Canadian Property/Casualty Insurance Industry

Transcription

1 Canadian Property/Casualty Insurance Industry Raymond Thomson, CPCU, ARe, ARM Associate Director Gordon McLean Senior Financial Analyst A.M. Best Annual Insurance Market Briefing Canada September 5, 2018

2 Canadian P/C Market Segment Outlook Is Stable Outlook has been stable over the long term Capitalization remains solid Operating performance remains profitable in the headwinds of weather-related pressures Rating outlook indicates limited positive or negative rating actions, which would be specific to companies rather than industry conditions Canadian Life Ins - Insurance Market Briefing Canada 2

3 Number of Ratings Interactive Rating Distribution Canada Property/Casualty Interactive Ratings Distribution ( *) * Superior Excellent Good Fair *Through June 30, All other years, as of year end. Source: A.M. Best data and research 3

4 Market Share Canadian P/C Market Share - Top 10: 2017 Group / Company DPW % of Industry Total C$ Billions Rank 1 Intact Group % 2 Aviva Group % 3 Desjardin Group % 4 Co-operators Group % 5 Lloyds Underwriters CAB % 6 TD Insurance Group % 7 Wawanesa Mutual Insurance Company % 8 RSA Group % 9 Economical Group % 10 Travelers Group % All Other % Industry Total % Source: A.M. Best data and research 4

5 Percentage Combined Ratio Combined Ratio Components *Excludes Lloyd s and ICBC Source: A.M. Best data and research Underwriting Expense Ratio Loss and Loss Adjustment Expense Ratio 5

6 Percentage Operating Ratio Operating Ratio Components *Excludes Lloyd s and ICBC Source: A.M. Best data and research Operating Ratio Combined Ratio 6

7 Net Investment Income (C$ Billions) Net Investment Income vs. Yield Net Investments Income Vs. Yield Net Investment Yield (%) *Excludes Lloyd s and ICBC Source: A.M. Best data and research Net Investment Income (C$ Billions) Net Investment Yield (%) 7

8 Loss Ratio (%) Auto Loss Trends Canada Property/Casualty Private Auto Insurers Loss Ratio Trend ( )* *Excludes Lloyd s and ICBC Source: A.M. Best data and research Auto - Liability Auto - Personal Accident Auto Other 8

9 Largest CAT Losses Canadian P/C - Catastrophe Losses Greater than CAD 300 Million ( ) Year Date Location Event 9 Loss & LAE Current Dollar Incurred Losses (C$ Million) 2016 May Fort McMurray, Alberta Fire 3,753 3, January Quebec, Ontario, New Brunswick Ice Storm 1,574 2, June Alberta Flooding 1,599 1, July Toronto Flooding 924 1, August Ontario Tornado/Hail August Alberta Hail/Windstorm May Slave Lake, Alberta Fire August Calgary and Southern Alberta Hail/Windstorm July Calgary and Southern Alberta Hail/Windstorm September Calgary and Southern Alberta Hail/Windstorm July Alberta, Manitoba, Ontario, Saskatchewan Hail/Windstorm July Calgary and Southern Alberta Hail/Windstorm June Alberta Flooding Source: A.M. Best data and research, IBC

10 Loss Ratio (%) Property Loss Trends Canada Property/Casualty Property Insurers Loss Ratio Trend ( )* *Excludes Lloyd s and ICBC Source: A.M. Best data and research Commercial Property 10 Personal Property

11 Canadian Composites Net Earned Premiums Canadian Net Earned Premium By A.M Best Composite 2017 Composite Net Earned Premium Combined Ratio Total Canadian Aggregate Auto 25, Total Canadian Aggregate Other 6, Total Canadian Aggregate Comm Cas 5, Total Canadian Aggregate Property 3, Total Canadian Aggregate Reins 1, Total Canadian Aggregate Finan Lns 1,

12 NEP (CAD, Millions) Canadian Composites Net Earned Premiums Canadian Net Earned Premium By Composite , , ,000 15,000 10,000 5, Development as % of NEP - Total Canadian Aggregate Auto Total Canadian Aggregate Other Total Canadian Aggregate Comm Cas Total Canadian Aggregate Property Total Canadian Aggregate Reins Total Canadian Aggregate Finan Lns - Source: A.M. Best data and research Net Earned Premiums 1 Year Favorable Development 12

13 Loss and LAE Reserves (CAD, Millions) Canadian Composites Loss and LAE Canadian Loss and LAE Reserves By Composite - YE , ,000 25,000 20,000 15,000 10,000 5, Development as % of Reserves - Total Canadian Aggregate Auto Total Canadian Aggregate Comm Cas Total Canadian Aggregate Other Total Canadian Aggregate Property Total Canadian Aggregate Reins Total Canadian Aggregate Finan Lns - Source: A.M. Best data and research Loss and LAE (Millions) 1 Year Favorable Development 13

