Canadian P&C Insurers Confront Rising Catastrophe Risk
Morningstar DBRS reports that despite the continuing financial strength and growth potential of Canadian property and casualty (P&C) insurers, they are encountering heightened exposure to natural disasters and related losses.
Industry Overview and Key Concerns
Speaking at the Credit Outlook Toronto 2026 conference, Marcos Alvarez, Managing Director of Global Financial Institution Ratings at Morningstar DBRS, analyzed the Canadian P&C insurance sector and emphasized that climate risk remains its most pressing challenge.
“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.
Financial Impact and Loss Trends
The previous year set a new record for Canadian natural catastrophe insurance losses, reaching approximately $9.3 billion. This figure includes the devastating Jasper wildfires—among the costliest in the country’s history, surpassed only by the 2016 Fort McMurray wildfire.
The expanding area of wildfire destruction across Canada has grown consistently year after year. As fires move closer to towns and cities, insurers with home, auto, or commercial coverage face mounting risks and potential financial hits.
Profitability and Risk Exposure
Return on equity for P&C insurance companies is increasingly tied to their exposure to natural catastrophe losses. This trend underscores the urgent need for the industry to develop new strategies for transferring or mitigating climate-related risks, both domestically and worldwide.
Author’s Summary
Canadian P&C insurers maintain robust capital positions but face escalating climate risks, urging them to enhance resilience and innovate in catastrophe risk transfer strategies.