Remarks by Superintendent Julie Dickson, OSFI, 2009 Property and Casualty Insurance Industry Forum

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Cambridge, Ontario Thursday, June 4, 2009 — Introduction

June, 2009 – When speaking again to a group that I have addressed in the past, I like to review the messages that I delivered on that previous occasion. I do this to see if those messages are still appropriate, and if they are, reinforce them. And if not, then it is good to examine how our thinking may have changed in the interim.

Last year I said that, “It had been a tumultuous 12 months…the financial turmoil may have had a banking or capital markets focus – but there were other (worrisome) developments that we were seeing that were centered on the Property and Casualty (P&C) industry”.

In this case, our thinking has not changed. Indeed, the events of the past 12 months have now overshadowed what I said then – and indeed the worrisome developments we saw pertaining to the P&C industry have, if anything, become even more so.

Falling interest rates, the meltdown of equity markets, and the subsequent impact on investment portfolios are elements of collateral damage inflicted on the P&C industry by the economic turmoil.

P&C tends to be a cyclical industry with its ups and downs – but the challenges faced by the industry are far worse in this down cycle with the soft financial markets and a severe recession in the mix. The extent and severity of the impact on P&C institutions is hard to predict, but having an insurance cycle that coincides with a recession that appears to be quite severe will continue to create challenges.

Discussion by Line

The remarks addressed auto, home and commercial lines

Conclusions (one of three)

Times are uncertain, and anything can happen. Risk management is central to a company’s long term success. Robust scenario testing needs to be undertaken, with multiple unexpected events being considered, and processes to set capital targets need to be robust.

Read the full text, eight pages, (Editor: it is well worth the read).

About OSFI

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