An extensive new report from EY (Ernst & Young LLP) on the current state of the property and casualty (P&C) commercial insurance market in Canada notes that the commercial automobile and commercial property lines of business alone generated premiums over $24-billion in 2024. These are forecast to grow significantly in the coming years as demand increases, as well.
“The convergence of economic pressures, regulatory changes, an evolving competitive landscape and technological advancements is significantly revolutionizing P&C commercial insurance,” the firm writes. “Insurers must embrace innovation and adapt their strategies.”
Interest rates
The report looks at distribution, underwriting and pricing, claims and back-office enablement, noting that the commercial insurance market is deeply influenced by macroeconomic factors – variables which shape insurers investment strategies, underwriting and pricing. “Where interest rates have been steadily declining over the past year, insurers face increased pressure on investment income,” the report states.
Entitled Commercial insurance reimagined: Driving growth through innovation and resilience in Canada, the report looks at pricing (firm, although broader conditions are easing), reinsurance, tariffs, evolving risks including climate change and natural disasters, product innovation and includes a regulatory outlook.
It notes initiatives gaining momentum, including the use of modular policies, real-time risk data, growing use of parametric insurance and the movement towards the use of more simplified language.
Parametric insurance
Other sections include a discussion about reinsurance costs, product innovation, future business models and the ways brokers are deepening their strategic role in the evolving distribution and product landscape: 79 per cent of brokers say they are proactively informing clients about emerging risks and exposures as part of maintaining their status as trusted advisors while 41 per cent of insurers say they are prioritizing digital empowerment for agents and brokers.
In addition to parametric insurance usage rising, they also say there is a rise in usage-based or on-demand insurance models. Still, they say 50 per cent of gig workers in Canada who rely solely on gig income, lack insurance coverage for their business. The wide-ranging report also examines talent shortages, agentic artificial intelligence and a number of other topics, as well.
“The Canadian commercial insurance landscape is undergoing a profound transformation, driven by technological advancements, evolving economic pressures and shifting regulatory requirements,” they conclude. “The industry’s future will depend on insurers’ ability to innovate and adapt to these dynamic forces while maintaining resilience and customer-centricity.”
Pricing trends
Property: According to the report, property rates decreased by three per cent, year-over-year, in the fourth quarter of 2024, driven by market capacity and increased competition. They say potential increases may be on the horizon, due to natural catastrophe losses, tariffs on steel and aluminum and claims severity.
Cyber: EY says cyber insurance rates decreased by three per cent during the same period, thanks to increased market capacity. Rates in this segment are expected to remain stable.
Casualty: Rates fell by two per cent in the fourth quarter of 2024, driven lower by strong competition and insurers’ appetite for growth in the segment. “The market is expected to remain stable to softening, with competition driving rate reduction for well-managed accounts,” they write. “However, rising repair and liability costs in commercial auto, along with concerns over reserve adequacy, may put upward pressure on future pricing.”
Financial and professional lines: Rates fell three per cent during the period, driven by increased capacity from new entrants and competitive market conditions. Rates are expected to remain competitive. Continued rate improvements are expected in directors and officers’ coverage with excess capacity keeping overall rates down.
