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FOR IMMEDIATE RELEASE
OLDWICK - SEPTEMBER 02, 2014 02:07 PM (EDT)
From weather fronts to the regulatory front, Canadian insurers have come through a turbulent period with their outlook remaining stable, positioning themselves to manage ongoing and upcoming challenges. Property/casualty (P/C) insurers endured a string of catastrophe losses in 2013 and are bracing for market changing regulations in some segments. Life insurers continue to labor through the low interest-rate environment while adjusting to changing capital requirements and accounting rules, according to a Best's Special Report.
The report, titled "Canada's Growth Offsets Turbulent Industry Climate," states that this activity comes amid steady, albeit relatively modest, economic growth for Canada. Modest growth of 2.3% is expected for the Canadian economy in 2014, and that rate of growth in gross domestic product (GDP) is expected to continue through 2016. Increased global demand for Canadian exports, improved business investment, solid private consumption, strong manufacturing and improved trade balance all will support growth, although this trend will depend heavily on continued recovery and expansion in the United States.
The Canadian P/C market proved to be very resilient in the face of financial and operational pressures from the events of 2013. The industry managed an underwriting profit and a respectable return on equity despite a record year for insured catastrophe losses. Thunderstorms, ice storms, hailstorms, unprecedented flooding in Alberta and Ontario, and a train disaster in Quebec contributed to CAD 3.2 billion of insurable losses, including CAD 1.75 billion for the Alberta flooding in June--Canada's costliest natural disaster ever.
Despite the continuing low interest rates and a lagging economic recovery, the Canadian life industry's overall profitability increased in 2013 for the third straight year. The industry benefited from strong equity market returns and a benign credit environment, as well as self-directed actions such as re-pricing products and focusing more on fee-based income. Still, the life industry struggles with low interest rates and narrowing spreads.
The Canadian life insurance sector continues to benefit from solid risk-adjusted capitalization, risk-focused decision making by management, improved earnings with low credit impairments, strong growth in assets under management and an ongoing focus on wealth management. While continuing to concentrate on investments, life insurers have reinvested organically as well as through acquisitions in chosen growth areas. Reduced leverage and refinancing of existing debt also have been positive rating factors for the industry.
To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=228307 .
A.M. Best will host an Insurance Market Briefing on the state of the Canadian insurance industry at the Sheraton Centre Toronto on Wednesday, September 3, from 8:00 a.m. to 12:00 p.m. EDT, with a lunch to follow. There is no charge to attend this event.
Leading A.M. Best rating analysts will discuss current and prospective trends in the property/casualty, life and reinsurance segments of the Canadian insurance industry. To register for this event, please visit www.ambest.com/conferences/imb.html.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.