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This is BMI’s third report on Canada’s insurance sector. As is the case with our other insurance sector reports, we put the non-life and life segments in a regional and global context. We discuss the main lines and seek to identify the major themes.
In this report, we have been able to incorporate the actual premiums for calendar 2009, as disclosed by Canada’s insurance regulator, the Office of the Superintendent of Financial Institutions (OSFI). Last year, the total premiums written by Canada’s insurance sector amounted to CAD85,233mn. This includes nonlife premiums of CAD55,101mn and life premiums of CAD30,132mn. In 2014, the corresponding figures should be CAD109,107mn, CAD70,827mn and CAD38,280mn respectively. In terms of the key drivers that underpin our forecasts, we are looking for non-life penetration to remain constant at 3.50% of GDP through the forecast period, and envisage that life density will rise from US$780 to US$850 per person. BMI’s proprietary Insurance Business Environment Rating for Canada is 72.0
As in previous quarters, what stands out is the strength and scale of the Canadian insurance sector. The life segment is dominated by three players – Great-West Lifeco (including its subsidiaries London Life and Canada Life), Manulife Financial and Sun Life Financial. All three rank among the 10 largest life insurance companies worldwide in terms of stock market capitalisation. All three have expanded beyond insurance into wealth management and other financial services. All three (but particularly Manulife and Sun Life) have expanded into the US. Manulife and Sun Life are unusual in world terms in that they also own cross-border businesses in the Asia Pacific region. All three would rank as very large insurers in any country.
In short, the processes of demutualisation and concentration over the last decade or so have produced life companies that have the ability to secure funding from global markets in order to undertake large scale deals. Manulife’s 2004 acquisition of US major John Hancock remains a key landmark. In contrast, the non-life segment consists mainly of mutuals and co-operatives that have not needed to raise capital from global markets. The Economical Insurance Group, The Co-operators Insurance & Financial Services, Desjardins Group and Wawanesa Mutual are all obvious examples. The non-life segment, which includes four state-owned monopoly automobile insurance companies (with differing mandates) is fragmented in that no single player appears to have a double-digit market share. This is despite the fact that many of the mutuals – and, indeed, some of the subsidiaries of multinationals such as Aviva and RSA – have in the past expanded by way of acquisition and/or operate through multiple brands. One consequence of the fragmentation and lingering mutualisation of the Canadian non-life segment is that the Canadian property and casualty insurers have had less desire and need than the life companies to seek challenges and opportunities in other countries.
Even a cursory examination of corporate websites shows that across both major segments (with health insurance in Canada provided by life companies) there is a huge variety of strategies. There are different prices, different product lines, different distribution channels (with most companies relying on several), different attitudes to the provision of financial services beyond and above insurance, and different priorities vis-à-vis stakeholders. Even the major banking groups have taken different approaches to insurance. TD Financial Group is a large player in the non-life segment through Meloche-Monnex, and its subsidiaries and affiliates. In the life segment, RBC Life and BMO Life are significant in terms of absolute premiums written, but a fraction of the size of each of the three largest life firms.
A key factor in the strength of the Canadian insurance sector – and indeed the commercial banking sector – has been the regulatory environment. OSFI is concerned primarily with the banks’ and insurers’ capital adequacy. The absence of problems in the wake of the global financial crisis suggests that it has performed its function effectively. Indeed, Canada’s financial institutions are among the best capitalised of any developed country. Some of the credit should also go to the provincial and territory regulators, of which the Financial Services Commission of Ontario (FSCO) and L’Autorité des marchés financiers (AMF) of Quebec are the two most important. The provincial and territory regulators are also concerned with solvency and capitalisation. However, they also oversee the dealings between the various financial institutions and their customers. We suggest that in a global context there are two challenges for the Canadian insurance sector. One is that, being mature and competitive, it is unlikely to achieve rapid growth through our forecast period – this is in spite of its advantages and a generally favourable outlook for the Canadian economy. Although both non-life and life insurance is open to foreign companies, we note that many of the deals that have taken place in recent years have involved sales of Canadian operations by foreign groups who have decided that those businesses are not central to their overall strategies. The second is that, as investors, the Canadian insurers are now so large in a global context that it would be difficult for them to emerge unscathed from any new financial crisis. However, as noted above, Canadian insurers have handled the global financial crisis and its aftermath well.