14 Segment Outlook Canadian Property/Casualty Headwinds Catastrophes increasing frequency and severity Challenges remain within the auto line, Ontario specifically Escalating discussion of the need for auto reforms Market competition despite rate increases Continued investment pressures places pressure on underwriting Tailwinds Solid balance sheet positions Profitable operating performance / consistently stable combined ratios Ongoing advancement in underwriting technology Economic growth Sustained top line premium growth - DPW up 3.5%, NPW down 1.1% High quality investment holdings Strong reinsurance programs Favorable reserve development patterns Solid capitalization has been achieved through retained earnings, while underwriting performance has remained profitable over the long term despite the challenges associated with an increased frequency of natural catastrophe losses. Many carriers are increasingly utilizing technology to enhance underwriting platforms. Maintain stable market outlook. 14

15 Emerging Issues and Potential Opportunities Cyber Insurance Flood Sharing Economy Cannabis InsurTech US Tax Reforms/Tariffs 15

16 Global Views on Reinsurance Canadian Life Ins - Insurance Market Briefing Canada 16

17 Global Reinsurance Market Trends Overall in 2017 most significant year for losses since catastrophes amounted to earnings events, as rated balance sheets emerged flat for the year. Hurricane Harvey, Irma, Maria combined with EQ in Mexico and Wildfire in California produced industry losses in the range of USD 80 to 100 billion. Alternative capital investors were NOT hindered by the losses and brought additional capacity to the market for the renewals. 17

18 Global Reinsurance Market Trends Combined Ratio (2013 to present) and Five-Year Average 120% 10% 9% 100% 33.6% 8% 80% 31.9% 33.5% 34.2% 34.7% 33.6% 7% 6% 60% 5% 40% 20% 55.9% 56.2% 56.2% 60.6% 76.5% 61.1% 4% 3% 2% 1% 0% yr Avg 0% Source: A.M. Best data and research Expense Ratio Loss Ratio Loss Reserve Development 18

19 Global Reinsurance Market Trends Return on Equity (2013 to present) and Five-Year Average 14% 13.0% 12% 11.6% 10% 8% 9.5% 8.3% 6% 4% 2% 0% -2% % Source: A.M. Best data and research Return on Equity Five-Year Average 19

20 Global Reinsurance Market Capacity Top 10 Global Reinsurance Groups: Non Life Munich Reinsurance Group Swiss Re Ltd. Berkshire Hathaway Inc. Lloyd s Hannover Ruck SE SCOR S.E. Everest Re Group Ltd. CL Group plc Transatlantic Holdings, Inc. PartnerRe Ltd. Top 10 Global Reinsurance Groups: Life Munich Reinsurance Group Swiss Re Ltd. Reinsurance Group of America Inc. SCOR S.E. Hannover Ruck SE Great West Lifeco Berkshire Hathaway Inc. Pacific LifeCorp PartnerRe Ltd Assicurazioni Generali SpA Ranked by unaffiliated gross premium written in 2017 Source: A.M. Best data and research 20

21 Global Reinsurance Market Capacity Estimate for Total Dedicated Reinsurance Capacity (USD billions) Convergence Capacity Traditional Capacity E Source: Guy Carpenter and A.M. Best 21

22 Market Landscape ~10 Years In Time Surviving Franchises of Today Sheltered Franchises Franchises That Are Gone What Does The Future Hold? Arch Aspen AXIS Everest Hannover Re Lloyd s Munich Re RenaissanceRe SCOR Re Swiss Re Allied World Endurance(Sompo Intl) General Re MS Amlin Odyssey Re National Indemnity Partner Re Tokio Millennium Re TransRe Validus XL Catlin Ariel Re Flagstone Harbor Point / Max (Alterra) IPC Re Montpellier New Castle Re Paris Re Platinum Re Fidelis Greenlight Re Hamilton Harrington Re Third Point Re Watford Re 22

23 The Case for M&A Broader product capability Broader geographic reach Greater influence Opportunity for growth Alternatively M&A is the result of a strategic opportunity Greater attractiveness to alternative capital 23

24 Alternative Capital M&A will continue Alternative capital 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 24

25 Segment Outlook Global Reinsurance Headwinds Intense competition Increasing interest from third party capital Earnings stabilize but remain under pressure Excess capacity hinders further improvement Potential for increased inflation Tailwinds Cession rates increasing Cat losses temporarily stabilize rates Favorable reserve development, but waning Strong risk-adjusted capital Increase in interest rates M&A Although capitalization remains strong and rate deterioration temporarily halted, pressure on margins continues. Over the intermediate term, returns for some reinsurers will fall short on a risk-adjusted basis. Maintain negative market outlook. 25

26 Q&A Canadian Life Ins - Insurance Market Briefing Canada 26

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