Insurance monitoring

Quarterly updates on the Life & Health and Property & Casualty insurance markets in the US and Canada, and special focus papers on associated themes.



US Property & Casualty Quarterly

Losses from natural catastrophes challenged the US P&C industry's results in 2017. Underlying underwriting performance already deteriorated in 1H17 due to elevated losses from winter storms, severe thunderstorms and tornadoes. Landfall by three Category 4 storms along with large California wildfires in 4Q17 compounded the year's underwriting losses, which amounted to USD 22.2 billion, up from USD 3.3 billion in 2016. Meanwhile, a stronger investment result, particularly from realized capital gains, helped offset some of the cat impact on the bottom line. Notably though, a majority of the realized capital gain was due to a large one-off transaction by one company. In all, the industry's 2017 net income was positive, but declined 20.6% yoy to USD 33.4 billion.

Canadian Property & Casualty Quarterly

The Canadian P&C industry's operating performance for 2017 improved yoy, but remained moderate. 2016's record cat losses were largely covered by global reinsurers and therefore not reflected in the domestic net loss ratio. The 2017 result of 65.6% was better by 1.1 points despite harsh winter weather and a number of summer storms. However, the expense ratio increased. Investment income was roughly flat, while sizable realized capital gains helped bring net income after tax to CAD 3.0 bn, from CAD 2.5 bn the year before. Although the industry ROE edged up by 1.5 points yoy to 7.3%, it remained below the roughly 10% average of the prior three years without large catastrophes.


Canadian Life & Health Quarterly

Canadian life insurers' global premium income continued to grow solidly in 2017, in line with robust economic growth. In Canada, individual annuity premiums turned the corner, while individual life premiums struggled following a domestic tax policy-driven surge in the prior year. The benefits ratio improved modestly, as premium growth exceeded growth in benefit payments. Meanwhile, the low interest rate environment continued to weigh upon lifecos' investment yield. Tightening credit spreads along with tax reform in the US (which reduced the tax deductibility of reserves) necessitated further sizable increases in actuarial liabilities. By contrast, rising stock markets supported an upturn in both assets under management and fee income for the year. In total, life companies' consolidated net income was down 8.5% yoy to CAD 8.7 bn, and the annualized ROE slid to 7.8%, from 9.4% in 2016.

US Life Quarterly

Direct premiums for the life and health industry stagnated over 9M17 mainly due to large decreases in individual annuity sales. Annuity products' sales suffered from continued uncertainties due to the delayed implementation of the Department of Labor's (DOL) new fiduciary rule. Despite the drag in total revenue, the industry's net income increased in 9M17 partly due to lower reserve increases and positive investment income. Expected increases in interest rates should further benefit investment returns while the sector will continue to benefit from the dynamic economic growth anticipated in 2018 and 2019.



Underwriting the US infrastructure gap

US infrastructure investment has long fallen behind what’s needed to maintain a state of good repair for existing assets, let alone power the economy of the 21st century. Over the next decade, the investment gap amounts to more than USD 2.1 trillion.