2022-23 SGI CANADA Annual Report
The Property and Casualty Insurance Business Environment
Canada's highly-competitive P&C industry consists of more than 120 private and government-owned insurers.
The P&C industry covers all types of insurance except life and health insurance. The automobile insurance sector
continues to be the largest contributor to gross premium volume, with half of all premiums. Property insurance ranks
second, followed by liability and other insurance.
Insurance is a mechanism for spreading risk - for sharing the losses of the few among the many. It makes the life of
an individual or business enterprise more stable by allowing people and businesses to engage in many ventures
without having to set aside reserves to meet the financial requirements that may arise from certain types of losses.
Insurance also facilitates the granting of credit by protecting the investments of both lenders and borrowers.
Insurance can be considered a large pool into which policyholders place their premiums. This pool provides
for payment of losses suffered by those who have claims and for the cost of running the insurance company.
Sometimes, total premiums are insufficient to pay claims and operating expenses. However, insurers also use
investment earnings to pay claims and keep premiums lower than they might otherwise be.
P&C insurance companies are supervised and regulated at both the federal and provincial levels. The federal regulator,
the Office of the Superintendent of Financial Institutions (OSFI), is responsible for the solvency and stability of P&C
insurance companies registered federally. Provincial authorities supervise the terms and conditions of insurance
contracts and licensing of companies, agents, brokers and adjusters, along with monitoring the solvency and stability of
provincially registered companies. The Corporation's subsidiaries are provincially regulated insurance companies.
Since automobile insurance is compulsory in Canada - unlike home and business insurance - it is the most regulated
product for P&C companies. Regulation of premium rates is based on claims and other costs of providing insurance
coverage, as well as projected profit margins. Regulatory approvals can limit or reduce premium rates that can be
charged, or delay the implementation of changes in rates. The Corporation's automobile premiums are subject to rate
regulation in Alberta and Ontario, which represent approximately 16.9% of consolidated gross premiums written.
The industry is a major part of the social and economic fabric of Canada. P&C insurers invest in a variety of securities
across global markets. Government regulations are in place for the P&C industry that require these investments to
be made using a prudent person's viewpoint.
The P&C industry also utilizes reinsurance. Reinsurers, most of which are international organizations, spread risk by
writing business with insurers in several countries and in many regions around the world. Insurance companies pay
premiums to reinsurers in exchange for an agreement to have a proportion of their claims paid for them, particularly
in the event of a major loss or catastrophe. Reinsurance is one of many tools used by insurers to guarantee that they
will meet every obligation to pay legitimate claims.
The Property and Casualty Insurance Compensation Corporation (PACICC), a non-profit entity, was formed in 1988 to
provide a reasonable level of recovery for policyholders and claimants under most policies issued by P&C companies
in Canada in the unlikely event a Canadian P&C company fails. The maximum amount a policyholder could recover
from PACICC is $0.4 million for certain qualifying policies and $0.5 million for personal property policies with respect to
all claims arising from each policy issued by the insolvent insurer and arising from a single occurrence. Policyholders
may also claim 70% of unearned premiums that have been paid in advance, to a maximum of $1,750 per policy.
As a Crown corporation not directly licensed by a provincial regulator, SGI CANADA's Saskatchewan operations are
not required by legislation to be a member of PACICC. SGI CANADA had been a member of PACICC for many years,
but withdrew its membership in June 2021, as Saskatchewan policyholders could never receive compensation
under current PACICC rules. However, SGI CANADA's two subsidiaries operating outside of Saskatchewan, SCISL and
Coachman Insurance Company, are both required by their regulator's licensing legislation to be members of PACICC.
2022-23 SGI CANADA Annual Report 7View entire presentation