TORONTO, May 23, 2000 – Insurers across Canada are working
to re- establish healthy earnings. There have been price increases and tighter
underwriting terms. Although results have improved somewhat, earnings are still very weak
for the country’s property and casualty insurers, according to data contained in the
latest edition of Perspective – the Insurance Bureau of Canada’s (IBC) quarterly analysis
of the financial performance of the P&C insurance industry.
New data contained in the paper show that higher prices
brought some improvement for the first quarter of 2002, but industry return on equity
(ROE) remains alarmingly weak near 3 per cent. At this pace 2002 will be the second worst year on record.
“Financially sound insurers can best serve drivers,
homeowners and businesses,” says Paul Kovacs, IBC’s chief economist. “Last year,
unfortunately, Canada’s insurers experienced their lowest earnings on record. It is an
immediate priority to re-establish healthy earnings, but this journey will take time.”
Claims continued to grow faster than general prices,
increasing by 4.4 per cent over the past four quarters. The largest increases have been in
auto insurance costs in Ontario, Atlantic Canada and Alberta. Favourable weather
conditions during the early part of this year did, fortunately, slow the growth in claims costs.
Over the same period, earned premiums increased by 7.4 per
cent — marking the first time in five years that growth in industry revenues exceeded
growth in claims costs. Despite this improvement, the combined ratio shows industry costs
were an alarming 108.9 per cent of premiums during the first three months of 2002.
There are extraordinary regional variations in insurance
results. The high cost of providing auto insurance coverage in Ontario, the Atlantic
provinces and Alberta, for example, is out of sync with current pricing. In sharp
contrast, the insurance markets in Quebec are sound.
“Over the past three decades, P&C insurers earned
an average return on equity of 10 per cent,” Kovacs says. “Currently, however,
there are few companies with healthy earnings. Most of these are specialty insurers,
including those focused on one provincial market. Every insurer that is operating all
across Canada is experiencing depressed earnings or losses.”
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 our Web site at
www.ibc.ca to view the latest edition of
Perspective and for more news releases and information.
