into earned premium growth in 2002, the agency notes.
Coupled with this, the industry is unlikely to achieve the same level of earnings support from capital gains and investment income – which played a significant role in financial returns for 2000. What is notable, A.M. Best says, is that reinsurance rates within the Canadian marketplace are rising faster than primary ones, which will add further discipline to the market. Reviewing the industry’s 2000 financial year return, the rating agency points out that reserve redundancies are at their lowest level since 1995, equal to 1.7% of net premium earnings (NPE) versus 3.3% and 4.7% for the two years prior. Overall, the industry produced a meager 6.4% return on equity (ROE) for 2000 compared with 6.6% for 1999, and 13.2% for 1997. In particular, direct writers achieved the lowest rate of growth in net premiums written for 2000, and made only 6.5% pre-tax ROE for the year compared with a 10.7% return for broker companies. Canadian stock companies also bested their mutual brothers in performance by almost double pre-tax ROE. The generally poor results of insurers last year are largely attributed to deterioration in the Ontario auto market, and the Maritimes, the rating agency says.
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