Canadian P&C Insurers Confront Rising Catastrophe Risks
Morningstar DBRS reports that Canadian property and casualty (P&C) insurers remain financially strong, supported by solid capital margins and growth potential. However, they increasingly face risks from natural catastrophes, which could lead to significant losses.
Industry Analysis at Credit Outlook Toronto 2026
Marcos Alvarez, Managing Director of Global Financial Institution Ratings at Morningstar DBRS, emphasized that climate risk is the foremost challenge for Canadian P&C insurers. He noted other risks such as cyber security, geopolitical tensions, and artificial intelligence, but highlighted climate risk as the top concern.
“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.
Impact of Natural Catastrophes on Canadian Insurers
Last year set a record for natural catastrophe insurance losses in Canada, totaling approximately $9.3 billion. This included the Jasper wildfires, the second costliest wildfire on record after the 2016 Fort McMurray fire.
- The area burned by wildfires in Canada has grown steadily each year.
- Wildfires are increasingly threatening populated areas, raising risks for insurers covering homes, vehicles, and businesses.
- Return on equity for P&C insurers is closely linked to their exposure to these natural catastrophe losses, posing a growing concern.
Summary
Canadian P&C insurers, while robust, face escalating threats from climate-related disasters that increasingly impact their financial stability.
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