President s message. Don Forgeron President and CEO, Insurance Bureau of Canada

Transcription

1 President s message When a wildfire swept through the northern Alberta city of Fort McMurray in May 2016, destroying or damaging 2,500 homes and buildings, and displacing almost 90,000 people, the devastation was a test for many. Residents were tested by the loss of their homes and businesses and the need to rebuild. For months, first responders were tested by a fire the size of Prince Edward Island that was so hot they nicknamed it The Beast. The Fort McMurray disaster the largest insured loss in Canada s history was also a test for Canada s property and casualty (P&C) insurance industry. Insurers are second responders. They arrive immediately after a disaster with cheques in hand to help their policyholders get through those first tough days. And in large-scale events, insurers work very closely with their policyholders and government stakeholders for months and even years. Almost a year after the fire, with rebuilding well underway, the P&C insurance industry can be proud of its response as it continues to help Fort McMurray residents recover. The industry will remain on the ground, identifying and responding to issues until the community is back on its feet. For Canadian insurers, 2016 is on record as the worst year ever for catastrophic losses (which are insured losses that total $25 million or more from a single event). The most recent tally is $5.03 billion, of which the Fort McMurray wildfire accounts for $3.7 billion. Our changing climate is creating more weather extremes more rain, more heat, more drought, more wind and is pushing these losses ever higher. In Canada and around the world, climate change is not a future threat but a present danger. These numbers tell the story. The Fort McMurray wildfire reduced Canada s GDP by almost half a percentage point in the second quarter of Canada s parliamentary budget officer estimated that the cost of natural disasters, driven in large part by climate change, will be almost $1 billion annually by Globally, the average annual economic cost of weather disasters has increased sixfold since the 1980s. Our companies, our customers and all Canadians are feeling the financial and emotional strain of our changing climate. This is why Insurance Bureau of Canada (IBC) and P&C insurers continue to work with governments and all stakeholders to tackle the effects of climate change and to help Canadians prepare for emergencies. Many Canadian insurers now offer homeowners new overland flood protection products. As well, insurers are encouraging governments to employ better landuse planning, repair existing infrastructure and create new, green infrastructure to make communities more resilient. P&C insurers are tackling another pocketbook issue, the cost of car insurance in some provinces, which continues to increase. There are encouraging signs that relief is on the way. In Ontario, the provincial government is working to create a new regulator with a mandate to focus on market conduct and innovation. The government has also committed to studying the reforms recommended in Fair Benefits Fairly Delivered, the report by David Marshall. The Alberta government has agreed to bring forward changes that can improve its system. In the Atlantic provinces, Newfoundland and Labrador and Nova Scotia are committed to reviews of their auto insurance systems. When we work together with our customers and governments, we can affect significant change on issues that Canadians care about. Don Forgeron President and CEO, Insurance Bureau of Canada IBC Facts

2 Canada s P&C insurance industry, all sectors 4 Industry at a glance 6 Premiums 8 Insurance dollar 9 Claims 10 Taxes and levies 12 Operating expenses 13 Profit 16 Catastrophic losses 24 Regulation and regulatory issues 1 IBC Facts

3 Industry at a glance 42.4% of direct written premiums were for car insurance in 2016 Of its $170.2 billion in total assets, the P&C insurance industry had $111.3 billion in invested assets in 2016 In 2016, Canadian insurers wrote $53.4 billion in direct written premiums for insurance on consumers homes, cars and businesses $9.0 billion the amount the P&C insurance industry contributed in taxes and levies to federal and provincial governments in 2015 The P&C insurance industry employed 124,900 people across Canada in 2016 IBC helped recover stolen vehicles worth $28 million in IBC Facts 2017

4 More than 203 private P&C insurers actively compete in Canada Property claims as a percentage of total claims have risen significantly over the last decade 39.3% 24.4% More than half of every dollar of premiums received by insurers is paid out in claims 56.6% - claims paid out to policyholders 21.5% - operating expenses including employee compensation 13.6% - taxes and levies 8.3% - profit margin IBC Facts

