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More consolidation, excess capacity for 2012

Brokers with market flexibility will have the advantage, predict experts.

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“In spite of the natural disasters of 2011 there is a lot of capital and excess capacity in the marketplace,” said Eric Walker, partner, WFT Corporate Finance & Valuations Ltd. “Consequently insurers and brokers will continue to look to buying volume to complete growth plans. This will keep values of insurers and brokerages at current market prices or higher.”

Walker is one of the speakers at the 2012 P&C Crystal Ball on January 20 in Toronto. Canadian Insurance Top Broker reached out to several other presenters about what they predict is in store for the P&C insurance industry this year.

Emerging Risks

“Market dynamics and emerging risks in a low-yield world will be some of the key issues for the P&C industry in 2012,” said Alister Campbell, president and CEO, Zurich Canada. “Also, we need to think more deeply about interconnectedness. The 2008 financial crisis demonstrated our vulnerability to systemic risk and trouble in a handful of financially mismanaged countries could threaten our global economic prosperity. Because we are so interconnected, the effects of catastrophes on the other side of the world, like the floods in Thailand, impact us in more ways than we initially thought. Our integrated supply chain—whether financial, material, or human will force us to think about risk in a new light.”

Independent Brokers

“Independent brokers with flexibility of markets will have the advantages over agents and direct writers,” said Ross Totten, president and CEO, Totten Insurance Group. “Larger more professional brokers will have the advantage. [It will be] more important than ever to maintain good relationships [and it's] necessary to have access to quality intermediaries. [Companies will be] looking for strong and larger broker relationships.”

Canadian Economy

“The headwinds facing the Canadian economy are still blowing hard: Europe is slipping into another recession because of its sovereign debt crisis,” Michael Gregory, managing director and senior economist, BMO Capital Markets. “The US economy appears to have perked up through the end of 2011, but some of the drivers were temporary. And, China’s economic momentum is slowing. Reflecting these external headwinds, along with the fact that the domestic retail and housing sectors are starting to succumb to record-high household debt burdens, we expect Canadian economic growth to average 2% this year, down from 2.3% in 2011 and 3.2% in 2010. This is not enough to make any major dent in the jobless rate (it should hover around the mid-7% mark through most of this year), but it is enough to cool inflation further (down to the low-2% range). Importantly, most of the economic sluggishness should occur during the first half of the year and growth should be back on the upswing by this autumn, assisted by a turnaround in global economic prospects.”

The 2012 P&C Crystal Ball is sponsored by Cookson Walker Consulting and will be held January 20 at the Doubletree by Hilton Toronto Airport. For more information, visit our events calendar by clicking here.