While the big three insurers continue to hold sway over the Canadian individual life insurance business, the two most influential players in Quebec continue to battle over fourth place. This time around, it is Industrial Alliance Insurance and Financial Services that has taken the lead over Desjardins Financial Security.

According to data collected by MSA Research and compiled by The Insurance and Investment Journal, insurers underwrote a total of $47.3 billion in life and health premiums in Canada during 2010. This result represents a 0.9% increase in growth compared to 2009.

Great-West on top

Great-West and its two subsidiaries London Life and Canada Life were still on top for 2010. The group of companies holds 24% of the market, and their total premiums reached $11.4 billion in Canada last year, up 3.4% compared to 2009. Great-West stands out from the group with 2010 premiums totalling $ 5.2 billion.The premium volume at Canada Life and London Life reached $ 3.6 billion and $ 2.5 billion respectively in Canada during 2010.

Manulife Financial ranks second in Canada with premiums of $8.37 billion in 2010, a decline of 3.3% versus 2009. Sun Life Financial comes third with premiums of nearly $8 billion in 2010 in Canada, reporting almost no growth compared to 2009.

The influence of the big three has declined, but just barely. They held 59.1% of the Canadian market in 2009, and 58.4% in 2010. The difference can be attributed to Manulife’s decline, since the two other major players advanced.

With $3.2 billion of premiums in Canada in 2010, Industrial Alliance has slightly outpaced Desjardins Financial Security, (DFS) which reported premiums totalling $3.18 billion. For Industrial Alliance, this premium volume represents an increase of 7.1% over 2009. For DFS, the increase amounts to a 2% gain. The market share of these two players is small compared to that of the big three: Industrial Alliance holds 6.74% of the market and DFS has 6.72%.

The sixth player in the Canadian market in 2010, Standard Life, suffered a decline of 19.4% in its premium volume compared to 2009. The insurer reported premiums of 1.3 billion for the year. This figure includes guaranteed products such as individual and group insurance, annuities and term deposits, but excludes segregated funds and mutual funds, says Ann-Marie Gagné, a spokesperson with Standard Life.

She explained to The Insurance and Investment Journal that the decline in premiums was mostly due to a return to a normal level of term fund sales in 2010. “In 2009, term fund sales had reached an exceptionally high level, given investors’ appetite for safer products during this period of uncertainty in the market,” comments Ms. Gagné.

There were other participants in this game of musical chairs besides Industrial Alliance and Desjardins. Medavie Blue Cross seized 8th place from RBC Life, with 2.7% of the Canadian market in 2010, compared to 2.6% for RBC. Assurant Solutions came ahead of Equitable Life, ranking 15th in market share thanks to a 22.4% increase in its premiums in Canada. It owes this leap to exceptional support from Assurant Life of Canada.

Niche players in Canada enjoyed particularly high rates of growth in 2010. Unity Life was the obvious champion, reporting an increase in premium volume of 57.8% compared to 2009. In its annual report, the company attributed this success to having broken records in virtually every key area of its operations in 2010. The report states that sales in 2010 were the best in the company’s history. Unity started the year with $118.8 million of premiums and finished with $187.4 million, although its Canadian market share is less than 1%.

A larger player, Groupe La Capitale, has a market share of 1.4%. It is active mainly in Quebec, and its presence outside the province is mostly linked to Penncorp, a subsidiary specializing in disability insurance for blue collar workers. Premium growth for the group reached 10.2% in 2010 compared to 2009, for a total of $648 million.

A smaller-sized but well-established player in health insurance products, ACE INA Life increased its premiums by 15% in 2010 compared to 2009. La Survivance saw its premiums increase by 12.1% over 2009, mainly due to its results in Quebec. As for Blue Cross Life of Canada, it saw an increase in premiums of 10.2% during 2010 compared to 2009.

Volatility and interest rates

In a special report issued on Sept. 5, the A.M. Best rating agency said that the solvency of Canadian life insurers is good. It points out that the country’s insurers earn profits, operate in a healthy regulatory environment, and benefit from a stable economy. Their reserves are also proportionate to the risks they take. Finally, the report says that Canadian life insurers are cautious in their risk management.

A.M. Best notes that most Canadian insurers maintain sufficient reserves. Although the ratio that measures these reserves, the Minimum Continuing Capital and Surplus Requirements (MCCSR), may decrease somewhat due to the implementation of new accounting standards, the ratings agency does not expect this decline to have serious consequences.

Nevertheless, A.M. Best suggests that the life insurance industry should not take this situation for granted. Low interest rates and the spectre of a U.S. recession could certainly change the rules of the game. The rating agency adds market volatility, the Canadian debt, and falling demand for products to the list of aggravating factors. A.M. Best also believes that the risk of contagion from the global economy, including the European debt, is the most serious the industry will face in the short term.

Highly concentrated

Overall, the rating agency sees the Canadian market as mature and highly concentrated in the hands of a few players, both with respect to life insurers and reinsurers. However, A.M. Best believes that niche insurers can to hold their own. They can focus on smaller clients with more personalized products.

Industry growth will also be improved by the imminent arrival of voluntary retirement packages. This opportunity for the private sector, combined with demographic trends, will encourage Canadian insurers to focus on pension products. According to A.M. Best, 70% of Canadian pension plans are currently administered by insurers.