A.M. Best Special Report: Canada Manages Effectively Through Turbulent Times

Canadian insurers were able to rebound in 2009 from difficult market conditions in 2008. Capitalization improved for the property/casualty (P/C) industry, benefiting from realized and unrealized gains in 2009. Life insurers’ premium income declined, though favorable trends have emerged in balance sheet and product de-risking and access to the capital markets.

High losses ratios on personal property and further deterioration in Ontario auto led the P/C industry to a net underwriting loss of about CAD 207.4 million in 2009, though the combined ratio improved marginally to 100.9, down from 101.2.

Auto insurers’ 2009 net loss ratio fell to 76.5 from 76.9, but claims cost inflation in Ontario auto’s personal accident business line drove the province’s net loss ratio to 148.0 from 124.7.

A.M. Best Co. anticipates continued challenges for the P/C industry, including loss cost pressures from the overall soft market conditions, while low investment yields may pressure investment income.

Premium income for Canadian life insurers fell in 2009, driven by reduced sales of universal life, group life and creditor insurance.

Sales of protection products rose, but Canadian consumers shied away from investment type products due to the lingering effects of market volatility and a low interest rate environment.

Life and annuity insurers have de-emphasized sales of capital intensive products, focusing more on economic and accounting concerns when determining product strategy.

In the group life market, insurers continue to implement aggressive strategies for new business acquisition.

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Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.