In its twentieth year of operations and amid economic turmoil, the Property and Casualty Insurance Compensation Corporation (PACICC) released its 2008 Annual Report along with a note: No further insurance insolvencies occurred during the past year among the corporation’s more than 200 members.
Since its inception in 1988, as Canada’s national guarantee fund providing financial protection for P&C policyholders in the event a carrier becomes insolvent, PACICC has paid out $105 million to approximately 10,000 policyholders. The lack of payment and insolvency over the last 12 months, given the economic turmoil, is evidence that the “industry remains well capitalized,” said incoming board chair, Robin Spencer of Aviva Canada.
However, according to analysis by PACICC industry members cannot forget the growing magnitude of financial risk they face, particularly since the business environment indicates that the P&C market is approaching the weakest point in the current cycle — the period, typically, when solvency risk is highest.
According to PACICC, five insurers fail each cycle, on average and eight years ago, during another hard market, and after the weakest point in the last cycle, six P&C insurers failed.
“PACICC will be an active participant in the review of the Canadian reinsurance market, being conducted by the Ontario Superintendent of Financial Institutions (OSFI),” said president and CEO Paul Kovacs.
“We have also completed research that will be shared with provincial Ministers of Finance to identify means of reducing the risk that the failure of an insurer may cause financial distress for other member insurers,” said Kovacs.
These initiatives, in light of the current economic climate, are because PACICC has made it a strategic priority for the current year to focus on strengthening incentives for insurer financial health.
Originally published in Canadian Insurance Business Magazine in April 2009