Issues To Watch
Debate Over Healthcare Reform
Total healthcare spending in Canada has risen from 7% of GDP in the mid-1970s to about 10% of GDP. On current trends, the figure will rise to 13% by 2015 and 17% by 2025. The governments of some provinces, including British Columbia and Ontario, will be spending about 70% of their revenues on healthcare by 2020. In June 2009, the Canadian Life and Health Insurance Association (CLHIA), the trade body for the country’s life and health insurance providers, published a report that included a number of general recommendations to the governments. Central to the recommendations was the concept that the governments should build on the public-private partnerships that are already a key feature of Canada’s healthcare system. Over the medium term, the health insurance companies could be significant beneficiaries of healthcare reform in Canada.
Further Deal-Making
The major life firms have shown that they can successfully fund and execute large scale acquisitions both within Canada and elsewhere. At a time when Canadian insurers enjoy scale and financial strength relative to their peers in other countries, it would not be surprising if they undertook new purchases over the coming year or so. Some of these transactions may be opportunistic, in that they are driven by the problems of the target company. Deal-making within the non-life segment is also a possibility.
Changes In Aggregate Investment Strategy
Collectively, the Canadian insurers represent one of the larger pools of investment assets worldwide, and have successfully managed the challenges of the global financial crisis and its aftermath. Changes to asset allocations will provide a useful indication of how the insurers see the global investment environment in the coming months.
About Us
ReportsandReports comprises an online library of 10,000 reports, in-depth market research studies of over 5000 micro markets, and 25 industry specific websites. Our client list boasts almost all well-known publishers of such reports across the globe. We as a third-party reseller of market research reports employ a number of marketing tools, such as press releases, email-marketing and effective search-engine optimization techniques to drive revenues for our clients. We also provide 24/7 online and offline support service to our customers.
Contact:
Ms. Sunita
7557 Rambler road,
Suite 727, Dallas, TX 75231
Tel: +1-888-989-8004
http://reportsandreports.blogspot.com/
http://reportsandreports.proarticles.co.uk/
http://reportsnreports.wordpress.com/
Browse All Business Monitor International Market Research Reports
This is BMI’s third report on Canada’s insurance sector. As is the case with our other insurance sector reports, we put the non-life and life segments in a regional and global context. We discuss the main lines and seek to identify the major themes.
In this report, we have been able to incorporate the actual premiums for calendar 2009, as disclosed by Canada’s insurance regulator, the Office of the Superintendent of Financial Institutions (OSFI). Last year, the total premiums written by Canada’s insurance sector amounted to CAD85,233mn. This includes nonlife premiums of CAD55,101mn and life premiums of CAD30,132mn. In 2014, the corresponding figures should be CAD109,107mn, CAD70,827mn and CAD38,280mn respectively. In terms of the key drivers that underpin our forecasts, we are looking for non-life penetration to remain constant at 3.50% of GDP through the forecast period, and envisage that life density will rise from US$780 to US$850 per person. BMI’s proprietary Insurance Business Environment Rating for Canada is 72.0
As in previous quarters, what stands out is the strength and scale of the Canadian insurance sector. The life segment is dominated by three players – Great-West Lifeco (including its subsidiaries London Life and Canada Life), Manulife Financial and Sun Life Financial. All three rank among the 10 largest life insurance companies worldwide in terms of stock market capitalisation. All three have expanded beyond insurance into wealth management and other financial services. All three (but particularly Manulife and Sun Life) have expanded into the US. Manulife and Sun Life are unusual in world terms in that they also own cross-border businesses in the Asia Pacific region. All three would rank as very large insurers in any country.
In short, the processes of demutualisation and concentration over the last decade or so have produced life companies that have the ability to secure funding from global markets in order to undertake large scale deals. Manulife’s 2004 acquisition of US major John Hancock remains a key landmark. In contrast, the non-life segment consists mainly of mutuals and co-operatives that have not needed to raise capital from global markets. The Economical Insurance Group, The Co-operators Insurance & Financial Services, Desjardins Group and Wawanesa Mutual are all obvious examples. The non-life segment, which includes four state-owned monopoly automobile insurance companies (with differing mandates) is fragmented in that no single player appears to have a double-digit market share. This is despite the fact that many of the mutuals – and, indeed, some of the subsidiaries of multinationals such as Aviva and RSA – have in the past expanded by way of acquisition and/or operate through multiple brands. One consequence of the fragmentation and lingering mutualisation of the Canadian non-life segment is that the Canadian property and casualty insurers have had less desire and need than the life companies to seek challenges and opportunities in other countries.
