Consolidation in Canada’s property and casualty industry in 2011-12 could intensify insurers’ restructuring activities moving forward, A.M. Best says in a special report on the Canadian insurance industry.
If so, can brokers expect their relationships with carriers to change as consolidation in Canada continues?
A.M. Best’s review of the Canadian insurance landscape noted “an active year” for consolidation in 2011. Intact Financial Corporation acquired AXA Canada for $2.6 billion and RSA Insurance Group bought GCAN Insurance Company for $420 million.
M&A activity proceeded apace in 2012, with Intact purchasing Jevco Insurance Company from Westaim for $530 million and RSA announcing its intended purchase of L’Union Canadienne from the Co-operators Group for $150 million.
“These acquisitions demonstrate how carriers are seeking to further develop distribution channels to consumers and are actively looking for customer-base growth,” A.M. Best states in its report. “These consolidations will not only test companies’ capabilities to maintain strong consumer relationships, but they will also test the limits of their market share, as they grow larger, more complex, and perhaps dominant in a segment.”
As companies increase in size and become more complex, they may contemplate restructuring, the report notes.
For example, as A.M. Best notes, consolidation may “intensify” insurers’ restructuring activities, such as re-evaluating existing business strategies, simplifying business models, flattening their business structures and bringing more focus to profitable lines of business.
All of these restructuring activities carry with them the potential to affect insurers’ relationships with their broker distribution channels.