Canadian P&C Insurers Facing Rising Catastrophe Risks
Morningstar DBRS reports that Canadian property and casualty (P&C) insurers remain financially strong, with solid capital reserves and growth prospects. However, they face increasing risks from natural catastrophes and the resulting losses.
Climate Risk as the Leading Challenge
At Credit Outlook Toronto 2026, Marcos Alvarez, Managing Director of Global Financial Institution Ratings at Morningstar DBRS, emphasized that climate risk poses the greatest challenge to P&C insurers in Canada.
“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 Natural Catastrophe Losses in Canada
The previous year saw record-breaking natural catastrophe insurance losses in Canada, totaling approximately $9.3 billion. This included the Jasper wildfires, one of the costliest events on record, second only to the 2016 Fort McMurray wildfire.
Increasing Wildfire Threats
The area affected by wildfires in Canada has steadily grown annually. As fires approach more populated regions, insurers are exposed to higher risks for home, auto, and commercial policies, resulting in potential significant financial losses.
Impact on Profitability
Return on equity for P&C companies largely depends on their vulnerability to natural catastrophe losses, a concern escalating both in Canada and worldwide.
Summary
Canadian P&C insurers maintain robust financial health but must develop strategies to mitigate rising natural catastrophe risks, particularly from escalating wildfire threats influenced by climate change.