Insurance Market Update 2012
Market Update Northern Alberta Risk & Insurance Management Society Professional Day March 14, 2012 Betty Dietz
Canadian Insurance Industry Mix of Business -by Direct Premium Written
Note: Commercial P&C for the above chart includes commercial property, liability and surety Source: MSA Research, as at Dec. 31, 2010
2
Top 10 Canadian Insurers Mix of Business & Market Share Other C Prop Liab Sur P Prop Auto
10.9%
8.0% 5.8% 5.1%
4.9%
4.9%
4.7%
Source: MSA Research, as at Dec. 31, 2010
3
rit er s
4.0%
Un de rw
ica l Llo yd 's
Ec on om
Fa rm e St at
an es a W aw
AX A
RS A
or elo s ch eM on ne x
M
Co op er at
Av iva
IFC
4.2%
4.0%
De sja rd in s
5.8%
Top 10 Commercial Insurers (excl. Auto) 12.9% 11.1%
7.6% 6.6% 5.9%
5.6%
5.4%
5.1% 3.8% 3.1%
Note: Commercial P&C for the above chart includes commercial property, liability and surety Source: MSA Research, as at Dec. 31, 2010
Source: MSA Research, as at Dec. 31, 2010
4
Direct Written Premiums Industry 10-year avg. = 6.7%
Year 2000 = base 100
Source: Industry data source: MSA Research. excluded Lloyd’s, ICBC, SGI, SAF, MPI and Genworth. All data up to the end of 2010.
5
Industry Combined Ratio Combined Ratio
Industry 10-year avg. = 99.0%
Industry data source: MSA Research
6
Impact on the industry of low yields
P&C Industry profitability
3-5 year Government of Canada bond yield
Source: Insurance Bureau of Canada 7
Pricing – U.S. Commercial P/C
Towers Watson Commercial Lines Insurance Pricing Survey March 2012 8
The Canadian P&C insurance industry Although a cyclical industry, the long-run ROE averages 10% 30-year average – 10%*
Source: IBC and MSA (*1981 to 2010)
9
A.M. Best Outlook
• A.M. Best negative outlook for the Commercial Lines P/C sector for second consecutive year.
10
Current Industry Ownership
Source: Canadian Underwriter Statistical Issue 2011
11
Commercial Property Casualty Ownership
Source: MSA Research 201 Data. Commercial P&C = Commercial Property, Liability, Surety. Adjusted for 2011 acquistions.
12
Catastrophes & Major Events - Frequency
Source: Munich Re Geo Topics 2011
13
Catastrophe & Major Events – Insured Losses
Source: Munich Re Geo Topics 2011
14
Top 10 Insured Loss Events in 2011 Event Date
Event Name Or Type
Event Location
3/11
EQ
Japan
2/22
EQ
New Zealand
7/25-11/30Flooding
# Of Structures/ Claims
# of Deaths
Insured Loss*
1,100,000
210
35
182
156,313
*30
13.5
Thailand
790
4,000,000
45
10.8
4/22-4/28 Severe Weather
U.S. (SE, Plains, MW)
344
700,000
10.2
7.3
5/21-5/27 Severe Weather
U.S. (Plains, MW, SE
181
750,000
9.1
6.8
8/22-8/30 HU Irene
U.S., Bahamas, Caribbean Isl.
46
835,000
8.6
5
12/21-1/14Flooding
Australia (Queensland)
36
58,463
4/3-4/5
Severe Weather
U.S. (MW, SE, Plains)
9
225,000
2.8
6/13
EQ
New Zealand
1
53,963
**30
1.8
48
150,000
2.5
1.7
86.7
20.9
434.8
107.2
4/14-4/16 Severe Weather
15,844
Economic Loss*
U.S. (Plains, SE, MW
30
All Other Events
Totals * Figures are in billions **The New Zealand government has only released a combined USD $30b economic loss total for the Sept 2010, Feb 2011, and June 2011 EQ Events
15
15
Source: Munich Re Topics Geo 2011
2.4 2
Top Canadian Catastrophes Losses 2011 More than $1.6 billion of insured losses in 2011: Ontario
$210 million windstorm in April
Slave Lake
$700 million in May
Goderich
$200 million in August
Alberta Hail
$185 million in July
Hurricane Irene
$150 million in July
Alberta Wind
$200 million in November
Manitoba / Saskatchewan Spring Flood
Over $800 million in economic loss but virtually no insured loss
Source: Aon Benefield Reinsurance Presentation
Proprietary & Confidential
16
Impact of Major Events & Catastrophes • Reinsurance capacity and pricing • Focus on Capacity Management − Catastrophe modelling / PML • More account focused catastrophe underwriting • Rate increases
17
Summary Industry Trends and Issues • • • • • •
Low investment returns Performance Gap widening Prolonged rate pressure fuelling under performance Continued industry consolidation Ownership changes Increase in global events and weather related claims, impacting reinsurance market, pricing and catastrophe underwriting
18
Canadian Insurance Industry Mix of Business -by Direct Premium Written
Note: Commercial P&C for the above chart includes commercial property, liability and surety Source: MSA Research, as at Dec. 31, 2010
2
Top 10 Canadian Insurers Mix of Business & Market Share Other C Prop Liab Sur P Prop Auto
10.9%
8.0% 5.8% 5.1%
4.9%
4.9%
4.7%
Source: MSA Research, as at Dec. 31, 2010
3
rit er s
4.0%
Un de rw
ica l Llo yd 's
Ec on om
Fa rm e St at
an es a W aw
AX A
RS A
or elo s ch eM on ne x
M
Co op er at
Av iva
IFC
4.2%
4.0%
De sja rd in s
5.8%
Top 10 Commercial Insurers (excl. Auto) 12.9% 11.1%
7.6% 6.6% 5.9%
5.6%
5.4%
5.1% 3.8% 3.1%
Note: Commercial P&C for the above chart includes commercial property, liability and surety Source: MSA Research, as at Dec. 31, 2010
Source: MSA Research, as at Dec. 31, 2010
4
Direct Written Premiums Industry 10-year avg. = 6.7%
Year 2000 = base 100
Source: Industry data source: MSA Research. excluded Lloyd’s, ICBC, SGI, SAF, MPI and Genworth. All data up to the end of 2010.