5 Premiums Insurance premiums are determined based on risk. Insurers consider the likelihood of a customer (or a group of customers with the same set of circumstances) making a claim, and how much those claims will likely cost. The price for premiums is based, in part, on an insurer s best estimate of the amount it will be required to pay out in claims on the policies it wrote in any given year. Insurers pool the premiums of their many policyholders to cover the losses claimed by the few in that year. Along with covering claim costs, premiums are calculated to cover taxes, operating expenses and expected profits. The requirement to estimate future costs is a unique challenge in the insurance business. Most businesses can calculate the actual costs of producing and selling a product before the selling price is determined. However, when setting premiums, P&C insurance companies can only estimate the costs of the medical treatments, car repairs or house repairs they will have to pay in the future. Consumers often find this confusing and are unsure about what a premium represents. Many think of their premiums as a bank account it is there just for them in case of a loss. But that s not how it works. Insurance companies report premiums in two ways. Direct written premiums are the total amount of premiums that a P&C insurance company receives in one year. Net written premiums are direct written premium amounts plus reinsurance written premium amounts minus reinsurance ceded premium amounts. There are more than 203 private P&C insurers actively competing in Canada to sell insurance policies on homes, cars and businesses. In 2016, private Canadian insurers wrote $53.4 billion in direct written premiums ($48.7 billion in net written premiums) for insurance on consumers homes, cars and businesses. Top 20 private P&C insurers by direct written premiums, 2016 Rank Company % 1 Intact Group Aviva Group Desjardins Group TD Insurance Group Co-operators Group The Wawanesa Mutual Insurance Company Lloyd's Underwriters RSA Group Economical Group Travelers Group Allstate Group Northbridge Group AIG Insurance Company of Canada Chubb Group Capitale Group Genworth Financial Mortgage Insurance 1.45 Company Canada 17 Zurich Insurance Company Ltd CAA Group The Guarantee Company of North America Green Shield Canada 0.86 Sources: IBC, MSA 6 IBC Facts 2017

6 Of the $48.7 billion in net written premiums, 44.3% was for one line of business: automobile, including commercial vehicle insurance. (Figures do not include government-owned auto insurers in British Columbia, Saskatchewan, Manitoba and Quebec, which exclusively provide the compulsory component of auto insurance in those provinces.) Personal property, commercial property and liability made up most of the rest. Specialized lines of insurance, such as boiler and machinery, marine and aircraft, and surety and fidelity, make up about 7.3% of the business. The smallest portion of the business is accident and sickness insurance, which a few P&C insurance companies sell. Most of this type of insurance is sold by life and health insurers. Net written premiums (NWP) in $000,000, 1993 to 2016 Personal property NWP Commercial property NWP Liability NWP Other NWP Total NWP Auto NWP ,158 2,803 2,062 1, , ,697 3,042 2,337 1, , ,403 3,163 2,553 1,694 1,258 18, ,597 3,246 2,658 1,867 1,202 18, ,553 3,281 2,711 1,878 1,185 18, ,686 3,383 2,469 1,823 1,198 18, ,839 3,293 2,434 1,846 1,315 18, ,705 3,429 2,591 1,982 1,471 20, ,281 3,481 2,768 2,194 1,519 21, ,150 3,971 3,909 3,145 3,333 27, ,781 4,452 4,518 4,081 2,581 31, ,415 5,079 4,802 4,357 2,622 33, ,430 5,315 4,820 4,600 2,698 33, ,590 5,621 4,985 4,826 2,943 34, ,758 6,033 4,997 4,766 3,540 36, ,140 6,495 5,001 4,624 3,438 36, ,126 7,013 5,313 4,667 3,068 38, ,977 7,598 5,568 4,726 3,416 40, ,239 8,192 6,014 4,817 3,533 42, ,690 8,565 6,136 4,502 3,758 43, ,089 9,024 6,339 4,731 3,823 45, ,295 9,791 6,621 4,781 4,143 46, ,630 10,187 6,656 4,988 4,547 47, ,563 10,798 6,789 4,969 4,557 48,676 Sources: IBC, MSA, SCOR, AMF Direct written premiums (DWP) by line, 2016 Line DWP in $000,000 DWP as % of total business Total auto 22, Auto - private passenger 18, Personal property 11, Commercial property 7, Liability 5, Specialized 4, Accident and sickness 1, Total business 53, Sources: IBC, MSA, SCOR, AMF Net written premiums (NWP) by line, 2016 Line NWP in $000,000 NWP as % of total business Total auto 21, Auto - private passenger 17, Personal property 10, Commercial property 6, Liability 4, Specialized 3, Accident and sickness 1, Total business 48, Sources: IBC, MSA, SCOR, AMF IBC Facts

7 Insurance dollar The Insurance Dollar graphic shows how insurers spent each dollar of revenue averaged over seven years, from 2010 to More than half of every dollar received is paid out in claims Sources: IBC, MSA 56.6% - claims paid out to policyholders 21.5% - operating expenses including employee compensation 13.6% - taxes and levies 8.3% - profit margin 8 IBC Facts 2017

