One of the worst-ever quarters for insured losses occurred in the third quarter of 2024, but property and casualty (P&C) insurers rated by Morningstar DBRS remain stable, helped by improved investment returns and pricing actions taken prior to the third quarter, particularly in the personal property insurance market.
“P&C insurers in Canada showed stability and resilience despite a tough 2024 that saw the highest natural catastrophe insured losses ever recorded,” they write in the commentary, Canadian P&C Insurance Outlook 2025: Recovering From the Worst Weather-Related Losses on Record.
Pricing is diverging
“Investment returns will continue to bolster overall returns, but with a smaller contribution to overall earnings as interest rates have declined.” They add that pricing between personal insurance and commercial insurance is diverging – a difference they say is set to become more pronounced in the coming year.
“We expect higher reinsurance prices, increased risk retentions, smaller investment income contribution to earnings and property insurance premium increases in 2025,” they write. “On the other hand, the pace of price increases is continuing to decelerate in some commercial lines. Overall, we expect our Canadian P&C’s credit ratings to remain stable in 2025, absent another record insured loss year,” they warn.
The commentary focuses extensively on claims figures associated with the four natural catastrophes which occurred during the quarter. Reinsurance prices are also expected to increase again in 2025, following an increase in 2023 and a year of stability in 2024.
“We may once again see Canadian insurers increase their risk retention levels to contain costs,” the report states. “Higher levels of risk on insurers’ balance sheets could reduce reinsurance expenses but would also typically lead to a corresponding increase in capital requirements and potentially higher volatility in their profitability.”
