AM Best ratings agency released its most recent report on the life and annuity and property and casualty insurance industries. In it, the agency takes a close look at the economic conditions affecting both industries and their ratings.
“Canada’s economy continues to recover, following a contraction of 5.4 per cent in 2020,” they write in the most recent Best’s Market Segment Report, Canada Insurance: Favorable Results in 2021 Despite Pandemic.
“Canada’s economy grew by 4.5 per cent in 2021 but is expected to slow to 3.4 per cent in 2022 and 1.8 per cent in 2023. Despite the slowdown, the International Monetary Fund expects Canada to grow faster than any of its G7 counterparts in 2022 and 2023.”
Headwinds for the Canadian economy include geopolitical tensions and conflicts, tighter financial conditions, higher inflation, depressed consumer and business sentiment, continued supply chain issues, housing market vulnerabilities and general economic slowdown globally.
“Personal consumption accounts for approximately 60 per cent of Canada’s GDP but will face pressure, despite its strength in the first half of 2022. Higher interest rates and elevated inflation will likely weigh on consumers,” they write. The report also looks at commodity markets, monetary policy, housing market vulnerabilities and persistent inflation.
“The rate of inflation continues to rise with headline inflation reaching 8.1 per cent in June (2022), following a 7.7 per cent rise in May, the largest yearly increase in decades,” they add. “Year-over-year, consumers paid almost 55 per cent more for gas. Food prices, while not increasing as dramatically as energy prices, have also trended above headline inflation. June food prices increased 8.8 per cent on an annual basis. Inflation pressures have been much more persistent and pronounced than originally anticipated.”
