Despite the strong price adjustments seen in the past year, the outlook on the Canadian property and casualty insurance sector remains negative, according to a report published by Standard & Poor’s Ratings Services. Intense competition, unrelenting claims costs, and poor investment returns continue to be factors that erode away profitability and capital.
The P&C market is fragmented, with an estimated 230 insurers active in Canada. Intense competition has ultimately led to thinner margins, and with no one dominant player, there is no obvious price leader in the Canadian marketplace.
In addition, the retail auto insurance market is particularly troubled; auto insurance represents the largest portion of premium revenues earned by the sector. “The upward spiral in automobile claims has not only led to a decline in profitability, but also to multimillion-dollar reserve-strengthening adjustments,” said Standard & Poor’s credit analyst Donald Chu.
“Industry Report Card: Canadian Property & Casualty Insurance” is available on RatingsDirect, Standard & Poor’s Web-based credit analysis system, at www.ratingsdirect.com.
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