Reinsurers in Canada's P&C industry had a rough time negotiating through COVID last year, with the sector's overall combined ratio skyrocketing from a profitable 92.6% in 2021 to an unprofitable 103.7% in 2021.

Claims costs were a major force behind those results. Reinsurers writing business in Canada reported greater than a 10-point increase in their loss ratios this past year – from 64.78% in 2021 to 75.61% in 2021. (Loss ratios are determined by dividing claims costs by premiums earned.)

\”The reinsurance sector were built with a rough 2021 despite a 22.8 [point] rise in NPE [net premiums earned],\” Joel Baker, president and CEO of MSA Research stated in the Q4-2021 MSA Quarterly Report. \”Claims jumped by a fantastic 43%, yielding an underwriting loss of $88 million.\”

Discounting partially explains the Canadian reinsurance industry's numbers in 2021, Baker pointed out.

In the financial world, discounting is basically the process of figuring out the present value of a payment or a stream of payments that is to be received in the future. For instance, trying to figure out the present value of exactly what a bond investment might be worth tomorrow, taking into consideration the fluctuation of interest rates, currency values, etc.

\”When discounting is stripped out [of the reinsurers' financial results], the outcomes look better,\” Baker said. \”Nevertheless, this sector underperformed the rest of the [Canadian P&C] market. \”These results warrant continued rate firming. Whether such firming can be achieved at July renewals or at year-end remains to be seen.\”

Out of 21 reinsurers in Canada appearing in MSA's statistics, 11 reported an underwriting loss and a combined ratio of more than 100%.

Swiss Reinsurance Company (124.7%), Partner Reinsurance Company from the U.S. (123.9%), and XL Reinsurance America Inc. (118.4%) reported the highest combined ratios (COR) among the reinsurers who wrote more than $58 million in net premiums in Canada in 2021.

The three lowest COR results were turned in by General Reinsurance Corporation (73.8%), part of the Berkshire Hathaway group of companies, Transatlantic Reinsurance Company (85.8%), and SCOR Canada Reinsurance Company (87.5%)


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