NET CLAIMS AND ADJUSTMENT EXPENSES
Figure 2 summarizes the composition of the claims ratio for the year ended December 31, illustrating the impact of accident year claims incurred, catastrophe losses, and prior year favourable claims development.
2016 Net Claims and Adjustment Expenses
|Core accident year claims
|Prior year favourable claims development
* The impact of the $6.0 million reinsurance reinstatement premiums on the claims ratio is fully reflected in the catastrophe losses ratio calculation.
The core accident year claims ratio, which excludes catastrophe losses and favourable claims development, increased in 2016 driven by deterioration in Ontario, British Columbia, and Alberta auto performance, and an increase in net claims severity and frequency.
Catastrophe losses totalled $73.9 million in 2016, representing one of the largest amounts in our history. We also incurred $6.0 million in reinsurance reinstatement premiums associated with recoveries triggered due to the Fort McMurray wildfire. Along with the impact of the Fort McMurray wildfire, the most costly insured disaster in Canadian history, we were also impacted by eight other weather-related events, including six separate wind and hail storms in Alberta, flooding associated with the rainstorm in Windsor, and the effect of Hurricane Matthew in the Atlantic region. Comparatively, 2015 was a relatively benign year. We incurred losses as a result of five weather-related events, including losses associated with three separate wind and hail storms in Alberta, an Ontario deep freeze winter storm, and a British Columbia lower mainland wind and water storm.
We continued to experience favourable claims development overall in 2016, demonstrating our continued prudent reserve levels. However, the continued deterioration in claims activity for Alberta and British Columbia auto resulted in the need for additional reserves related to prior years to be recorded. Comparatively, 2015 benefited from favourable claims development that arose from the one-time Ontario auto regulatory reforms enacted in that year which reduced reserves for certain open claims, primarily related to prior accident years.
Refer to Figure 16, which shows the level of favourable claims development over the past ten calendar years and demonstrates our continued prudent reserving practices.