8 Claims In 2016, Canadian P&C insurers paid out $32.0 billion, or 63%, of insurance company revenues in claims. A note about terminology in the chart below: Net claims incurred are the total claims cost incurred in the period less any share to be paid by reinsurers. Net claims incurred (NCI) in $000,000, 1993 to 2016 Auto NCI Personal property NCI Commercial property NCI Liability NCI Other NCI Total NCI ,420 1,974 1,430 1, , ,892 1,955 1,493 1, , ,342 2,003 1,504 1, , ,034 2,301 1,665 1, , ,221 2,112 1,838 1, , ,185 2,523 2,089 1, , ,475 2,152 1,758 1, , ,443 2,286 1,847 1, , ,431 2,316 2,031 1, , ,844 2,352 2,195 2,085 2,019 19, ,028 2,574 2,161 2, , ,081 2,921 2,033 3, , ,626 3,570 3,356 3, , ,968 3,556 2,173 2,577 1,052 20, ,753 3,842 2,589 2, , ,997 4,720 3,157 2,726 1,404 25, ,472 5,071 3,454 2,878 1,464 26, ,205 4,566 3,276 2,766 1,475 27, ,607 5,336 4,087 2,977 1,560 28, ,731 5,013 3,981 2,615 1,479 27, ,125 6,161 4,699 2,486 1,650 30, ,835 6,045 3,955 2,526 1,970 30, ,277 5,489 3,797 3,106 1,761 29, ,450 6,339 5,570 2,973 1,710 32,043 Sources: IBC, MSA, SCOR, AMF Net claims incurred (NCI) by line, 2016 Line of business NCI in $000,000 NCI as % of total business Total auto 15, Auto - private passenger 13, Personal property 6, Commercial property 5, Liability 2, Specialized 1, Accident and sickness Total business 32, Sources: IBC, MSA IBC Facts

9 Taxes and levies Each year, the P&C insurance industry makes significant tax contributions to government tax revenues. In 2015, Canadian P&C insurers contributed taxes and levies totalling $9.0 billion to federal and provincial governments. About 86% ($7.7 billion) of the industry s total tax contribution was incurred through the insurance supply chain and was paid regardless of the industry s bottom line, while only 14% ($1.3 billion) was paid in income taxes. The main taxes and levies applied to the P&C insurance industry are: Retail sales tax on claims and expenses. The P&C insurance industry paid an estimated $2.17 billion in goods and services tax (GST) and provincial sales tax (PST/QST) applicable to P&C insurance claims. An additional $458 million in sales taxes related to general and administrative expenses was incurred as part of daily operations. Being a GST/HST exempt industry means these costs are unrecoverable through input tax credits. Insurance premium tax. Provinces apply this tax, which is included in premiums, at different rates on different insurance products. Some jurisdictions have combined this tax with a fire tax. The fire tax is collected by some provincial governments to be disbursed to municipalities to support fire services. Retail sales tax on premiums. This is a provincial sales tax collected from policyholders in Manitoba, Ontario and Quebec. On July 1, 2016, Newfoundland and Labrador also applied a 15% RST on P&C insurance products. Health care levy. This levy is paid to most provincial governments to support the health care system, particularly to pay the public health system costs for victims of automobile collisions. Health care levies are included in the industry s total tax contribution because they are a mandatory payment. Federal and provincial taxes and levies payable in $000,000, 2015 Income taxes 1,267.5 Payroll taxes 1,482.2 Realty and business taxes 34.2 Transaction taxes GST on claims* PST/QST on claims* 1,270.8 Sales tax on operating expenses RST on premiums (Man., Ont., Que.) 1,593.7 Insurance premium taxes 1,661.6 Transaction subtotal 5,887.4 Total taxes 8,671.3 Health levies Total 8,994.1 *Harmonized sales tax (HST) is allocated into the appropriate component Source: IBC 73% of the total tax contribution. The impact of these taxes on premiums varies depending on the insurance product. On a Canada-wide basis, these taxes account for 14.6% of the premium for personal property insurance, 13.7% of the premium for private passenger auto insurance (includes health care levies), 11.2% of the premium for commercial liability insurance and 10.2% of the premium for commercial property insurance. Excluding income taxes and the portion of payroll taxes remitted to governments on behalf of employees, the remaining taxes and levies accounted for over $6.5 billion or 10 IBC Facts 2017

10 Provincial premium, premium sales and premium fire tax rates, as of April 1, 2017 Premium tax rate (%) Premium sales tax rate (%) Premium fire tax rate (%) Alberta British Columbia (auto and property insurance) British Columbia (excluding auto and property) Manitoba New Brunswick* Newfoundland and Labrador Northwest Territories Nova Scotia Nunavut Ontario (auto insurance) Ontario (property insurance) Ontario (excluding property and auto) Prince Edward Island Quebec** Saskatchewan (auto insurance)*** Saskatchewan (hail insurance)*** Saskatchewan (excluding auto and hail)*** Yukon* * In New Brunswick and Yukon, the fire tax applies on property and auto fire risks. ** Insurance premium tax rates include a surcharge and a compensation tax. Quebec has extended the application periods of the surcharge of 0.18% to March 31, 2022 and the compensation tax of 0.30% to March 31, *** Starting July 1, 2017, the 6% PST will apply to all insurance as defined in the Saskatchewan Insurance Act. Source: IBC IBC Facts

