Alberta Rejects Public Auto Insurance, Examining Viable Solutions and Ways to Stop the Exit of Private Insurers

Market players, such as Sonnet Insurance Company and others, have decided to stop offering auto insurance coverage in Alberta driven by the province’s insurance operating environment, which has not allowed for profitable growth. We do not consider Sonnet’s exit as a significant event, having no adverse credit ratings implications on its parent company, Definity Financial Corporation. However, more generally, we view regulatory uncertainty and constrained profitability as a drag on earnings, especially for insurers with a portfolio concentration in Alberta auto insurance.

Key highlights
-- Alberta auto insurers have experienced years of weak profitability and regulatory uncertainty, leading to calls for major auto insurance reforms in the province.
-- With a fixed rate cap in place for 2024 and no clear long-term solution, the regulatory and operating environment remains unfavourable for auto insurers in Alberta.
-- Sonnet Insurance Company's planned exit from the Alberta auto market has had no credit rating impact on its parent company, Definity Financial Corporation.

According to Nadja Dreff, Senior Vice President, Sector Lead, North American Insurance Ratings, “Until a couple of weeks ago, the Government of Alberta contemplated introducing a public insurance system but has since indicated that it will likely not be pursuing that option. Nonetheless, the province needs to find a long-term solution to its auto insurance challenges or risk further capacity constraints, thereby making it more difficult for Albertans to get adequate coverage at an affordable price.”