Canada’s Minister of Finance, François-Philippe Champagne, tabled his budget on November 5. The extensive document includes measures aimed at helping communities better prepare for natural disasters.

Section 5.4 of the budget, entitled Strengthening Disaster Preparedness, addresses, among other things, the particular risk facing certain regions of the country where the likelihood of a major earthquake is higher. These include southwestern British Columbia and the St. Lawrence River valley between Quebec City and Ottawa.

The proposed earthquake insurance backstop will take another step forward, a development likely to be welcomed by insurers that are members of the Property and Casualty Insurance Compensation Corporation (PACICC). PACICC has been advocating for such a mechanism with government authorities for several years.

The government has announced that it will soon introduce legislation to establish the Canadian Earthquake Insurance Facility. The announcement has been welcomed by several insurance industry organizations (see Industry reactions below).

To strengthen Canada's ability to withstand a rare event such as a major earthquake striking a densely populated region, the government intends to establish this insurance backstop.

“Financed through nominal levies on insurers, the Facility would provide emergency funding of up to $50 billion to the property and casualty insurance sector following an extreme earthquake,” the budget states on page 281.

The legislation will seek to implement the facility quickly for federally regulated insurance companies while working with the provinces to extend access to provincially regulated insurers. The legislation would be reviewed five years after implementation to assess its effects on the earthquake insurance market.

Wildfires

Regarding wildfires, the budget notes that approximately 5,400 fires burned some 4.5 million hectares in 2026. These fires forced more than 33,750 people to evacuate their homes, including 8,800 members of Indigenous communities.

To address the specific evacuation needs of Indigenous communities, the government announced additional funding in October for the Emergency Management Assistance Program, with an allocation of $865.6 million for 2026-2027. The budget provides $461 million annually for the following four years, bringing planned funding to $2.7 billion over five years.

In addition, the government will provide up to $2.5 billion to aircraft manufacturer De Havilland Canada to increase its production capacity for water bombers at its Alberta facility.

The superintendent and competition

The federal government is continuing its efforts to increase competition in Canada's financial sector, including by amending the mandate of the Office of the Superintendent of Financial Institutions (OSFI). The legislation governing OSFI will be amended to include a secondary objective related to competition.

In carrying out its regulatory mandate, OSFI will be required to consider “competition considerations, such as proportionality of requirements, compliance burden and market impacts, are more clearly and consistently reflected in how OSFI regulates and supervises financial institutions,” the Minister of Finance states on page 146 of the budget.

To “make the process more predictable, transparent and timely” for a financial institution, including an insurance company, to become federally regulated, the relevant legislation will be amended to give the government a one-year deadline to decide on applications submitted by new institutions.

In his previous budget, tabled in November 2025, Champagne had already announced the federal government's intention to increase competition in the banking sector.

The government has also announced its intention to expand infrastructure investment opportunities for Canadian life insurers by making more investments in transportation networks, energy infrastructure and other assets in the Canadian economy eligible.

Industry reactions

Celyeste Power, president and CEO of the Insurance Bureau of Canada (IBC), welcomed the government's commitment to introduce legislation establishing an insurance backstop in the event of a major earthquake. “A major earthquake is a question of when, not if”, she says.

Power notes that the industry has been calling for such a mechanism for several decades and that Canada is the only G7 country facing significant seismic risk without a financial protection mechanism in the event of a major earthquake.

IBC also welcomes the proposed change to OSFI's mandate included in the Carney government's budget.

For its part, the Insurance Brokers Association of Canada (IBAC) welcomed the opportunity to participate in discussions with the federal government and ensure that the perspectives of clients and insurance brokerages were heard. “Having a federal government solution in place will provide the necessary conditions for the market to respond over time by improving earthquake coverage and reducing deductible levels,” IBAC says in its press release of November 5.

“British Columbia and Quebec face the highest probability, and the economic fallout would be devastating for those living in affected communities. But it doesn't stop there: the resulting financial upheaval and instability would cascade throughout the national economy. All Canadians can be reassured by today's announcement,” adds Peter Braid, CEO of IBAC.

Climate Proof Canada, a coalition that includes numerous associations, including IBC and IBAC, as well as major insurance companies, also welcomed the announcements, particularly those concerning emergency management in First Nations communities.

However, the organization adds that the approach to economic climate resilience should include other measures, notably renewing and increasing funding for the National Adaptation Strategy and making dedicated investments in infrastructure resilience.

Climate Proof Canada also called for housing support measures that do not encourage construction in areas vulnerable to flooding or wildfires. It also called for updates to building codes.

Capital gains taxation

The Minister of Finance has also created the Canada Growth Incentive to help high-potential businesses attract investment. The announcement includes two components:

  • A new tax exemption on up to $15 million in capital gains realized from the sale of a qualifying successful investment.
  • An enhancement to the small business investment rollover, allowing more capital gains tax to be deferred when proceeds are reinvested in another Canadian business.

For a founder realizing a capital gain of $15 million, this would mean retaining nearly 96% of the value realized, compared with 71% previously. The incentive would provide $715 million in tax relief over four years beginning in the 2027-2028 fiscal year, according to page 125 of the federal budget.

However, page 379 specifies that certain businesses are not eligible for this exemption, including those engaged in certain professional activities, such as accounting, law, notarial services, medicine, engineering and architecture, as well as “any business whose principal asset is the reputation or skill of one or more employees.”

Businesses operating in agriculture, fishing, forestry, mining, financial services, insurance, utilities, real estate, food services and accommodation, arts, recreation and entertainment are also excluded.

In its response to the budget, the Conseil du patronat du Québec highlighted the announcement among the measures it welcomed. For its part, the Canadian Federation of Independent Business (CFIB) considers the measure promising and believes it could become a powerful driver of investment. However, CFIB criticizes the numerous complex rules which result in “excluding about half of the businesses that could otherwise use it,” while describing Champagne's budget as a “mega disappointing for Canadian small businesses.”