Brokers are unlikely to be directly affected by a liberal campaign pledge to raise corporate tax rates on insurance companies making more than $ 1 billion in profits a year, suggests the CEO of the national association brokerage.
As quoted by The Canadian Press, On August 26, Prime Minister Justin Trudeau proposed to increase the corporate tax rate on banks and insurance companies with profits exceeding $ 1 billion by three percentage points.
CP quoted Trudeau as saying that banks and insurance companies have made “windfall” profits from the government’s economic stimulus measures.
Peter Braid, CEO of the Insurance Brokers Association of Canada, said Canadian Underwriter On Monday, he doesn’t expect the campaign promise to directly affect brokerage houses, although campaign promises tend to lack detail.
“While this announcement may be good policy, it is not good economic policy. In my opinion, specific industrial sectors should not be segmented with different tax levels. This not only adds unnecessary complexity to the corporate tax system, but it can also lead to an influx of capital to other jurisdictions with lower rates, ”Braid said on Monday.
A federal election is scheduled for September 20.
“This week Canada’s biggest banks are posting their last massive billions of dollars in profits… as we rebuild we’re going to ask the big financial institutions to pay back a bit,” Trudeau said last week, as quoted by CP.
Most Canadian P&C insurers don’t earn nearly $ 1 billion a year in premiums, let alone profits. Canada’s largest insurer, Intact Financial Corp. hit the profit threshold of $ 1 billion in 2020. Intact last February reported net income of $ 1.082 billion in 2020, up 44% from $ 784 million in 2019.
For their part, the Big 3 life insurers made profits of more than a billion dollars last year. Sun Life Assurance Company of Canada, Great-West Lifeco Inc. and The Manufacturers Life Insurance Company reported 2020 net income of $ 2.4 billion, $ 3.1 billion and $ 5.9 billion respectively.
None of the P&C insurers listed in the 2021 Canadian Underwriter’s Statistical Guide had underwriting profit of $ 1 billion or more in 2020. The guide to statistics uses data from MSA Research. Of the 127 insurers listed, 114 had net premiums written of less than $ 1 billion in 2020.
The Liberal campaign pledge announced on August 26 includes the establishment of an unspecified “clawback dividend” for the banking and insurance sectors that would last for four years, which, combined with the tax hike, would pay off at least $ 2.5 billion per year, reported CP.
Although most Canadian insurers are not publicly traded, the Office of the Superintendent of Financial Institutions publishes financial data on federally regulated property and casualty insurers.
OSFI figures show that some of the largest insurers reported net income of over $ 100 million in 2020. Examples include: Lloyd’s Underwriters, $ 591 million; Allstate Insurance Company of Canada, $ 351 million; The Co-operators General Insurance Company, $ 290 million; and National Security, $ 183 million.
Desjardins General Insurance Group did not have a consolidated report from OSFI, but Certas Habitation et Auto reported net income of $ 148 million in 2020 while The Personal reported $ 137 million.
Featured Image via iStock.com/Julen Arabaolaza