Brokers are unlikely to be directly affected by a liberal election pledge to raise corporate tax rates for insurance companies that make more than $ 1 billion a year, the National Brokers Association CEO suggests.
As quoted by The Canadian Press, Prime Minister Justin Trudeau proposed on Aug. 26 that the corporate tax rate be increased by three percentage points for banks and insurance companies with profits over $ 1 billion.
CP quoted Trudeau as saying that banks and insurance companies had made “windfall” profits from government stimulus measures.
Peter Braid, CEO of the Insurance Brokers Association of Canada, told the Canadian underwriter on Monday that he did not expect election promises to directly affect brokers, even though election promises typically contain few details.
“This announcement may be good policy, but not good economic policy. In my opinion, certain industries should not be segmented with different tax rates. Not only does this add unnecessary complexity to the corporate tax system, it can also lead to some capital flowing into other jurisdictions at lower rates, ”Braid said on Monday.
A federal election is planned for September 20.
“This week, Canada’s largest banks are releasing their recent massive billions of dollars in profits … so as we rebuild, we’re going to ask big financial institutions to repay a little,” Trudeau said last week, as quoted by CP.
Most Canadian property and casualty insurers don’t make nearly $ 1 billion in premiums, let alone in profits. Canada’s largest insurer, Intact Financial Corp., hit break even in 2020 at $ 1 billion. Intact last February reported net income of $ 1.082 billion in 2020, up 44% from $ 784 million in 2019.
For their part, two of the Big 3 life insurers posted profits of over $ 1 billion last year. Sun Life Assurance Company of Canada, Great-West Lifeco Inc., and The Manufacturers Life Insurance Company reported 2020 net profits of $ 5.57 billion, $ 1.318 billion and $ 912 million, respectively.
None of the property insurers listed in the 2021 Canadian Underwriter Statistical Guide made an underwriting profit of $ 1 billion or more in 2020. The statistics guide uses data from MSA Research. Out of 127 insurers listed, 114 had net written premiums of less than $ 1 billion in 2020.
The Liberals’ election pledge, announced on August 26, provides for the introduction of an unspecified “recovery dividend” for the banking and insurance industries that would last four years, which, along with the tax hike, would bring in at least $ 2.5 billion a year reported CP.
Although most Canadian insurers are unlisted, the Office of the Superintendent of Financial Institutions publishes financial data for government-regulated property and casualty insurers.
The OSFI figures show that some of the largest insurers reported net income of over $ 100 million for 2020. Examples are: Lloyd’s Underwriters, $ 591 million; Allstate Insurance Company of Canada, $ 351 million; The Co-Operators General Insurance Company, $ 290 million; and Security National, $ 183 million.
Desjardins General Insurance Group didn’t have a consolidated report from OSFI, but Certas Home and Auto reported net profits of $ 148 million for 2020, while The Personal reported $ 137 million.
Feature image via iStock.com/Julen Arabaolaza