S&P Report Finds Canadian P/C Outlook ‘Remains Stable’

The outlook on the Canadian property and casualty (P&C) insurance industry remains stable says a report published by Standard & Poor’s Ratings Services. The report, entitled “Industry Report Card: Slower Momentum Expected For Canadian Property And Casualty Insurers,” suggests that, “although operating performance has been quite good and capital has been strengthened in the past several years, the P&C industry has likely reached the peak of the cycle that normally spans a duration of about five years. Performance continues to be driven by the supply and demand dynamics of a highly competitive sector that is fragmented and largely dependent on third-party distribution. “

“As long as the laws of supply and demand exist, cycles will exist,” states S&P credit analyst Foster Cheng. “Nevertheless, we believe that recent memories of spiraling claims experience should lead to more moderate cycles and the industry is not expected to test the lows experienced in 2002 anytime soon,”

S&P also notes: “With more than 200 companies, the industry remains ripe for further consolidation. The continued emergence of a few large companies is expected to result in these companies achieving scale, price leadership, and better underwriting and claims management. Until stronger pricing leadership is established within the industry and tighter control of distribution occurs,
the cyclical nature of the industry will continue.

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