Insurance industry must be prepared for weather, political changes and challenges in 2014

I received a current SCOR report today that showed the 2013 results of 19 insurance companies representing about $11 billion in written premiums, about 25% of the total in Canada.

The interesting thing is that their combined ratio was over 100% for the first time in over three years. Some had a better result but others were worse. Overall their underwriting result was poor but their investment income was positive and produced an overall profit. 2013 was an excellent year for investment income with the stock market showing extraordinary gains in many sectors.

However, in most years the markets have a correction following a year of substantial growth. The other factor that could be a concern for insurers and reinsurers is the change in weather patterns around the world. Canada had its share of surprises in cities like Calgary and Toronto and the surrounding areas. Both eastern Canada and the United States had two winter storms that were unusually strong and damaging. Reinsurers were spared the brunt of the losses since insurers were not involved in all areas.

The insurance industry must be prepared for many problems in 2014 due to the political unrest around the world which can also affect the stock markets. The United States still has a problem with health care and Ontario still has uncertainty with auto insurance. Ontario has a Liberal government that needs the support of the NDP to stay in power and past history shows that the NDP party does not like the insurance industry. They were in power once in Ontario and it is unlikely they will ever form the government here again. However, they enjoy the position of being needed by the Liberals for them to retain their minority position. All of these things will play out in 2014.