Insurance Market Outlook 2019 - Mid-Year Update

Insurance Market Outlook 2019 - Mid-Year Update


At the beginning of each year, we try to ‘crystal ball’ where we see the insurance market. This year we spoke about the increasingly ‘hardening’ global insurance environment on the property casualty side of the business. This is due in no small part to the multiple catastrophic weather related events which resulted in unprecedented claims levels, increased rates, reduced market availability and stricter underwriting guidelines. Not a good combination to say the very least.

The continuing trend in this direction has raised concerns, enough that we wanted to do a mid-year update to our usual annual Insurance Market Outlook, something we have not done in over 25 years. This time with a singularly Canadian focus.

The Canadian Insurance Market, as an industry, continues to struggle, posting its lowest level of profitability in almost 20 years. These unfavorable financial results in 2019 Q1 have raised concerns about an elevated insolvency risk, catching the attention of regulators.

Canada has not had an insurer go bankrupt for more than 10 years, but sustained losses since 2015 are definitely on the radar of insurers and industry watchdogs as it is widely understood that the risk of an insurer becoming insolvent is one the rise.

One of the indicators of potential insolvency is the number of companies losing money. Regulators report that over 83% of companies were profitable in 2015. However Q1 2019 shows just 63%, the lowest in almost 30 years.

To put this in some context, reports show that Q1 2019 saw industry total underwriting losses of $756 million as compared to $119 million over the same period last year. That’s the unsustainable piece.

It was stated that there is not a lot of good news in the numbers, however, the capital base of Canada’s Insurance Industry on aggregate, has never been stronger.

That said, insolvencies happen to individual insurers not on the average. The industry watchdog, the PACICC, is keeping a close eye.

As in the past, we continue to monitor the industry and give an overview of where the markets are at, how it will impact both availability and cost of insurance for our clients. Our principal focus in 2019 remains to be advise our clients on the best road forward for them.

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