COVID-19 last year might have been the end of the world as we know it, to riff on a song by R.E.M., but Canada's P&C insurance market is doing fine – financially, a minimum of.
After a full year of the pandemic behind us, Canada's federally regulated insurers posted an underwriting profit of $1.93 billion in 2021 Q4, according to results published recently through the Office of the Superintendent of Financial Institutions (OSFI). Which more than triples the modest $457.6 million underwriting conserve the industry scraped together during the same period in 2021.
Essentially, hard market pricing, withdrawal of capacity from unprofitable business, generally benign weather, and reduced economic and driving activity due to pandemic-related lockdowns have all been cited as reasons for the improved industry results in 2021.
Canada's P&C industry wrote $52.3 billion in net premiums in 2021 Q4, that is 13.2% more than they wrote during the same period in 2021. And net investment income in 2021 Q4, at approximately $3.7 billion, showed a 12.4% improvement over the previous year.
Consistent with preliminary P&C industry statistics authored by MSA Research Wednesday, data from OSFI indicate that non-public lines carriers may have benefited most from the lockdown conditions imposed to prevent the spread of COVID.
Claims losses generally subsided for personal lines carriers.
In personal property, for example, the industry's loss ratio dropped from 58.1% in 2021 Q4 right down to 51.9% in 2021 Q4. A similar trend happened in commercial property, even though the loss ratio in commercial remains in the troublesome 60% range. That said, the 2021 Q4 loss ratio in commercial property decreased to 62.4%, down from 65.9% within the same period the previous year.
Less driving due to government lockdowns appeared to play a role in shaving almost 7 percentage points from the industry's personal auto loss ratio in 2021 Q4 – right down to 71.8% last year from 78.1% the year before.
Commercial liability in 2021 Q4 was a different story altogether.
Overall, the industry's loss ratio in commercial liability lines trended downward by roughly 3 percentage points – down from 87.7% in 2021 Q4 to 84.7% in 2021 Q4. But there’s the storyline about the statistician that drowned inside a river an average of three feet deep. The general loss ratio in liability masked some alarming increases in this particular class of business.
Specifically, in three major commercial liability lines – CGL (with products), cyber, and D&O – federally regulated P&C insurers saw loss ratios climb; in some instances, quite markedly. This happened even though total net premiums earned increased during these three lines of business with a total of 45%.
Cyber loss ratios in Canada continue to skyrocket, a trend highlighted by a whopping 207% increase in 2021 Q4. With cyber-attackers trying to take advantage of people working from home throughout the pandemic, the cyber liability loss ratio jumped even higher in 2021 Q4 Up to 307%.
Loss ratios in D&O liability lines continue to climb, albeit not as dramatically as with cyber. Already on the high side (at 66.6%) in 2021 Q4, the industry's D&O liability loss ratio ticked as much as 73.9% in 2021 Q4. Brokers told Canadian Underwriter throughout the year that class action lawyers happen to be suing corporate boards based on the response of companies (particularly publicly-traded companies) to COVID risk.
And while CGL policies generally do not cover pandemic risk, the loss ratio in this category during the pandemic nevertheless showed a marginal 1% rise in 2021 Q4 – from 81.1% in 2021 Q4 to 82.1%.