The total Canadian reinsurance market, including business placed with non-registered (offshore) companies, grew at a similar rate to reach a total written premium base of about $4.5 billion, according to A.M. Best data. (Roughly half the reinsurance premiums are placed offshore. All dollar amounts reflect the approximate U.S. dollar value based on the Canadian dollar exchange rate).

The RRCs returns indicate a reduction in the sectors underwriting loss to $174 million for 2002, compared with the previous years loss of $233 million, with the combined ratio reflecting a 10 percentage-point improvement to 110.2. (The RRC represents 22 registered reinsurers in Canadanow 18 companies after the latest withdrawals from the market.)

Despite improved underwriting conditions, reinsurers suffered a 13 percent decline in investment income to $243 million for 2002 (2001: $277 million). The top 10 reinsurers delivered an average return on equity of 4.4 percent for 2002, largely as a result of two companies that generated a return of more than 10 percent each: Everest Re and Axa Corp. produced returns of 20.8 percent and 13.6 percent respectively.

Pierre Dionne, vice president at Toronto-based Caisse Centrale De Reassurance, noted that reinsurers should be working around a 90 combined ratio in the current investment climate in order to generate an adequate ROE. “A combined ratio of 110 percent is not good enough.”

His perspective is supported by Brian Gray, president of Toronto-based Swiss Reinsurance Co. of Canada, and Ken Irvin, the president of Munich Reinsurance Canada Group, located in Toronto. Mr. Gray pointed out that reinsurers and insurers have been lucky in that the past two years have produced minor catastrophe-related losses.

“The combined ratio has improved, but it is far from acceptable. We need to be in the low 90s,” Mr. Gray said.

Furthermore, Mr. Irvin emphasized the fact that 2001s combined ratio of 119 reflected costs associated with the 9/11 terrorist attacks. “Last years improvement [in the combined ratio] was mostly due to these costs being removed,” he affirmed.

“Last years 110 combined ratio was a bad number,” Mr. Irvin said, predicting that 2003 will show improvement.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 1, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.