The P&C Actuary's Role in Solvency Monitoring - Property and ...

PACICC – The P&C Actuary’s Role in Solvency Monitoring Page 42
PART 8 – HISTORY OF P&C INSURER INSOLVENCY IN
CANADA
Table 3 on the following page is based in part on Table 2 from Predicting P&C Insurer Solvency
in Canada by Anne E. Kleffner and Ryan B. Lee, 79 and supplemented with information of the
“cause of failure” supplied by PACICC. We reorganize the table from alphabetic order, as
presented in the paper, to year wound up. This enables us to track the potential effect of changes
in regulatory and actuarial professional standards with the number of P&C insurers who became
insolvent or were liquidated.
Key dates of federal regulation include:
― 1992 – actuarial certification of the adequacy of outstanding claims and unearned premium
provisions was required for all companies’ 1992 annual statements
― 1999 – DCAT reports were required for P&C insurers
― 2003 – external review was required on a triennial basis for P&C companies
There does seem to be a reduction in the number of federal insolvencies after these key dates, in
particular those related to reserving practices. Since the 1992 changes, only one federal insurer
has failed due to inadequate reserving or rapid growth (and resulting in inadequate reserving). 80
However, since those changes, six provincial insurers failed as a result of inadequate reserving or
rapid growth.
There has also been a strengthening of the role of the actuary for provincially regulated P&C
insurers. This is primarily by request or directive of the regulator rather than the issuance of
formal regulatory guidelines or changes in the insurance legislation.
79
August 2006, Haskayne School of Business, University of Calgary.
80
This federal insurer entered into run-off at the time of the changes and its reserve deficiency pre-dated
the 1992 changes.