Overall, companies in Canada’s property and casualty insurance sector have a stable outlook in terms of financial strength. However, “climate-related catastrophes, personal auto pressures, economic uncertainty and rising cyber threats remain key challenges to the industry's stability,” says AM Best.
The report, entitled Canada Property/Casualty: Strong Earnings and Improved Underwriting Results Underpin Stable Outlook, was published by the agency on Sept. 21.
“The Canadian P&C insurance sector remains resilient, supported by strong capitalization, improved underwriting profitability, steady investment returns and technological efficiency,” AM Best says in the report summary.
The document’s authors note the increasing sophistication of cybersecurity threats and a rise in ransom demands. “Sustaining profitability going forward will depend on the industry’s ability to be agile and refine its risk management practices and leverage technological innovations, including artificial intelligence (AI),” the report states.
Regulatory framework
In its assessment of the situation, the agency notes efforts by regulators to oversee the industry, both federally through the Office of the Superintendent of Financial Institutions (OSFI) and at the provincial level. Major auto insurance reforms are underway in Ontario and Alberta.
AM Best highlights OSFI’s recent release of guidelines on cyber risk management and climate-related risks. Regarding auto insurance reforms, the agency notes that in Ontario, structural changes introduced by the province will force insurers to review their policies and how they “engage policyholders to guide them through complex coverage decisions”.
Regarding Alberta’s reform, the authors believe the transition period could be difficult for insurers’ profitability in the short term while the market adjusts to the proposed changes. Over the longer term, a system aimed at reducing the number of cases settled in court should help restore the profitability of auto insurance.
Competition
In 2025, approximately 98 per cent of Canadian P&C insurers had a credit rating of A- or higher, a proportion similar to the previous year. Some 14 issuers saw their ratings improve, while two experienced a deterioration in their borrowing capacity.
Of the 97 companies analyzed by AM Best, only three had their ratings assigned a negative outlook, mainly due to mergers or acquisitions involving companies with less favourable credit profiles.
Regarding the reinsurance market, AM Best says it revised the outlook for the global market in this sector at the beginning of 2026, changing it from positive to stable. The agency attributes this to “property pricing softness, persistent casualty challenges, and elevated catastrophe losses.” According to AM Best, underwriting discipline has remained broadly intact, retention levels and high attachment points have generally been maintained, and reinsurers remain very well capitalized.
Consolidated market
The report notes that consolidation continues in Canada, where three major transactions were completed in 2026: the acquisition of a significant portion of Travelers’ Canadian portfolio by Definity Financial Corporation, and the merger of Gore Mutual and Beneva.
Meanwhile, the acquisition of Everest Insurance Company of Canada by Wawanesa Mutual Insurance Company, announced in March 2026, is expected to close in the final quarter of 2026. A total of $305 million in commercial insurance premiums is being transferred as a result.
Climate-related claims
AM Best also provides an update on the major catastrophic losses of 2025 and the trend in the first half of 2026. In June alone, a series of major convective storms caused more than $1 billion in damage across several provinces, according to estimates by Catastrophe Indices and Quantification (CatIQ).
Despite the high cost of climate-related catastrophic claims in 2025, at more than $2.4 billion, Canadian insurers, as a whole, improved their combined ratio and underwriting results, the agency notes. The improvements were significant in personal lines and more evident in home insurance, due to the lower impact of extreme weather events in 2025 compared with the previous year.
In terms of underwriting performance, the Canadian industry’s loss ratio in commercial insurance stood at 44.3 per cent in 2025. This represents a decrease of 7.7 points from the previous year and is the lowest rate in 10 years. This result is welcome in a context where insurance revenue rose by only 2.1 per cent in 2025, due to a softening market and more flexible underwriting rules.
Uncertainty
The report also addresses geopolitical risks related to the trade conflict launched by the United States and the ongoing wars in Ukraine and the Middle East. These factors increase economic uncertainty and can adversely affect insurers’ revenues.
It also mentions exposure to cyber risks, the use of artificial intelligence, the growing share of wholesalers in the market, as well as the increasing impact of global warming on the area burned by wildfires in Canada.
On the latter point, AM Best notes that insured losses caused by wildfires totalled $8.1 billion between 2016 and 2025, more than 10 times the $734 million in insured losses recorded during the 2006-2015 decade.
