At a recent industry conference hosted by Morningstar DBRS, analysts covering the Canadian property and casualty (P&C) insurance industry noted that climate change remains the number one risk for P&C insurers. As catastrophe losses rise too, they say it is possible the industry could increasingly consider the use of catastrophe bonds (CAT bonds). 

The conference, Credit Outlook Toronto 2026, in addition to highlighting the persistence of catastrophe risk for insurers, also discussed Definity Financial Corporation’s acquisition of Travelers Indemnity Company, and also discussed Intact Financial Corporation and Fairfax Financial Holding Limited.

“In recent years, a common thread among some of the major Canadian P&C insurance carriers has been their appetite to become global players outside of Canada through mergers and acquisitions,” they state in the Morningstar DBRS note, Natural Catastrophes Are a Brewing Storm for Canadian P&C Insurance Companies.

That said, they add that growing alongside these opportunities is the rising threat posed by natural catastrophes. “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,” says Marcos Alvarez, managing director of global financial institution ratings.

Record setting year of losses 

The note goes on to look at Canada’s record setting year of natural catastrophe insurance losses recorded in 2024. They say in the last 10 years, global insured natural catastrophe losses have increased by 50 per cent. “In Canada, the losses are 2.5 times greater than 10 years ago, driven by floods, wildfires, hailstorms and even hurricanes,” they write.

Alvarez adds: “Perils that were considered secondary, such as wildfires, are increasingly becoming relevant for insurers which may require different underwriting strategies going forward.” 

Among the possible solutions, he says the market could evolve through an increased use of CAT bonds. Although TD Insurance issued the first of its kind Canadian CAT bond in January 2025, and although Alvarez says it remains unclear if other P&C insurers in Canada will follow, he says CAT bonds remain a viable option for insurers as unprecedented natural catastrophe losses continue to affect the country.