US and Canada

Growing steadily ahead of the pandemic crisis



  • US Life insurance and annuity premium growth slowed to 1.2% in 2019 as the previous year’s surge in annuity sales (+5.1%) normalized. That surge came after the Department of Labor’s fiduciary ruling was struck down by courts in March 2018. Group and especially ordinary life performed well in 2019. Ordinary life insurers tried to get more business before principle-based reserving changes became mandatory in 2020. Overall, however, the increase in life cover was not enough to offset the fall in annuity sales.
  • In Canada, real life and annuity premiums declined by 1.2% as at-target inflation eroded small nominal sector gains. Growth in individual and group life policies are estimated to have advanced modestly in nominal terms, the former on strength in the whole life segment, while annuities were hampered by the continued low interest rate environment. We expect this year’s economic contraction and financial market volatility will lead to further premium contraction before a moderate rebound in 2021.
  • In 2020, the economic contraction due to COVID-19, with rising unemployment, financial market volatility and disruption to distribution will have a strong negative impact, particularly on US individual and group life premium growth, and on overall life sector growth in Canada.
  • In 2021, we see US premiums as continuing to stagnate, and expect a moderate rebound in Canada.
  • Historically low interest rates, increased market volatility and accelerating unemployment will put significant downward pressure on life insurers’ profitability and investment returns this year. Though the industry is well capitalised, largescale rating downgrades and defaults could strain the capital position of insurers that had increased exposure to lower-rated, less liquid investment grade securities in the last few years.
  • Principle-based reserving (PBR) has become mandatory for all US life insurers as of 1 January 2020, a significant departure from previous rule-based reserving. PBR requires insurers to combine company-specific assumptions with rule-based calculations. Life insurers are also required to use new mortality tables for business written in 2020. The push towards a common fiduciary standard in the industry continues with the National Association of Insurance Commissioners and the Securities and Exchange Commission introducing their versions of the standards in 2020/2021. The full impact of the changes is not clear yet.


  • This year sigma retrospectively added accident & health (A&H) business written by health insurers in the US to the non-life dataset, to align with practice in other regions. This has doubled the nominal non-life premiums in the US. Previously, estimated 2019 premiums were USD 912 billion; post inclusion, the US non-life market is estimated at USD 1.8 trillion.
  • The A&H business in the US grew by 1.9% in inflation-adjusted terms in 2019, slightly stronger than in 2018. Health insurers have been benefitting from declining medical cost and utilisation rate trends in recent years. In 2020, health insurers will face increasing frequency and severity of claims related to COVID-19, and also lower premium growth associated with rapidly growing unemployment rates and firm closures.
  • In US Property & Casualty (P&C), commercial lines led the uptick in 2019, with commercial auto and general liability growth particularly strong. Underlying exposure growth and accelerating rate increases both contributed. In Canada, strong rate increases across the board supported overall market growth. We expect the sharp recession in 2020 will lead to a decline in exposures, though modest rate increases are expected to continue on the commercial side. Overall, we project that premium growth will decline modestly in real terms this year, before re-accelerating in 2021.
  • The outlook for US P&C remains subdued with falling premiums and a squeeze on profitability. Business interruption (BI) losses on account of this year’s pandemic remain hard to quantify. Also workers’ compensation claims could rise based on some states enacting statutes of presumptions. We expect higher claims in some other commercial lines, including credit & surety, event cancellation, director and officers (D&O) and medical malpractice. In contrast, personal auto could have a year of solid profitability in 2020, depending on how far accident frequency falls, over and above premium give-backs. Pandemics are generally not covered in P&C insurance policies and as such, we do not expect a significant increase in overall claims, though unquantifiable exposure exists in some unexpected lines (eg, covers for dentist offices in Canada). In the aggregate these should be manageable.

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