Canada’s P&C Insurance industry still hurting – IBC quarterly report

TORONTO, March 12 – The country’s property and casualty insurers are
still reeling through tough times, according to data contained in the latest edition of
Perspective — the Insurance Bureau of Canada’s quarterly analysis of the financial
performance of the P&C insurance industry.

The paper shows return on equity for the industry in 2001
declined to the lowest level ever recorded — 3.0 percent.

Low earnings resulted in increased prices at most insurance
companies, with a premium revenue increase of 8 percent. At the same time a 12 percent
surge in insurance claims all but wiped out the revenue hike.

“The new data are troubling because they show that the industry’s financial health
did not improve at the end of the year,” says Paul Kovacs, IBC’s chief economist.

“Insurers have been losing money in Atlantic Canada
for 9 of the last 12 years — including the last six consecutive years. Results are also
poor in Ontario and Alberta,” adds Kovacs. By contrast, the Quebec insurance market
is by far the healthiest in Canada.

“The industry was caught last year between a rock and
a hard place. Governments have not yet given the industry authority to manage and control
its healthcare expenses and medical claims. Such costs have been on the rise by 14 percent
annually for more than a decade. Add to that falling interest rates and volatile equity
markets, and the result is lower earnings.”

“Four consecutive years of weak profits are nature’s
way of saying that more adjustments lie ahead for insurers and their customers,”
Kovacs says. “For insurers, the priority needs to be material improvement in
underwriting performance and profitability.” IBC believes the 17 percent growth in industry direct
written premiums over the past four quarters is evidence that the adjustment has begun.

The Insurance Bureau of Canada is the national trade
association of the private property and casualty insurance industry. It represents some
200 companies that provide more than 90 per cent of the non-government home, car and
business insurance in Canada. Visit the media section of the bureau’s website at to view the latest
edition of Perspective and for more news releases and information.

View the Quarterly issue of Perspective

Download Perspective in PDF format