Canadian P&C Insurers Seek Ways to Transfer Rising Catastrophe Risk
Morningstar DBRS reports that Canadian property and casualty (P&C) insurers remain financially solid, supported by strong capital buffers and solid growth prospects. However, the industry faces an escalating challenge from natural disasters and related financial losses.
Climate Risk as the Top Concern
At the Credit Outlook Toronto 2026 event, Marcos Alvarez, Managing Director of Global Financial Institution Ratings at Morningstar DBRS, analyzed the state of the Canadian insurance market. He emphasized that environmental hazards pose the greatest threat to P&C companies.
“While the industry also faces wider challenges from cyber security, geopolitical risks, and artificial intelligence, climate risk remains the number one risk for P&C insurers,” said Alvarez.
Record Losses and Increasing Exposure
The previous year brought unprecedented insured losses from natural catastrophes in Canada, reaching about $9.3 billion. Among these was the destructive Jasper wildfire, the second-costliest event after the 2016 Fort McMurray blaze.
The acreage destroyed by fires across Canada continues to expand annually, increasing the danger to nearby settlements. This growing proximity heightens loss potential for insurers offering home, auto, and commercial coverage.
Impact on Profitability
Return on equity for Canadian P&C insurers remains closely tied to their exposure to catastrophe events. As climate-related threats intensify, managing this risk has become critical both regionally and globally.
Author’s Summary
Canadian insurers remain financially sound but increasingly vulnerable to mounting natural disasters, driving an urgent need for better catastrophe risk management and transfer strategies.