Even a cursory examination of corporate websites shows that across both major segments (with health insurance in Canada provided by life companies) there is a huge variety of strategies. There are different prices, different product lines, different distribution channels (with most companies relying on several), different attitudes to the provision of financial services beyond and above insurance, and different priorities vis-à-vis stakeholders. Even the major banking groups have taken different approaches to insurance. TD Financial Group is a large player in the non-life segment through Meloche-Monnex, and its subsidiaries and affiliates. In the life segment, RBC Life and BMO Life are significant in terms of absolute premiums written, but a fraction of the size of each of the three largest life firms.
A key factor in the strength of the Canadian insurance sector – and indeed the commercial banking sector – has been the regulatory environment. OSFI is concerned primarily with the banks’ and insurers’ capital adequacy. The absence of problems in the wake of the global financial crisis suggests that it has performed its function effectively. Indeed, Canada’s financial institutions are among the best capitalised of any developed country. Some of the credit should also go to the provincial and territory regulators, of which the Financial Services Commission of Ontario (FSCO) and L’Autorité des marchés financiers (AMF) of Quebec are the two most important. The provincial and territory regulators are also concerned with solvency and capitalisation. However, they also oversee the dealings between the various financial institutions and their customers. We suggest that in a global context there are two challenges for the Canadian insurance sector. One is that, being mature and competitive, it is unlikely to achieve rapid growth through our forecast period – this is in spite of its advantages and a generally favourable outlook for the Canadian economy. Although both non-life and life insurance is open to foreign companies, we note that many of the deals that have taken place in recent years have involved sales of Canadian operations by foreign groups who have decided that those businesses are not central to their overall strategies. The second is that, as investors, the Canadian insurers are now so large in a global context that it would be difficult for them to emerge unscathed from any new financial crisis. However, as noted above, Canadian insurers have handled the global financial crisis and its aftermath well.
Issues To Watch
Debate Over Healthcare Reform
Total healthcare spending in Canada has risen from 7% of GDP in the mid-1970s to about 10% of GDP. On current trends, the figure will rise to 13% by 2015 and 17% by 2025. The governments of some provinces, including British Columbia and Ontario, will be spending about 70% of their revenues on healthcare by 2020. In June 2009, the Canadian Life and Health Insurance Association (CLHIA), the trade body for the country’s life and health insurance providers, published a report that included a number of general recommendations to the governments. Central to the recommendations was the concept that the governments should build on the public-private partnerships that are already a key feature of Canada’s healthcare system. Over the medium term, the health insurance companies could be significant beneficiaries of healthcare reform in Canada.
Further Deal-Making
The major life firms have shown that they can successfully fund and execute large scale acquisitions both within Canada and elsewhere. At a time when Canadian insurers enjoy scale and financial strength relative to their peers in other countries, it would not be surprising if they undertook new purchases over the coming year or so. Some of these transactions may be opportunistic, in that they are driven by the problems of the target company. Deal-making within the non-life segment is also a possibility.
Changes In Aggregate Investment Strategy
Collectively, the Canadian insurers represent one of the larger pools of investment assets worldwide, and have successfully managed the challenges of the global financial crisis and its aftermath. Changes to asset allocations will provide a useful indication of how the insurers see the global investment environment in the coming months.
About Us
ReportsandReports comprises an online library of 10,000 reports, in-depth market research studies of over 5000 micro markets, and 25 industry specific websites. Our client list boasts almost all well-known publishers of such reports across the globe. We as a third-party reseller of market research reports employ a number of marketing tools, such as press releases, email-marketing and effective search-engine optimization techniques to drive revenues for our clients. We also provide 24/7 online and offline support service to our customers.
Contact:
Ms. Sunita
7557 Rambler road,
Suite 727, Dallas, TX 75231
Tel: +1-888-989-8004
http://reportsandreports.blogspot.com/
http://reportsandreports.proarticles.co.uk/
http://reportsnreports.wordpress.com/
