Despite major losses in the summer of 2024, Canada's property & casualty insurance industry saw improved results in the final quarter of the year, creating a sense of optimism in the market for the year 2025, according to a recent analysis.
The research note, entitled Amid challenges, the Canadian P&C market achieves double-digit growth in 2024 was published on March 26 by S&P Global Market Intelligence. According to its authors Tim Zawacki and Husain Rupawala, the return to normal in the fourth quarter of 2024 was particularly promising in auto insurance, but there was also real progress in reducing losses on the property side.
However, the geopolitical tensions arising from the U.S. administration's trade war with its major partners, as well as the possible change of government in Canada, “could significantly affect the insurance landscape.” Changes to tariffs imposed by Washington and countermeasures adopted by Canada could create uncertainty, but also opportunities for Canadian insurers, the researchers add.
“The potential for increased costs for replacement parts, with the Canadian government implementing countermeasures to impose a 25% tariff on auto parts imported from the US, could hinder the auto sector's recovery momentum,” says the report.
The authors also highlight the impact of the trade war on auto insurers' businesses, whose operating costs are likely to rise, due to the cost of parts, while revenues could fall due to reduced demand for goods.
Auto insurance
Revenues from insurance products increased by 22.3% in automobile insurance, reaching $28.4 billion in 2024, compared with $23.2 billion in 2023.
The gross insurance service ratio, which is estimated on the basis of expenses over insurance revenues, rose from 92.6% in 2023 to 94.8% in 2024, a deterioration of 2.2 percentage points.
In private passenger automobile insurance, the effect of rate increases was particularly noticeable in the final quarter of 2024, when revenues from insurance products reached $5.8 billion, up 26% compared to the same quarter of the previous year. This compares with a 7.3% increase in commercial auto revenues in the fourth quarter of 2024 over the same quarter in 2023.
The research note also highlights the poor results in Alberta in private passenger auto insurance. The gross insurance service ratio reached 144.5% in the fourth quarter, compared with 95.1% in the same quarter of 2023.
Home insurance
In property insurance, revenues from insurance products rose by 17.8% in 2024 to $24.3 billion. However, the gross insurance service ratio also deteriorated by 6.4 percentage points to 90.5%.
In the third quarter of 2024, due to the Jasper fires and other major summer losses, the gross insurance service ratio reached 128.1% in property & casualty insurance. The upturn in the fourth quarter enabled insurers to restore this ratio to a normal level for the full year 2024.
“In recent years, Canada has been hard hit by significant challenges including wildfires, floods and severe storms. Insurers are increasingly recognizing that such extreme weather events are not anomalies but rather part of a new baseline, requiring them to adapt to the evolving landscape of weather-related risks,” say the authors.
