Best’s Market Segment Report: Canada Insurers See Favorable 2021 Results Despite COVID-19; Inflation Could Dent Future Performance

OLDWICK, N.J.--(BUSINESS WIRE)--
Property/casualty and life/annuity insurers in Canada posted solid underwriting results in 2021 amid economic momentum following a COVID-19-driven slump, according to a new AM Best report.

Given a number of positive market forces, plus strong levels of capitalization among Canadian insurers, AM Best is maintaining its stable market segment outlook on Canada’s property/casualty (P/C) and life/annuity (L/A) industries. However, in its new Best’s Market Segment Report, titled, “Canada Insurance: Favorable Results in 2021 Despite Pandemic,” AM Best notes the Canadian economy will face some headwinds in 2022, including higher inflation and the spillover impacts of Russia’s invasion of Ukraine. The higher level of inflation, along with a rising frequency of catastrophic losses, supply chain imbalances and labor shortages, could pressure P/C insurers’ operating returns. For L/A writers, inflation may result in higher operating costs; in particular, wage inflation, which would exacerbate the talent gap.

Canada’s P/C insurers posted a combined ratio in 2021 of 86.3, just over 10 percentage points better than that recorded in 2020, while net income jumped by 76% to CAD 8.3 billion. “Canada’s P/C insurers remain well-equipped from a capital and liquidity perspective and have proven their ability to adapt quickly to a dynamic landscape,” said Rosemarie Mirabella, director, AM Best.

Canada’s L/A insurers also generated a net income increase in 2021, by 27% to CAD 15.9 billion. AM Best expects the segment to remain resilient, based on an expected improvement in mortality and the positive impact of higher interest rates on investment income. At the same time, IFRS 17 becomes effective on Jan. 1, 2023, and as the implementation date approaches, more clarity about the potential impact on financial statements has emerged.

“In AM Best’s discussions with insurers, they have stated that there will be no strategic or fundamental changes in the way they conduct business with regard to claims paying or shareholder dividends,” said Michael Adams, associate director, AM Best. “Rating changes with the introduction of IFRS 17 is not expected, though over time, new insights may emerge that could lead to rating impacts.”

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=323693.

AM Best will host an insurance market briefing on the state of Canada’s insurance industry in Toronto on Friday, Sept. 9, 2022. During the half-day event, AM Best analysts will deliver market insights and present overviews of Canada’s main insurance sectors. For more information, please go to www.ambest.com/conferences/regimbcanada2022/index.html.

To preview the briefing with a recent video discussion on Canada’s insurance industry, please go to http://www.ambest.com/v.asp?v=ambcanada922.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2022 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

src="https://cts.businesswire.com/ct/CT?id=bwnewssty=20220907005973r1sid=acqr8distro=nxlang=en" style="width:0;height:0" />

View source version on businesswire.com: https://www.businesswire.com/news/home/20220907005973/en/

Michael Adams
Associate Director

+1 908 439 2200, ext. 5133

[email protected]

Christopher Sharkey
Manager, Public Relations

+1 908 439 2200, ext. 5159

[email protected]

Ann Modica
Associate Director

+1 908 439 2200, ext. 5209

[email protected]

Jeff Mango
Managing Director,

Strategy Communications

+1 908 439 2200, ext. 5204

[email protected]

Rosemarie Mirabella
Director

+1 908 439 2200, ext. 5621

[email protected]

Source: AM Best