11 Operating expenses Operating expenses for P&C insurers include facility costs, information technology, market research and employee compensation. Employee compensation is the largest operating expense. In 2016, the P&C insurance industry employed 124,900 people across Canada. Compensation levels in the industry are relatively high compared with most other sectors in the economy. The average weekly salary in 2016 was $1,234. This reflects the advanced skill mix that employees in the P&C insurance industry possess. Employment in the insurance industry as a whole (which includes life, health and medical, and P&C) grew by 11% between 2010 and 2016, according to Statistics Canada. Average weekly wage compared to benchmark industries, 2016 Mining and quarrying (except oil and gas) 1,716.9 Professional, scientific & tech. services 1,316.9 Information & cultural industries 1,305.3 Insurance carriers & related activities 1,234.2 Public administration 1,232.5 Credit intermediation 1,149.3 Manufacturing 1,088.9 Hospitals 1,060.4 Educational services 1,016.5 All industries Retail trade Accommodation & food service Source: Statistics Canada Table IBC Facts 2017

12 Profit Profit or return on equity in the P&C insurance industry is cyclical. It has fluctuated around an average of 10.5% since The 2016 industry return on equity was 6.0%. In 2016, underwriting posted gains for the 14th consecutive year. The 2016 net underwriting income was $489 million. Before 2003, underwriting posted losses for 24 years in a row. On investment, 2016 was a year of relatively low returns of 2.7%. Return on investment moves in lockstep with the yields for 3- and 5-year Government of Canada bonds, which have fallen for the last two decades. Investment income for 2016 was $3.0 billion. The P&C insurance industry is highly regulated by governments and is required by law to invest its assets prudently. More than 68% of invested assets are placed in bonds. Of its $170.2 billion in total assets, the P&C insurance industry has $111.3 billion in invested assets. This makes the Canadian P&C insurance industry a major stakeholder and investor in the national economy. P&C insurers invest mainly in domestic government and corporate bonds, and in preferred and common stocks. These investments produce a steady flow of income and balance the more variable income from the underwriting side of the business, which tends to fluctuate from year to year. Investments in $000,000 as of December 31, 2016* Bonds Shares Mortgages Real estate Term deposits Other Total 75,999 11,607 1, ,561 17, , % 10.4% 1.1% 0.2% 4.1% 15.9% 100.0% * As per the latest OSFI regulatory filing forms, which came into effect Q Sources: IBC, MSA IBC Facts

13 Return on equity, return on investment and underwriting ratios, 1993 to 2016 Return on equity * Return on investment Earned loss ratio Operating expense ratio Combined ratio % 10.7% 77.1% 32.8% 109.9% % 8.0% 75.7% 31.3% 107.0% % 9.1% 73.3% 30.8% 104.1% % 10.3% 72.7% 30.7% 103.4% % 10.4% 71.4% 31.2% 102.6% % 8.5% 74.9% 32.9% 107.8% % 7.3% 72.6% 33.2% 105.9% % 9.0% 75.9% 32.7% 108.7% % 7.5% 80.0% 31.0% 111.0% % 5.4% 76.9% 28.9% 105.8% % 6.2% 69.9% 28.6% 98.4% % 5.6% 62.7% 28.2% 91.0% % 5.9% 64.7% 28.7% 93.4% % 5.9% 59.5% 28.1% 87.5% % 5.5% 62.5% 28.5% 91.0% % 3.9% 70.3% 30.0% 100.3% % 4.2% 69.5% 30.0% 99.6% % 4.3% 69.1% 30.2% 99.4% % 4.2% 68.2% 30.3% 98.4% % 3.9% 64.7% 30.6% 95.3% % 3.1% 68.1% 30.8% 98.9% % 3.9% 66.6% 31.0% 97.6% % 3.3% 63.5% 31.4% 94.9% % **2.7% 67.6% 31.8% 99.4% * Excluding Lloyd s ** As per the latest OSFI regulatory filing forms, which came into effect Q Sources: IBC, MSA, SCOR, AMF 14 IBC Facts 2017

14 Return on equity (ROE), 1975 to 2016 (%) Average ROE Excluding Lloyd s Sources: IBC, MSA Return on investment (ROI) compared with Government of Canada bond yield, 1989 to 2016 (%) 12 8 P&C ROI 4 Yield for 3 5 year Government of Canada bonds Sources: IBC, MSA, Bank of Canada IBC Facts

