A.M. Best s Insurance Market Briefing Canada. Views on Property Casualty and Reinsurance

Transcription

1 A.M. Best s Insurance Market Briefing Canada Views on Property Casualty and Reinsurance September 6, 2017 Raymond Thomson Associate Director Gordon McLean Senior Financial Analyst

2 Canadian P&C Industry Outlook: STABLE Solid risk-adjusted capitalization Underwriting and operating profitability recorded in 2016 Continued refinement and sophistication of underwriting technology Continuing attention to developing and enhancing risk management fundamentals

3 Canadian P&C Industry A.M. Best Rating Trends All ratings are in the category of Good, Excellent, or Superior based on the A.M. Best Financial Strength Rating Scale Wawanesa Mutual Insurance Company was downgraded in Several outlook changes (both negative and positive) have taken place in 2016 and 2017 The pace of movement among rating categories has slowed Not anticipating significant number of rating changes

4 Canadian P&C Industry Interactive Rating Distribution 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% * *Through June 30, All other years, as of year end. Superior Excellent Good Fair

5 Canadian P&C Industry Market Share All Lines Rank Group / Company DPW (C$B) % 1 Intact Group % 2 Aviva Group % 3 Desjardin Group % 4 TD Insurance Group % 5 Co-operators Group % 6 Wawanesa Mutual Insurance Company % 7 Lloyds Underwriters CAB % 8 RSA Group % 9 Economical Group % 10 Travelers Group % Total % Source: A.M. Best data and research 2016

6 Canadian P&C Industry Combined Ratio Components Underwriting Expense Ratio Loss & Loss Adjustment Expense Ratio *Excludes Lloyd s CAB & ICBC

7 Canadian P&C Industry Operating Ratio *Excludes Lloyd's CAB & ICBC Operating Ratio

8 Canadian P&C Industry Net Investments: Income vs. Yield Net Investment Income (C$ Billions) Net Investment Yield (%) 2.0 *Excludes Lloyd's CAB & ICBC Net Investment Income (C$ Billions) 2.0 Net Investment Yield

9 Canadian P&C Industry Auto Net Loss Ratio Trends Loss Ratio (%) *Excludes Lloyd's CAB & ICBC Auto - Liability Auto - Personal Accident Auto - Other

10 Canadian P&C Industry Auto Net Premiums Written 25.0 NPW (Millions) *Excludes Lloyd's CAB & ICBC Auto - Other Auto - Personal Accident Auto - Liability

11 Canadian P&C Industry Catastrophe Losses Year Date Location Event Loss & LAE Current Dollar 2016 May - August Fort McMurray, Alberta Fire 4,000 4, February Quebec, Ontario, New Brunswick Ice Storm 1,574 2, June Alberta Heavy Rains/Flooding 1,740 1, July Toronto Heavy Rains/Flooding May Slave Lake, Alberta Fire August Ontario Wind/Rainstorm July Calgary and Southern Alberta Wind/Thunderstorm August Calgary Flooding/Hail/Wind September Calgary Hail July Ontario Heavy Rains July - August Alberta, Manitoba, Ontario, Saskatchewan Wind/Thunderstorm June Alberta Flooding July - Present British Columbia Fire TBD TBD, Bank of Canada Incurred Losses (C$ Million)

12 Canadian P&C Industry Net Loss Ratios Commercial Personal * Excludes Lloyd's CAB & ICBC

13 Canadian P&C Industry Key Future Issues Consolidations / M&A activity Distribution Channel Expansion Ontario Auto Technology / Infrastructure / Modeling Cyber Risk

14 Canadian P&C Industry Fort McMurray Fire Largest single catastrophic occurrence in Canadian History: (C$3.6 Billion IBC to C$4.6 Billion PCS) Earnings event for the overall Canadian industry Primary (Domestic) Market fared well Reinsurers shouldered relative loss burden Pre-event soft reinsurance climate Lessons learned from Slave Lake OSFI s BC Quake 1/500 reinsurance mandate Industry s response to 2013 and 2014 catastrophic loss years

15 Canadian P&C Industry Fort McMurray Fire Lessons Learned Insured Exposures v. Concentration of Insured Exposures Risk Transfer Claims Handling Local Regulations Understanding Capabilities Risk / Concentration Analysis Restoration of pre-loss conditions

16 Canadian Reinsurance Market 2016 Canadian Reinsurance NPW by Line Commercial Property Personal Property Liability Auto Liability Surety Auto Other All Other

17 Canadian Reinsurance Market NPW and Shareholders Equity C$ in Billions PHS NPW

18 Canadian Reinsurance Market Combined Ratio Expense Ratio Loss and LAE Ratio Yr Avg.

19 Canadian Reinsurance Market Combined Ratio vs. Global Reinsurance Market Canadian Reinsurance Global Reinsurance Yr Avg.

