TORONTO, Nov. 1, 2022 /PRNewswire/ -- Aon plc (NYSE: AON), a leading global professional services firm, has released its 2022 Canadian Insurance Market Report. Published to help Canadian clients make better decisions about risk management and insurance programs, Aon's report finds that the market continues to remain complex; however, increased competition, along with positive underwriting results and loss activity, has resulted in a transition from a market experiencing significantly challenged results to one focused on profitable growth.
While historical market issues have largely settled, 2022 has brought new volatility. Geopolitical uncertainty, ongoing supply chain issues stemming from the residual impact of the COVID-19 pandemic, economic volatility and climate change continue to weigh on the Canadian market, and underwriters are closely monitoring their exposures and deploying capacity based on careful risk selection.
As focus shifts to the last quarter of the year, it will be important to keep a watchful eye on how underwriters react to any catastrophic losses. An increase in loss development is also expected in most regions as the costs from earlier events are fully realized. Accelerated inflation, along with supply chain and labour shortages, will further amplify costs, and experts are forecasting a challenging reinsurance renewal period to close out the year.
"Inflationary increases to valuations are only one component of the substantial increase in the cost of claims," said Russell Quilley, head of Commercial Risk and chief broking officer for Canada at Aon. "Although inflation has materially increased true exposure values, there is a significant lack of availability of contractors, supplies and equipment, which is extending the recovery periods for business interruption claims. These factors are contributing to material increases in the costs of claims and insurers are insisting on pricing increases to reflect true indemnity costs."
- Inflation and rising interest rates continue to dampen growth, but the Canadian economy is predicted to remain strong. Markets are cautiously looking ahead to growth and profitability.
- Global insured catastrophe losses in the first half of 2022 were US$38 billion, 18 percent above the 21st century average, with severe convective storm (SCS) activity the primary driver.
- Historically, the largest economic losses occur in the latter half of the year, and the market is continuing to closely monitor the Atlantic hurricane season, SCS and wildfire activity as inflation may further amplify costs.
- Catastrophe activity has depressed reinsurer shareholder returns and raising capital is challenging. Many reinsurers are mitigating volatility by rebalancing their portfolios, among other strategies.
- Market conditions are stabilizing but remain complex, as insurers maintain strict underwriting discipline and risk selection. For clients, strategically planning and preparing for renewals is critical.
For more information, view the report here.
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