15 Catastrophic losses Insured losses for a given disaster are deemed catastrophic when they total $25 million or more. Catastrophic losses for a year are the sum total of insured losses from these natural disasters. Catastrophic losses due to natural disasters have increased dramatically over the last decade. In 2016, catastrophic losses accounted for approximately $5.03 billion, which were the highest ever; of the $5.03 billion, $3.7 billion were a result of the Fort McMurray wildfire. The wildfire that occurred in May 2016 forced the evacuation of almost 90,000 people from Fort McMurray and surrounding communities. The fire destroyed or damaged 2,500 homes and buildings and thousands of vehicles and resulted in almost 49,000 claims in total. Before 2016, the year 2013 was the record-breaker for catastrophic losses, when insurers paid out more than $3.4 billion, including $1.8 billion as a result of the floods in southern Alberta and around $1 billion as a result of a summer storm and flooding in Toronto. As well, at the end of 2013, a massive winter storm hit southern Ontario and parts of Eastern Canada. Another record year for insured losses was 1998, the year that an ice storm occurred in Quebec and Ontario that included six days of freezing rain, month-long power outages and $2.1 billion in insured losses. Milestone losses of the past decade include the hailstorms in Alberta during the summer of 2014 that cost insurers $550 million in insured losses. They also include the Slave Lake fire that ravaged a remote area of Alberta, causing $750 million in insured losses in the spring of 2011, and the Toronto rains of 2005 that generated $708 million in claims. (All figures in this section are in 2016 dollars. For catastrophic losses expenses, see chart next page.) Catastrophic losses in Canada in $000,000,000, 1983 to Loss + Loss Adjustment Expenses in 2016 dollars Estimated Trend Line Source: IBC, PCS Canada, CatIQ, Swiss re, Munich Re, Deloitte 16 IBC Facts 2017

16 Catastrophic losses by event in $000, 1983 to 2016 The table below shows the steady increase in the number and cost of catastrophic losses in Canada. This is not a Canada-only phenomenon; it is part of a worldwide trend. The table includes insured losses by event and annual totals from 1983 to From 2009 on, it sets out insured losses for the two largest events in the year and annual totals. The figures are reported by Property Claim Services Canada (PCS Canada), which tracks insured losses arising from catastrophic events in Canada, and Catastrophe Indices and Quantification Inc. (CatIQ) as indicated at the end of the table. Insured losses for all events are available through subscription to PCS Canada and CatIQ. Date and place Event type Loss expenses Loss expenses in 2016 dollars 1983 July 9, Saskatchewan Storm 16,385 36,211 Aug. 3, Edmonton AB Storm 22,060 48,752 Total ,445 84, April 30, Bruce County ON Wind 39,066 82,774 Total ,066 82, May 30, Leamington ON Storm 16,390 33,404 May 31, Barrie ON Tornado 83, ,041 Total , , May 29, Montreal QC Hail 45,473 89,005 Total ,473 89, May 29, Montreal QC Hail 24,891 46,657 July 14, Montreal QC Storm 44,678 83,747 July 31, Edmonton AB Tornado 148, ,126 Total , , June 7, Medicine Hat AB Tornado 50,027 90,217 July 6, Slave Lake AB Flooding 21,500 38,772 Aug. 16, Calgary AB Hail 37,127 66,954 Total , , July 20, Harrow ON Flooding 13,807 23,701 Total ,807 23, July 9, Calgary AB Hail 16,279 26,661 Total ,279 26, March 27 28, Sarnia ON Tornado 25,407 39,399 July 3, Red Deer AB Storm 28,202 43,734 Aug. 27, Maskinongé QC Tornado 17,667 27,397 Sept. 7, Calgary AB Hail 342, ,503 Nov. 30, Ontario Wind 5,429 8,419 Total , ,451 IBC Facts

17 Date and place Event type Loss expenses Loss expenses in 2016 dollars 1992 July 31, Calgary AB Hail 22,078 33,748 July 31, Toronto ON Flooding 4,898 7,487 Aug. 28, Alberta Hail 5,263 8,045 Aug. 28, Elmira and Aurora ON Flooding 4,348 6,646 Sept. 1, Alberta Hail 7,421 11,344 Oct. 6 7, Avalon NL Wind 8,216 12,559 Nov , southern Ontario Wind 36,437 55,697 Nov , Quebec Wind 12,056 18,428 Total , , March 13 14, Quebec Storm 18,447 27,671 July 25 Aug.14, Winnipeg MB Flooding 184, ,256 July 29 30, Alberta Hail 8,116 12,174 July 29, Saskatchewan Flooding 5,383 8,075 July 29 30, Quebec Flooding 7,624 11,436 Total , , Jan , southern Ontario Flooding 13,145 19,694 Jan. 28, southern Ontario Storm 6,250 9,364 May 18, southern Manitoba Storm 8,260 12,376 May 22, Saskatchewan Storm 8,666 12,984 June 18, southern Alberta Hail 8,263 12,380 Aug. 4, Salmon Arm BC Storm 10,225 15,320 Aug. 4, Aylmer QC Tornado 6,911 10,354 Aug. 27, southern Manitoba Hail 8,112 12,154 Aug. 28, southern Ontario Storm 7,219 10,816 Total , , June 6 9, Calgary AB Flooding 20,764 30,435 July 4, Edmonton AB Hail 14,698 21,544 July 10, southern Alberta Hail 26,389 38,680 July 13 15, southern Ontario Storm 53,439 78,328 July 17, Calgary AB Hail 52,304 76,665 July 30, southern Manitoba Storm 8,468 12,412 Aug. 26, Regina SK Storm 12,294 18,020 Oct. 5 6, Hamilton ON Storm 16,325 23,928 Total , , July 16, Winnipeg MB Flooding/hail 146, ,062 July 16 18, Calgary AB Hail 119, ,005 July 24 25, Calgary AB Hail 85, ,088 July 19 20, Saguenay QC Flooding 207, , IBC Facts 2017

