Insurers See Profit in Q2, But Brace for Impact of Catastrophes in Q3
The second quarter of 2021 has been a profitable one for insurers, but experts warn that the upcoming third quarter may bring challenges as natural catastrophes continue to hound the industry.
According to a report from the Insurance Bureau of Canada (IBC), the property and casualty (P&C) insurance industry saw a 10.5% increase in net income in the second quarter compared to the same period last year. This is largely due to a decrease in claims costs and an increase in investment income.
However, the IBC also noted that the industry is bracing for the impact of natural catastrophes, which have been on the rise in recent years. In the first half of 2021 alone, there have been 10 catastrophic events in Canada, resulting in over $1.3 billion in insured losses.
The most significant of these events was the heatwave that swept across Western Canada in June, causing over 800 deaths and resulting in an estimated $1 billion in insured losses. Other notable catastrophes include the flooding in British Columbia and the wildfires in Manitoba and Ontario.
Experts predict that the trend of increasing natural catastrophes will continue, making it a challenging third quarter for insurers. In fact, the IBC has already declared the heatwave in June as a catastrophic event, and more declarations are expected in the coming months.
Despite the potential impact of these catastrophes on earnings, the P&C insurance industry remains financially strong and well-equipped to handle these challenges. Insurers have been investing in technology and data analytics to better assess and manage risks, as well as implementing stricter underwriting guidelines to mitigate losses.
In addition, the industry has been working closely with governments and other stakeholders to develop strategies for adapting to and mitigating the effects of climate change. This includes investing in resilient infrastructure and promoting risk reduction measures.
As the third quarter progresses, insurers will continue to closely monitor the impact of natural catastrophes on their earnings and adjust their strategies accordingly. The industry remains committed to providing financial protection and support to Canadians in times of need, while also working towards a more sustainable and resilient future.
