Best's Market Segment Report: Canada Insurers Expected to Notch Positive Results in 2023; AM Best Maintains Stable Outlooks on Country's P/C and L/A Segments
Despite rising insured losses, Canada's property/casualty (P/C) insurers recorded a fourth year of underwriting profitability in 2022, while its life/annuity (L/A) sector has shown very strong regulatory capital levels amid the transition to IFRS 17 accounting standards, according to a new AM Best report. AM Best has maintained its stable outlooks on Canada's P/C and L/A segments.
Canada's P/C segment reported net income of CAD 6.6 billion in 2022, well above the reported results of the past five years, with the exception of CAD 8.3 billion in 2021. The Best's Market Segment Report takes an in-depth look at Canada's insurance industry and notes that key industry headwinds persist for its P/C sector, including supply chain imbalances, economic inflation, global political uncertainty, rising climate risk, rising reinsurance costs and cyber risk.
Despite positive net income, equity growth for the P/C segment was constrained by the impact of rising interest rates on fixed-income investment valuations. The aggregate loss ratio for the personal property lines rose by more than seven percentage points in 2022 compared with a year earlier, reflecting higher catastrophe activity. "However, the loss ratio remained below the 10-year average, despite the significant uptick," said Rosemarie Mirabella, director, AM Best.
Canada's L/A segment's performance in 2022 was underscored by favorable earnings and underwriting bolstered by rising interest rates and generally favorable mortality trends. The improvement occurred despite higher expenses associated with rising inflation and valuation markdowns in L/A insurers' commercial real estate and alternative investment portfolios. In addition, favorable top-line growth was noted in the fixed-rate annuity, participating whole life and accident, and sickness lines of business, bolstered by favorable economic conditions and ongoing improvements in customer experience through a heightened focus on innovation.
"The whole life and fixed-rate annuity product lines have experienced record sales in both Canada and the United States in the past year," said Michael Adams, associate director, AM Best. "In addition, mortality results for the L/A insurers continue to decline from their pandemic highs."
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=336404.
AM Best will host an insurance market briefing on the state of Canada's insurance industry in Toronto on Friday, Oct. 6, 2023. During the half-day event, AM Best analysts will deliver market insights and present overviews of Canada's main insurance sectors. For more information, please visit the event website.
To view a recent video discussion on Canada's insurance industry, please go to http://www.ambest.com/v.asp?v=ambmbc1023.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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