Canadian P&C Insurers Face Rising Catastrophe Risks
Morningstar DBRS reports that Canadian property and casualty (P&C) insurers remain financially strong, showing healthy capital reserves and ongoing growth. However, their stability is increasingly challenged by the growing frequency and severity of natural catastrophes.
Climate Risk as the Primary Threat
At the Credit Outlook Toronto 2026 event, Marcos Alvarez, Managing Director of Global Financial Institution Ratings at Morningstar DBRS, provided insights into the state of the Canadian insurance industry. He emphasized that environmental risk has become the dominant threat for P&C insurers, outpacing other emerging concerns.
“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.
Escalating Losses from Natural Disasters
Canada experienced record-breaking losses from natural catastrophes last year, estimated at approximately $9.3 billion. Among these incidents were the destructive Jasper wildfires—among the most expensive in Canadian history, surpassed only by the Fort McMurray fires in 2016.
The steady increase in burned acreage each year reflects a growing proximity of wildfires to densely populated areas. This trend heightens the risk exposure of insurers covering residential, automotive, and commercial assets.
Financial Performance Under Pressure
Morningstar DBRS notes that the return on equity for P&C insurers is closely linked to their exposure to catastrophe-related losses. As natural disasters become more frequent and severe, the industry’s profitability and capital resilience will continue to be tested both in Canada and worldwide.
Author’s Summary
Canadian P&C insurers remain financially solid but face mounting strain from increasing climate-driven disasters that directly threaten future profitability.