As a group, property and casualty (P&C) insurers’ return on equity (ROE) in the first six months of 2025 was 10.7 per cent, down from 13 per cent reported during the same period in 2024. Although lower, this analysis by Grant Kelly, chief economist and vice president, financial analysis and regulatory affairs with the Property and Casualty Insurance Compensation Corporation (PACICC) indicates that these returns are exactly equal to the industry’s 50-year, long-run, average ROE.
“The decline in average returns was due to worsening underwriting results,” he writes in the quarterly report, Solvency Matters. The note, entitled A perfectly average first six months, states that expenses were up 9.8 per cent while revenues were up just 6.4 per cent. “This resulted in a $730-million decline in the industry’s net insurance result. The underwriting results in Canada’s auto insurance markets were particularly gruesome.”
Erosion of the industry’s capital base
The industry’s net comprehensive combined ratio (NCCR) measuring underwriting profitability indicates that private passenger auto insurance is eroding the industry’s capital base in eight provinces and all three territories.
“NCCR measures underwriting profitability by including the impact of insurance service expenses, reinsurance expenses, general and operating expenses and net insurance finance expenses, all relative to net insurance revenue. A NCCR ratio greater than 100 per cent indicates that this line of coverage is eroding the industry’s capital base,” Kelly writes.
The only auto markets reporting a NCCR below 100 per cent were Ontario and Quebec, he adds. Personal property insurance results in Newfoundland and Labrador, Ontario, Manitoba and Saskatchewan also deteriorated, due to wildfires. “Insurance written in these jurisdictions also generated NCCRs greater than 100 per cent.”
Of the PACICC’s 163 member insurers reporting to the fund, 26 reported losses over the first six months of 2025.
