Canadian P&C Insurers Face Rising Catastrophe Risk
Morningstar DBRS reports that Canadian property and casualty (P&C) insurers remain financially strong, with solid capital margins and growth potential. However, they are increasingly threatened by natural catastrophes and the resulting losses.
Industry Analysis at Credit Outlook Toronto 2026
Marcos Alvarez, Managing Director of Global Financial Institution Ratings at Morningstar DBRS, emphasized the critical challenges facing the Canadian insurance sector. While risks such as cybersecurity, geopolitical tensions, and artificial intelligence exist, climate risk stands out as the foremost concern for P&C insurers.
“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
In the past year, Canadian insurers faced a record $9.3 billion in natural catastrophe losses. This total includes the Jasper wildfires, among the most expensive wildfires in Canadian history, surpassed only by the 2016 Fort McMurray wildfire.
- The number of acres burned by wildfires in Canada has steadily increased each year.
- Wildfires are encroaching closer to populated areas, escalating risks for insurers covering homes, vehicles, and commercial properties.
Impact on Insurer Profitability
The return on equity for P&C insurers is strongly influenced by their exposure to natural catastrophe losses, a concern that keeps growing both globally and in Canada.
Author summary: Canadian P&C insurers remain strong but face escalating financial risk from climate-driven natural catastrophes, particularly wildfires, which significantly affect their profitability and risk management strategies.
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