Surge in Cat events means home insurers are facing cost issues
Published: October 22, 2018
CATEGORY: Home Insurance
Insurance companies are already facing rising costs in the auto market because of increased collisions and higher repair costs. While many insurers have discussed pulling back on auto and focusing elsewhere, companies may be left wondering where to go. That’s because another major P&C market is also facing problems.
Companies are also being pinched in the home insurance market, where home and commercial claims are on the rise.
The frequency of catastrophe losses from storms, floods, and wildfire are leading to a spike in claims from both homeowners and commercial business owners. Insurance companies in Canada handled $5.5 billion in commercial and home insurance claims during the second quarter of this year. The Office of the Superintendent of Financial Institution (OSFI) says this is a 22% increase compared to the $4.5 billion in claims over the same frame last year.
Claims ratios across all P&C home insurance providers have increase to 71% this year, a 7% rise compared to last year. What is causing this rise:
“Mostly the cats,” Joel Baker, president and CEO of MSA Research, told Canadian Underwriter recently, referencing catastrophe events. “There were a slew of them in the first half of the year.”
Glenn McGillivray, managing director of the Institute for Catastrophic Loss Reduction (ICLR), says that while cat events clearly play a role, these situations are not the sole reason for rising claims frequency.
“Not enough people have overland flood cover in New Brunswick to drive those kinds of numbers,” McGillivray says. “If you look at the loss ratios by province, you may be able to match them up with a particular cat or cats. But in some cases, like New Brunswick, there appears not to be a match, so the problems lie elsewhere.”