5
Industry Combined Ratio Combined Ratio
Industry 10-year avg. = 99.0%
Industry data source: MSA Research
6
Impact on the industry of low yields
P&C Industry profitability
3-5 year Government of Canada bond yield
Source: Insurance Bureau of Canada 7
Pricing – U.S. Commercial P/C
Towers Watson Commercial Lines Insurance Pricing Survey March 2012 8
The Canadian P&C insurance industry Although a cyclical industry, the long-run ROE averages 10% 30-year average – 10%*
Source: IBC and MSA (*1981 to 2010)
9
A.M. Best Outlook
• A.M. Best negative outlook for the Commercial Lines P/C sector for second consecutive year.
10
Current Industry Ownership
Source: Canadian Underwriter Statistical Issue 2011
11
Commercial Property Casualty Ownership
Source: MSA Research 201 Data. Commercial P&C = Commercial Property, Liability, Surety. Adjusted for 2011 acquistions.
12
Catastrophes & Major Events - Frequency
Source: Munich Re Geo Topics 2011
13
Catastrophe & Major Events – Insured Losses
Source: Munich Re Geo Topics 2011
14
Top 10 Insured Loss Events in 2011 Event Date
Event Name Or Type
Event Location
3/11
EQ
Japan
2/22
EQ
New Zealand
7/25-11/30Flooding
# Of Structures/ Claims
# of Deaths
Insured Loss*
1,100,000
210
35
182
156,313
*30
13.5
Thailand
790
4,000,000
45
10.8
4/22-4/28 Severe Weather
U.S. (SE, Plains, MW)
344
700,000
10.2
7.3
5/21-5/27 Severe Weather
U.S. (Plains, MW, SE
181
750,000
9.1
6.8
8/22-8/30 HU Irene
U.S., Bahamas, Caribbean Isl.
46
835,000
8.6
5
12/21-1/14Flooding
Australia (Queensland)
36
58,463
4/3-4/5
Severe Weather
U.S. (MW, SE, Plains)
9
225,000
2.8
6/13
EQ
New Zealand
1
53,963
**30
1.8
48
150,000
2.5
1.7
86.7
20.9
434.8
107.2
4/14-4/16 Severe Weather
15,844
Economic Loss*
U.S. (Plains, SE, MW
30
All Other Events
Totals * Figures are in billions **The New Zealand government has only released a combined USD $30b economic loss total for the Sept 2010, Feb 2011, and June 2011 EQ Events
15
15
Source: Munich Re Topics Geo 2011
2.4 2
Top Canadian Catastrophes Losses 2011 More than $1.6 billion of insured losses in 2011: Ontario
$210 million windstorm in April
Slave Lake
$700 million in May
Goderich
$200 million in August
Alberta Hail
$185 million in July
Hurricane Irene
$150 million in July
Alberta Wind
$200 million in November
Manitoba / Saskatchewan Spring Flood
Over $800 million in economic loss but virtually no insured loss
Source: Aon Benefield Reinsurance Presentation
Proprietary & Confidential
16
Impact of Major Events & Catastrophes • Reinsurance capacity and pricing • Focus on Capacity Management − Catastrophe modelling / PML • More account focused catastrophe underwriting • Rate increases
17
Summary Industry Trends and Issues • • • • • •
Low investment returns Performance Gap widening Prolonged rate pressure fuelling under performance Continued industry consolidation Ownership changes Increase in global events and weather related claims, impacting reinsurance market, pricing and catastrophe underwriting
18
