This article was written by Amanda Stephenson and published by The Canadian Press on November 22, 2024. According to a global credit rating agency, the extensive modifications recently made to Alberta’s auto insurance system are a move towards improvement. However, the unpredictable and increasing claims due to hailstorms are a concern.

Nadja Dreff, the senior vice-president and sector lead for global insurance and pension ratings at Morningstar DBRS, expressed that the reforms unveiled by the Alberta government are beneficial for a market that has been progressively unprofitable for insurers. Dreff highlighted that the government’s decision to permit rate increases of up to 7.5 percent annually, a significant jump from the previous 3.7 percent cap, will provide insurers with more assurance about their capacity to continue operations in the province.

However, Dreff pointed out that the escalating number and intensity of natural disasters in Alberta, specifically hailstorms, pose a significant risk to the province’s auto insurance industry. It is uncertain whether the new, higher rate cap will be sufficient for the industry to cover the increased payouts related to future hailstorms.

The Insurance Bureau of Canada reports that Alberta has witnessed five of the top ten most expensive natural disasters in Canadian history since 2016. These events have exerted significant pressure on home, business, and auto insurance premiums.

Those interested in investment should consider how these changes and uncertainties could impact the auto insurance sector in Alberta, and how they might shape the market’s future profitability.