18 Date and place Event type Loss expenses Loss expenses in 2016 dollars July 23, Outaouais QC Wind/hail 1,571 2,269 Aug. 8, Ottawa ON Flooding 20,257 29,258 Aug. 8, Outaouais and Estrie QC Flooding 7,882 11,384 Nov. 9, Montreal and Quebec City QC Flooding 76, ,826 Total , , Feb. 27, Niagara Peninsula ON Wind 23,776 33,770 April 6 7, Sudbury ON Flooding 20,558 29,200 July 14 15, Chambly QC Flooding 29,865 42,419 Total , , Jan., southern Quebec Ice storm 1,384,100 1,946,533 Jan., eastern Ontario Ice storm 170, ,080 Jan., southern New Brunswick Ice storm 20,000 28,127 July 4 9, Calgary AB Hail 69,742 98,082 Sept , Niagara Peninsula ON Wind 63,403 89,167 Total ,707,245 2,367, Jan., southern Ontario Snowstorm 120, ,885 June 5, Drummondville QC Hail 20,555 28,410 July 5 6, Quebec Wind 43,321 59,875 July 28, Atlantic provinces Flooding 15,756 21,777 Sept. 22, Atlantic provinces Flooding 15,648 21,628 Total , , May 12, southern Ontario Storm 128, ,440 July 7, southern Manitoba Storm 18,559 24,979 July 14, Pine Lake AB Tornado 17,916 24,113 Aug. 9, Calgary AB Storm 28,058 37,764 Oct. 30, Sydney NS Flooding 4,010 5,397 Dec. 17, Atlantic provinces Wind 19,756 26,590 Total , , Feb. 1, Atlantic provinces Snowstorm 13,746 18,047 Feb. 8, southern Ontario Storm 54,078 70,998 Feb. 8, Quebec Storm 53,843 70,690 July 13, Alberta Storm 25,513 33,496 July 28, Edmonton, AB Storm 23,902 31,381 Sept. 19, Atlantic provinces Flooding 6,362 8,353 Dec. 14, southwestern British Columbia Wind 27,035 35,494 Total , ,458 IBC Facts

19 Date and place Event type Loss expenses Loss expenses in 2016 dollars 2002 Jan. 31, southern Ontario Wind 34,508 44,308 March 9, Ontario Wind 110, ,510 June 8, southern Alberta Flooding 42,828 54,991 June 10, southern Ontario Storm 53,943 69,263 July 26, southwestern Ontario Storm 60,060 77,117 Total , , March 30 April 1, New Brunswick Flooding 4,695 5,864 March 30 April 1, Newfoundland and Labrador Flooding March 30 April 1, Prince Edward Island Flooding March 30 April 1, Nova Scotia Flooding 18,557 23,178 Aug , Alberta Wind/hail 33,565 41,924 Aug , Saskatchewan Wind/hail 29,055 36,290 Summer, British Columbia Forest fires 200, ,805 Sept , Prince Edward Island Hurricane 6,665 8,325 Sept , Nova Scotia Hurricane 132, ,710 Total , , July 2 11, Edmonton AB Hail 166, ,576 July 15, Calgary AB Hail 21,500 26,367 July 15, Peterborough ON Flooding 87, ,065 Sept. 9, eastern Ontario Rainstorm 57,600 70,638 Total , , June 6 8 and June 17 19, Alberta Flooding 300, ,000 June and July 1 2, Manitoba Flooding 60,000 72,000 July 5 and Sept. 26, Quebec Rainstorm 57,000 68,400 Aug. 19, Ontario Hail/tornadoes/wind 625, ,480 Total ,042,400 1,250, Feb. 6, British Columbia Storm 6,406 7,539 Aug. 10, Alberta Hail 13,593 15,998 Sept. 24, Greater Toronto Area ON Wind/hail 4,628 5,447 Nov.15 Dec. 15, British Columbia Storm 133, ,629 Total , , Jan. 5, British Columbia Storm 16,235 18,696 June 5, Alberta Storm 44,621 51,384 June 22 24, Manitoba Storm 17,607 20,276 Summer, Manitoba Storms 47,400 54,584 July 7, Alberta Forest fires 7,376 8,494 July 28 29, Alberta Hail 16,581 19,094 Aug. 1, Newfoundland and Labrador Wind 6,039 6,954 Total , , IBC Facts 2017

