Remarks by Julie Dickson OSFI to the 2011 Property and Casualty Insurance Industry Forum

Cambridge, Ontario, June 1, 2011 — Some significant changes and events have taken place since the last time I spoke here. These have all offered opportunities to learn and to improve our understanding and management of risk. Tonight I am going to briefly review the results for 2010 and then discuss key areas of risk and capital.

The Bigger Picture

But first let me say a few words about the recent financial crisis and its implications. OSFI and our counterparts around the world are attempting to identify and apply the lessons learned from the financial crisis. These lessons are being used to strengthen supervisory regimes and craft regulatory policies to help avoid a future financial crisis and to limit the spread and impact if one does happen. We are receiving significant and helpful input from financial institutions as we do this work.

I have said before that I think the crisis has lessons for all financial institution sectors, even P&C, even though the epicenter of the crisis was not in the P&C sector. Now before you get nervous, let me be clear. We understand the substantial differences which separate the insurance sector from the banking sector, and the life sector from the P&C sector.

For example, insurance companies in general do not engage in the types of highly leveraged and interconnected activities that caused the recent crisis. You enjoy steady policyholder demand for your products. Policyholders cannot immediately demand payments, which means there can be no �run on the bank�.

So even if P&C companies may be very different from banks in terms of the risks and the consequences for the financial system should something go wrong, the P&C sector is incredibly important. That is why OSFI takes lessons learned from the financial crisis � primarily a banking crisis � and looks to see whether it makes sense to apply such lessons in other sectors, such as P&C.

It is also why we are of the view that the bar for insurance regulation and supervision needs to be raised globally. We have no international agreement on key aspects of regulation in this sector � such as a common capital standard. We have not even agreed that full consolidated supervision is required. These are things that we continue to push for globally.


Having a strong, profitable and innovative insurance sector is critical to Canadians. We are encouraged by the risk management measures companies are taking, but the bar must continue to rise. The external environment � which can drive investment results � is subject to much uncertainty. Continuing soft markets in the large commercial lines, unfolding developments in Ontario auto insurance reforms, and recent escalating trends in catastrophic events demand that companies stay ahead of the curve and maintain underwriting discipline.

Companies can be harmed by the same old things � inadequate pricing, rapid growth, insufficient capital and under-reserving � as well as by some new dangers � over-reliance on models and changing weather/catastrophic patterns. Both types of threats are always present. Dealing with these risks is important given the important role of P&C companies in the economy.

Read the full text with a review of the P&C Industry 2010, issues and current activities, go here.

About OSFI

OSFI is an independent agency of the Government of Canada. It reports to the Minister of Finance. For more information visit