As Canada enters reinsurance renewal season with a record $7.7 billion in NatCat losses, rating agency AM Best says that after a significant market correction, reinsurance premium rates as of January 1, 2025 will be 2023. I expect it to be more orderly.
Unless, of course, you’re a carrier in an area that’s at massive risk in areas with flood, hail, or wildfire risk.
“Even though catastrophe losses in Canada reached C$3.1 billion in 2023, the 2024 reinsurance renewal season was more orderly as changes implemented in the previous year took effect. ” notes AM Best in its latest Canadian Market Segment Report.
“Yet, due to an unprecedented wildfire season and increased flooding throughout the year, carriers in concentrated regions are being disproportionately affected by additional reinsurance premium increases.”
Overall, however, the Canadian reinsurance market in 2023 has become more challenging and has fulfilled its original role in reducing reinsurers’ exposure to increasing secondary peril climate risks in Canada.
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“The Canadian P&C insurance market has undergone significant changes to the terms, conditions and structure of reinsurance programs for the 2023 reinsurance renewal season, leading to significant price increases for primary insurers,” AM Best noted. There is.
“Canadian reinsurers rated by AM Best performed well, benefiting from a favorable underwriting environment and improved pricing conditions. In 2023, the industry expected a combined ratio of 65.6% (net/net) and 77.8% (net/gross) compared to 75.3% (net/gross) and 83.6% (net/gross) in 2022. Moreover, market demand continues to rise. “Insurance income increased to C$4.2 billion, highlighting the continued attractiveness of the sector.”
Due to the 2023 reinsurance market adjustment, Canadian non-life insurers will hold approximately 10% or more of NatCat claims in 2024. It was a record year, with a third of Jasper destroyed by wildfires and Calgary experiencing record rainfall and massive flooding. Quebec and Ontario.
Peter Askew, President and CEO of Guy Carpenter (Canada), said: “We can observe that around 50% of losses from these four major events flow into the reinsurance market. That’s a pretty important part,” he said at the National Insurance Conference. Canada (NICC) is located in Vancouver. “But interestingly, there was a significant change in the reinsurance structure in 2023, which led to a significant increase in holdings.
“We observe that (prior to Canadian reinsurance renewals in 2023 and 2024) the split would have been approximately 60:40, i.e. 40% retained by the cedent and 60% into the reinsurance market and a significant portion will be retained by those insurance companies.”
As a result of Canada’s reinsurance market restructuring in 2023, AM Best’s reinsurance market outlook has been revised from ‘stable’ to ‘positive’.
“This upgrade reflects the industry’s higher margins, higher attachment points and more stringent conditions,” AM Best said in its report.
“For 2025, AM Best expects reinsurance renewals to follow the orderly transition seen in 2024.
“However, increased catastrophe risk, as well as macroeconomic and geopolitical risks, are still key considerations that can impact the sector. Furthermore, increased secondary risks are It will also affect settings and contract terms.”
Feature image courtesy of: iStock.com/peterschreiber.media