20 Date and place Event type Loss expenses Loss expenses in 2016 dollars 2008 Jan. 9, Ontario Storm 28,017 31,528 April/May, New Brunswick Flooding 8,010 9,014 June 10, several regions in Quebec Hail 125, ,666 July 1, Lethbridge AB Windstorm/hail 20,500 23,069 July 9, Swift Current SK Aug. 8, Red Deer AB Sept., Saskatchewan Hail 132, ,543 Dec. 21, Vancouver BC Winter storm Total , , Jan 6 8, Fraser Valley BC Flooding/water Feb , Ontario Flooding/ice/snow/wind April 25 27, Ontario Hail/tornadoes/wind July 11 13, Hamilton and Ottawa ON, Montreal and Mirabel QC Hail/tornadoes/wind July 24 28, Ontario Flooding/wind 227, ,790 Aug. 1 3, Alberta Hail/wind 376, ,351 Aug , Manitoba Hail/wind Aug. 20, southern Ontario Hail/tornadoes/wind Aug. 23, New Brunswick and Newfoundland and Labrador Flooding/hurricane/wind (Hurricane Bill) Aug. 29, New Brunswick, Newfoundland and Labrador, and Quebec Flooding/tropical storm/wind (Tropical Storm Danny) Total ,032,782 1,159, March 13, Toronto and Hamilton ON Flooding/wind May 28, Winnipeg MB Flooding/water June 5 6, Leamington and Windsor/Essex County ON Flooding/hail/tornadoes/wind 127, ,193 June 16 18, southern Alberta and Saskatchewan Flooding/water June 29, various regions, AB and Saskatoon, SK Hail/flooding/windstorm/ lightning July 1 3, Swift Current, Wynyard and Hudson Bay region SK Flooding/hail/tornadoes/wind July 12 13, Calgary and southern Alberta Hail/wind 530, ,137 Aug. 22, Calgary AB Sept , Newfoundland and Labrador Flooding/hurricane/wind (Hurricane Igor) Sept. 30 Oct. 1, Ontario and Quebec Flooding/windstorm/lightning/ water (remnants of Tropical Storm Nicole) Dec., Atlantic provinces Storms Total ,235,299 1,361, March 5 7, Ontario and Quebec Flooding/ice/wind April 10 11, Thunder Bay, southern and eastern Ontario April 27 28, Ontario and Quebec Hail/tornadoes/wind May 14 17, Slave Lake AB Fire 742, ,602 June 2, Manitoba and Saskatchewan IBC Facts

21 Date and place Event type Loss expenses June 7, southern Ontario June 17 21, Weyburn and Estavan, SK June 23 24, Ontario and Quebec July 7, Red Deer, Bergen, Olds, Bowden and Innisfail, AB July 18 19, Alberta, Manitoba and Saskatchewan Aug. 15, Saskatoon, Biggar and Warman, SK Aug. 21, Goderich ON Aug , New Brunswick, Quebec and Ontario Flooding/water Flooding/hail/windstorm/ lightning Windstorm/hail/lightning/water Hail/tornados/wind Hail/flooding/windstorm/ lightning Flooding/hail/tornados/wind Flooding/wind (remnants of Hurricane Irene) Loss expenses in 2016 dollars Nov. 27, Alberta Wind 238, ,408 Total ,044,397 2,189, March 2 3, Ontario and Quebec Windstorm/winter storm/water May 26 29, Thunder Bay ON and Montreal QC Flooding/wind 259, ,997 June 25 27, Saskatchewan Windstorm/hail/lightning/water July 11 12, Edmonton AB Flooding/hail/wind July 22 23, Hamilton, Ottawa and surrounding areas ON Flooding/hail/wind July 26, southern Alberta (Cardston to Nanton) Hail/wind Aug. 11, southern Quebec Flooding/windstorm/lightning/ water Aug. 12, region around Calgary AB Flooding/hail/wind 562, ,940 Aug. 14, Calgary AB Oct , Ontario and Quebec Flooding/wind (remnants of Hurricane Sandy) Total ,460,893 1,541, April 11 14, southwestern Ontario Winter storm May 28 June 2, parts of Ontario and Quebec Flooding/wind June 19 24, southern Alberta Flooding/hail/wind 1,827,000 1,910,316 July 2, Edmonton AB July 8 9, Toronto and southern Ontario Flooding/wind 999,500 1,045,080 July 19, central and southern Ontario and southwest Quebec Flooding/hail/wind July 19, Regina SK Hail/lightning/water July 23, southern Alberta Dec , Ontario, Quebec, New Brunswick, Nova Scotia, Freezing/ice/wind Prince Edward Island, and Newfoundland and Labrador Total ,540,388 3,701, June 17 18, southern Ontario Flooding/hail/tornadoes/wind June 28 July 1, southern Manitoba and Saskatchewan Flooding/wind 109, ,196 July 5, Quebec, New Brunswick, Nova Scotia and Prince Edward Island July 17, Alberta and Saskatchewan Windstorm/flooding/water (remnants of Tropical Storm Arthur) 22 IBC Facts 2017