20 Canadian Reinsurance Market Total Return on Equity 18.0 Canadian Reinsurance Global Reinsurance Yr Avg.

21 Global Reinsurance Market Outlook - NEGATIVE Capitalization remains strong but Performance has deteriorated and pressure on margins continues to mount. Returns for some reinsurers will fall short on a riskadjusted basis. Headwinds Tailwinds

22 Global Reinsurance Market Top 50 Global Reinsurers Reinsurance Premiums Written Life & Non-Life 2017 Rankings Company Name (USD m) Gross Net 1 Swiss Re Ltd. 35,622 33,570 2 Munich Reinsurance Company 33,154 31,891 3 Hannover Ruck SE 17,232 15,192 4 SCOR S.E. 14,569 13,238 5 Berkshire Hathaway Inc. 12,709 12,709 6 Lloyd's 11,576 8,694 7 Reinsurance Group of America Inc. 10,107 9,249 8 China Reinsurance (Group) Corporation 7,857 7,517 9 Great West Lifeco 6,195 6, Korean Reinsurance Company 5,554 3,903 Rank % Rank % Rank % Rank % Rank %

23 Global Reinsurance Market Combined Ratio 100% 90% Loss Ratio Expense Ratio Loss Reserve Development 10% 9% 80% 70% 31.6% 31.9% 33.5% 34.8% 34.7% 32.6% 33.3% 8% 7% 60% 6% 50% 5% 40% 4% 30% 20% 60.2% 55.9% 56.2% 56.2% 60.6% 62.2% 57.8% 3% 2% 10% 1% 0% Q2 5yr Avg 0%

24 Global Reinsurance Market 120% Combined Ratio by Reinsurance Sector Loss Ratio Expense Ratio 100% 91% 89% 92% 92% 96% 97% 93% 87% 87% 91% 92% 93% 91% 87% 88% 90% 98% 80% 60% 40% 20% 0% Q Q European "Big Four" U.S. & Bermuda Lloyd's

25 Global Reinsurance Market Return on Equity ROE (%) Q17 ROE 5 Yr Avg

26 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Global Reinsurance Market Return on Equity by Sector 9.7% 11.5% 11.0% 13.1% 13.0% 8.1% 6.8% 7.5% 10.9% 11.4% 10.6% 8.1% 10.9% 8.1% 8.9% 14.7% 16.2% 15.1% European "Big Four" U.S. & Bermuda Lloyd's Q2 Five Year Average

27 Global Reinsurance Market Return on Equity Less Loss Reserve Development 12% 10.9% 10% 8% 6.8% 6% 4% 2% 0% Source: AM Best Data and Research 5yr Avg ROE 5yr Avg ROE excl. Loss Res. Dev.

28 Global Reinsurance Market Operating Cash Flow as a % of Equity by Sector 25% 20% 15% 10% 5% 5.5% 15.4% 17.1% 17.9% 11.4% 19.2% 2.9% 9.9% 9.7% 11.4% 10.4% 10.9% 10.9% 7.2% 6.0% 5.4% 13.2% 0% European "Big Four" U.S. & Bermuda Lloyd's Q2 Source: AM Best Data and

29 Global Reinsurance Market Alternative Capital M&A will continue Alternative capacity is driving change Market is still largely influenced by global leaders Alternative capital is driving a great deal of structural change in the market. However, the market continues to be heavily influenced by the global reinsurance leaders.

30 USD Billions Global Reinsurance Market Estimated Total Dedicated Reinsurance Capacity E Traditional Capacity Convergence Capacity

31 Global Reinsurance Market Third Party Capital Breakout Direct Institutional Investors Reinsurance Sponsored Managers (including sidecars) Dedicated ILS Managers 2017E

32 Global Reinsurance Market Alternative Capital Major Players Nephila Credit Suisse Asset Management LGT Insurance-Linked Partners Fermat Capital Management Stone Ridge Capital Management Securis Investment Partners Catco Leadenhall Capital Management Elementum Advisors Aeolus Vast majority of alternative capital is influenced by these major market players

33 Mergers and Acquisitions The Result of Strategic Opportunities Broader product capability Broader geographic reach Greater influence Opportunity for growth Greater attractiveness to alternative capital

34 Questions & Comments

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