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Member, Beacon International Group, Ltd.
TORONTOCanada's property/casualty insurance industry remains stable, but profits are under pressure from lower premium growth and a decline in underwriting income, according to a report by Standard & Poor's Corp.
Property/casualty premiums grew only 2.8% in 2007, while claims increased 5.2% and general expenses rose 7.8%, according to the report by S&P analysts in Toronto. The industry generated underwriting income of $2.3 billion Canadian ($2.26 billion), down 19.2% from 2006 largely due to deteriorating automobile insurance results in Ontario, according to the report.
Commercial lines experienced "intense" pricing pressures across all lines in 2007, but the sector's results were better than the personal lines sector, mainly due to limited catastrophe losses, the report said. Commercial insurance rates declined an average of 7.5% last year.
"The fierce cutthroat competition among commercial insurers continues as the claims environment remains relatively benign," the report said. "In addition to lower rates, commercial insurers are also expanding coverage, which could be a recipe for more trouble down the road."
Canadian property/casualty insurers, though, remain well-capitalized, which should allow them to withstand the soft market cycle and rising claims, according to the report. The industry likely will continue to experience deteriorating results for another two to three years, S&P said.