Canada’s property and casualty and life insurance sectors are stable, despite potential market pressures brought on by the increase in weather and fire catastrophes, and by the persistently low interest rate environment, says a new A.M. Best special report.  

Still, A.M. Best suggests monitoring factors such as potential seismic events, economic volatility and regulatory changes. 

Take the Canadian life insurance segment, which is struggling with low interest rates, regulatory changes and limited domestic growth opportunities. Yet, the industry remains well-capitalized, given the build-up in its equity.

Read: How life insurance can still protect clients, despite tax changes

A.M. Best finds most life companies maintained pricing discipline in their markets and stayed focused on growing their core lines of businesses. The companies benefited from “solid underwriting fundamentals, increased sales, less volatile investment performance and interest rate and equity market movements,” says A.M. Best.

As for competitive pressure, “Canada’s life insurance industry remains […] dominated by the top three life insurance groups, which maintain a 63% market share as measured by net premiums written as of year-end 2016,” said Ed Kohlberg, associate director for A.M. Best. “Product pricing — while competitive — remains rational […].” 

P&C pressures

In its release, A.M. Best says the pre-tax operating income of property and casualty insurers declined 26.5% in 2016.

It finds the significant decline in underwriting profits resulting from catastrophic events was partially offset by additional investment income, but that realized capital gains dropped approximately 55% from the prior year, while net income was down approximately 30%.

An September 1 announcement by Insurance Bureau of Canada links climate change to increased weather events. IBC says in a release, “Climate change is causing severe weather events, especially storms involving floods, to happen more frequently and with greater intensity. While the insured damage from the spring floods is significant, the total cost to homeowners and government is not yet known,” said Craig Stewart, vice-president, federal affairs, at IBC.” 


The release discusses two spring 2017 storm and flooding events that occurred in Eastern Ontario and Western Quebec; one took place between April 5 and 7 while the other occurred between May 5 and 7. Combined, those events resulted in approximately $223 million in insured damage. 

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