Too early to call insurance situation a hard market
Published: April 6, 2019
Updated: April 30, 2019
Author: Luke Jones
CATEGORY: Industry News
Customers are paying more for their insurance, but industry insiders believe calling the situation a hard market is not the correct description.
Monica Ningen, CEO of Swiss Re Canada and English Caribbean, spoke at the company’s Canadian Annual Outlook Breakfast and said it is too soon to call it a hard market. Instead, she believe prices are just moving towards a more sustainable level.
Don Forgeron, CEO of the Insurance Bureau of Canada (IBC), also spoke at the event and said the last price increase like this happened in the commercial market.
“The last hard market we had for commercial was 2002. That’s the last time when prices shot up that it got the attention of policymakers and bar owners and small business owners,” Forgeron told reporters after the breakfast.
“I don’t know that you are going to see those swings from a soft to a hard market,” said Forgeron. “I think we are going to have to come up with another word to describe the world that we are in now, which is perhaps a more realistic market, where companies are taking a look at each line of business and doing what they need to do.”
The obvious question is why prices are increasing? It seems a number of reasons are in play, including a rise in weather events and catastrophes. Weather-related claims have risen as events like flooding and wildfire become more frequent and more severe.
Personal auto insurance claims are also on the rise, with the cost of vehicle repair increasing for insurance companies. Low interest rates are “not helping” says Forgeron.
Ningen adds that the present situation is different from past experiences because carriers would often offset losses from one line with the profits from another.
“We are now in a time period in the industry where you see some lines of business under-performing – losses are high – and there is not any lines of business that are awesomely performing that offset it. So you are starting to see boards of directors and investors getting a little more restless than in the past because of that total balance sheet view. I think that has resulted in some of the lines of business that have been significantly under priced starting to see pressure on those prices. You have also seen some capacity pulled out of the market – Lloyds of London for example.”