22 Date and place Event type Loss expenses Loss expenses in 2016 dollars Aug. 4 5, southern Ontario Flooding/wind Aug. 7 8, southern Alberta, Calgary Flooding/hail/wind 568, ,441 Nov , Ontario and Quebec Flooding/wind Total ,013,436 1,039, June 11 12, Alberta, Saskatchewan and Manitoba June 22 23, Ontario Flooding/windstorm/lightning/ water July 21 22, Alberta and Saskatchewan Flooding/hail/tornadoes/wind 349, ,378 Aug. 4 5, Alberta Flooding/hail/wind 131, ,863 Aug. 29, British Columbia Windstorm/water Total , , Feb , New Brunswick, Ontario and Quebec Flooding/ice/snow/wind March 23 26, Ontario Winter storm/windstorm/water May 3 19, Fort McMurray AB Fire 3,816,447 3,816,447 June 24 25, Saskatchewan, Manitoba and Ontario Flooding/windstorm/hail/water June 28 30, Alberta, Saskatchewan and Manitoba Hail/flooding/windstorm/water July 8, Ontario Windstorm/water/lightning July 8 11, Alberta, Saskatchewan and Manitoba Flooding/hail/windstorm/water July 15 16, Alberta and Saskatchewan Flooding/hail/windstorm/water July 18 20, Alberta, Saskatchewan and Manitoba July 22, Saskatchewan July 27, Ontario and Quebec July 30 Aug. 1, Alberta, Saskatchewan and Manitoba Hail/windstorm/flooding/water 473, ,172 Sept , Ontario Flooding/windstorm/water Oct. 9 11, New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island Windstorm/flooding/water (remnants of Hurricane Matthew) Total 2016* 5,166,046 5,166,046 * preliminary Sources: 1983 to 2007: IBC, PCS Canada, Swiss Re and Deloitte Sources: 2008: IBC, CatIQ Sources: 2009, 2011, 2012: CatIQ, PCS Canada Sources: 2010: IBC, CatIQ, PCS Canada Sources: 2013 to 2015: CatIQ, PCS Canada Sources: 2016: CatIQ, PCS Canada IBC Facts

23 Regulation and regulatory issues The federal and provincial governments regulate the P&C insurance industry. The provincial governments regulate market conduct, and the federal Office of the Superintendent of Financial Institutions (OSFI) regulates solvency. While it is impossible to pinpoint exactly how much the industry pays per year to comply with regulatory requirements, it s estimated to be hundreds of millions of dollars. Auto insurance, in particular, is very highly regulated. The provincial governments determine how claims are handled and how complaints are managed; they also administer rate approval systems. IBC is advocating for auto insurance reform in several provinces, including Alberta, Ontario, and Newfoundland and Labrador. Through IBC, the P&C insurance industry also engages with regulators and the federal government to ensure that new regulatory initiatives balance the needs of both consumers and insurers. Enhancing the efficiency and cost effectiveness of insurance regulation can also bring significant benefits to consumers by reducing costs, which will be reflected in premiums. OSFI s 2015 Minimum Capital Test (MCT) Guideline captured significant regulatory capital changes following an 18-month consultation period with the industry. Further revisions to the MCT will be announced in mid-2017, in the form of a Draft MCT that will be subject to a public consultation. The final MCT Guideline is expected in September 2017 and will come into effect on January 1, In recent years, standards and guidelines developed by international bodies have had a greater influence on Canada s regulatory system. This is a result of the global financial crisis of 2008, which spurred a revamping of rules worldwide. Particularly significant is the guidance provided by the G20, a forum for the governments and central bank governors of 20 major economies; the Financial Stability Board, which monitors and makes recommendations about the global financial system; and the International Association of Insurance Supervisors, which is leading the development of the global Insurance Capital Standard (ICS). While the ICS is currently in early stages of development, later versions of the ICS are likely to influence the Canadian capital standard, where deemed appropriate by OSFI. IBC is collaborating with its international colleagues to monitor and comment on the ICS development and with OSFI to ensure that any capital changes are appropriate in the Canadian context. To better align with international trends and the evolving expectations of regulators, IBC has revised its Code of Rights and Responsibilities and its Standards of Sound Marketplace Practice. All IBC members are urged to adopt the new voluntary code and standards, and post them on their websites. Market conduct going global The International Association of Insurance Supervisors Insurance Core Principles are driving regulatory activity in Canada. For instance, they are influencing the market conduct regulation governing how insurance companies treat their customers. The increased influence of international regulatory bodies means that regulation of the P&C insurance market in Canada is becoming more consistent with regulations that are in place around the globe. IBC monitors global regulations to assess their impact on Canadian insurers. This involves ensuring that international regulations are sensitive to the domestic regulatory landscape and the particulars of the P&C insurance industry in Canada. IBC also participates in the discussions led by the Global Federation of Insurance Associations, providing input into the development of many aspects of international regulations that affect P&C insurers. 24 IBC Facts 2017