Reinsurance News

Recent Canadian flooding unlikely to impact reinsurance: S&P

26th May 2017 - Author: Steve Evans

While losses will cause a hit to insurers, the recent flooding that impacted parts of Canada in the provinces of Quebec, Northern Ontario and British Columbia is not anticipated to hurt reinsurers or affect reinsurance protection.

Canada floods photo from CTVRating agency Standard & Poor’s says that preliminary estimates put economic losses from the flooding around the $350 million mark, at which level the impact to insurers will not be significant and to reinsurance perhaps negligible.

For Canadian insurers S&P believes that the event will not be particularly detrimental, resulting in a temporary dip in earnings.

“We expect the impact from these events to be an earnings rather than a capital event for the Canadian property and casualty sector,” explained S&P Global Ratings credit analyst Brian Suozzo.

The flooding struck Quebec, parts of Northern Ontario and British Columbia. Quebec was hardest hit, with prolonged and torrential rainfall and melting snow resulting in rising water levels that affected 78 municipalities. Areas along rivers were particularly affected, with a few declaring states of emergency.

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Despite the fact that flood insurance penetration is relatively low, S&P expects property insurers will suffer losses from the Canadian flooding event.

“Although we do not believe insurers will be affected significantly–and the level of losses is unlikely to affect reinsurance protection–the combined ratios will increase a bit for insurers operating in the flood-exposed regions,” Suozzo explained.

S&P says that insurers picked up some losses after the Alberta floods of 2013, and that as a result flood insurance pricing “would reflect to some extent the potential for insurers to bear such losses, though we do not believe it will fully reflect the extent of the risk.”

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