Market Overview

Best's Special Report: Canadian Property/Casualty and Life Insurance Sectors Remain Stable, As Economy Continues to Grow


Canada's property/casualty industry has remained resilient in the face
of ongoing and escalating weather-related challenges while its life
insurance sector continues to be well-capitalized amid limited growth
opportunities and a new regulatory scheme, according to a new A.M.
special report.

The Best's Special Report, titled, "Outlook for Canada's P/C and
Life Segments Remains Stable, as Economy Continues to Grow," analyzes
the recent performance and also details the challenges that face each
industry segment, some of which have become all too familiar issues. The
report was released in conjunction with A.M. Best's 2018 Insurance
Market Briefing – Canada event, scheduled for Wednesday, Sept. 5 in

Canadian P/C insurers did not face the magnitude of the 2016 Fort
McMurray wildfire in 2017, at least on a single-event basis, but did
contend with 15 catastrophe events that impacted underwriting results.
Every peril other than earthquake was represented last year, as most
provinces felt the wrath of wind and water, and British Columbia was
victimized by two large wildfires. In most cases, no individual event
was severe enough to reach into insurers' catastrophe reinsurance
programs; most losses were net to each insurer's bottom line. Despite
the impact of weather events, the industry's combined ratio improved by
1 point in 2017, to 97.1

"Because most of the Canadian P/C writers rated by A.M. Best provide
coverage in a number of provinces and maintain comprehensive catastrophe
reinsurance programs, they have been able to absorb these concentrated
events, with small hits to earnings but without material impacts on
their balance sheets," said Raymond Thomson, associate director.

As for Canada's life insurance sector, A.M. Best believes these insurers
have done a commendable job of navigating the prolonged low interest
rate environment. These actions have supported operating margins to
date, although current margins many not be sustainable should interest
rates remain low. The level of return on equity has declined with equity
bases growing faster than earnings, leaving companies to strategically
assess the deployment of capital.

"Overall operating earnings remain strong," said Ed Kohlberg, associate
director. "Underwriting performance has generally been favorable, and
core earnings continue to grow through the expansion of wealth and asset
management business sales in Canada and globally."

Kohlberg also noted that counterbalancing factors include stubbornly low
interest rates, economic uncertainty both in Canada and globally, and
concerns about legacy blocks of business that could add to the
volatility of earnings and capital. The Bank of Canada has raised its
overnight rate three times since July 2017, to the current 1.25%.

To access a copy of this special report, please visit

To view a video related to this report, please visit

For more information about A.M. Best's 2018 Insurance Market Briefing –
Canada event, please visit

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