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The COVID-19 Pandemic is Taking its Toll on Canada’s Economy and Insurance Industry

According to a recent report, Canada’s property and casualty insurance industry has so far fared better than their life counterparts amid the volatile economic and market dynamics created by the COVID-19 pandemic.

In its Best’s Market Segment Report, titled “COVID-19 Taking Its Toll on Canada’s Economy and Insurance Industry,” AM Best states that the country’s overall insurance industry remains well-capitalized.

However, for Canada’s life insurance industry, top-line growth has been materially affected, as consumers reacted to COVID-19-fueled economic strain, and agents and life insurance representatives transitioned with varying degrees of success to a digital sales environment. Life insurers’ operating earnings also have been impacted because of the market dynamics and asset valuations, and earnings likely will be pressured by the prolonged volatility in the equity markets and low interest rates, leading to lower fee-based revenue as well.

Canada’s property/casualty companies continue to show that they have the ability to remain profitable and meet the challenges presented by COVID-19, on top of those presented by increasingly volatile weather and climate conditions, fire and seismic activity, as well as economic volatility and competitive and regulatory issues.

The personal auto insurance line remains a soft spot, however, as performance deteriorated again in 2019, and experienced a 10-point rise in the loss and loss adjustment expense ratio, reversing two years of improvement. All auto lines remain exposed to loss frequency brought on by factors such as distracted driving and more miles driven.

In addition, inflation and a continual increase in loss severity due to rising repair costs are still affecting the auto lines. Early indications are that frequency trends will be down significantly in 2020, as shelter-in-place requirements, business closures, and remote working arrangements have caused a steep decline in miles driven across the country. AM Best maintains a stable outlook on Canada’s property/casualty segment.

Read the full story at: https://www.insurance-canada.ca/2020/09/14/best-market-segment-report-covid19-its-toll-on-economy/