The country’s property and casualty insurers are still facing tough times, according to data from the Insurance Bureau of Canada’s quarterly analysis of the financial performance of the P&C insurance industry.

The paper shows return on equity for the industry in 2001 declined to the lowest level ever recorded at 3.0%. Low earnings resulted in increased prices at most insurance companies, with a premium revenue increase of 8%. At the same time a 12% surge in insurance claims all but wiped out the revenue hike.

“The new data are troubling because they show that the industry’s financial health did not improve at the end of the year,” says Paul Kovacs, IBC’s chief economist. “Insurers have been losing money in Atlantic Canada for 9 of the last 12 years, including the last six consecutive years. Results are also poor in Ontario and Alberta.” By contrast, the Quebec insurance market is by far the healthiest in Canada. “The industry was caught last year between a rock and a hard place. Governments have not yet given the industry authority to manage and control its healthcare expenses and medical claims. Such costs have been on the rise by 14% annually for more than a decade. Add to that falling interest rates and volatile equity markets, and the result is lower earnings.”

“Four consecutive years of weak profits are nature’s way of saying that more adjustments lie ahead for insurers and their customers,” Kovacs says. “For insurers, the priority needs to be material improvement in underwriting performance and profitability.” IBC believes the 17% growth in industry direct written premiums over the past four quarters is evidence that the adjustment has begun.