Tabled on Nov. 4 by Canada’s Finance Minister François-Philippe Champagne, the 2025–2026 budget includes a range of announcements affecting the insurance industry.
Regarding the statutory review of the Bank Act, which was initially scheduled for 2023 and later for 2025, its postponement to 2026 had already been announced in the Dec. 2024 economic update delivered by Minister Chrystia Freeland under the Justin Trudeau government.
In Annex 5 of the recent budget, Minister Champagne extends the sunset provisions for the Bank Act until June 30, 2033, along with those relating to insurance companies and to trust and loan companies.
The Insurance Brokers Association of Canada (IBAC) is closely monitoring this file, as the current provisions prevent banks from selling insurance directly in their branches. Allowing such sales would reduce consumer protection, according to IBAC.
This restriction is part of IBAC’s ongoing lobbying activities on Parliament Hill in Ottawa. Association CEO Peter Braid notes that the organization intends to monitor any potential amendments that may occur in the meantime affecting the Bank Act.
Major earthquake
On page 227, the Carney government states it aims to increase the insurance sector’s resilience to natural disasters, including the possibility of a major earthquake. Liam McGuinty, Vice President, Federal Affairs at the Insurance Bureau of Canada (IBC), welcomed the announcement.
IBC underlined that a major earthquake off the coast of British Columbia or in Quebec could result in economic losses amounting to tens of billions of dollars, posing a threat to the country’s economy as a whole.
“Canada is the only G7 country with significant earthquake risk that lacks a formal government-backed financial backstop net for earthquake insurance,” says McGuinty.
IBAC also highlighted this announcement in its response to the budget. “The government’s commitment to work with the insurance sector on this issue will help to safeguard our economy,” it says.
Tax fairness
Several announced measures aim to preserve the integrity of the tax system. “To ensure that Canadian multinational insurers do not avoid tax on their Canadian insurance business operating through a foreign subsidiary, Budget 2025 proposes to amend the Income Tax Act to clarify that income derived from assets held by a foreign affiliate of a Canadian insurance company that support Canadian insurance risks is taxable in Canada,” reads page 219 of the budget.
Some taxpayers believe that this specific rule under the foreign accrual property income (FAPI) regime does not apply to investment income from such assets, the budget clarifies on page 355. The government proposes to clarify that such investment income be included in FAPI. The measure would apply to taxation years that begin after Budget Day.
The national flood insurance program is not mentioned in the budget statement. The word “flooding” appears in various sections, such as those related to the renewal of the National Public Alerting System, the modernization of Canada’s Meteorological Service (MSC), and mapping of flood-prone areas on Indigenous reserves.
Dental Insurance
The government pledges to protect the dental care program, which is expected to benefit five million Canadians, according to estimates on page 25 of the budget.
For the dental benefits plan offered to retired federal public servants, the government plans to increase the required years of service for eligibility from two to six.
Pharmaceuticals
At the Public Health Agency of Canada (PHAC), where savings of 15 per cent over three years are anticipated, page 307mentions that the Patented Medical Prices Review Board (PMPRB) “will modernize its hearings by leveraging existing technology, enabling faster and more cost-effective procedural processes.”
The Canadian Generic Pharmaceutical Association (CGPA) and Biosimilars Canada welcomed the life sciences and manufacturing support measures, including a lower effective marginal tax rate, immediate and accelerated capital investment write-offs, and enhancing the Scientific Research and Experimental Development (SR&ED) tax incentives.
According to Jim Keon, president of both organizations, the budget did not provide sufficient resources PHAC needs to adress its growing backlog of generic and biosimilar drug submissions. There are reportedly 500 applications under review, over 100 of which are “backlogged.”
At the current pace, it will take years to increase capacity and eliminate the backlog. The review process is funded through a cost-recovery model, with the industry covering 75 per cent of the cost, CGPA notes.
“Driver Inc.”
The deliberate misclassification of employees by employers is a problem that has been widely criticized in the trucking industry, where the use of “independent contractors” as drivers has become more common in recent years. This allows employers to avoid paying the proper amount of income tax, or public pension plans and employment insurance contributions, giving them a significant competitive advantage.
To crack down on employers that misclassify employees, Budget 2025 proposes to provide $77 million to the Canada Revenue Agency (CRA) over four years, starting in 2026–2027. The CRA would be able to share information with Employment and Social Development Canada for the purpose of adressing worker mdisclassification.
The moratorium on reporting service fees in the trucking industry is also being lifted. Minister Champagne had already announced this intention on October 30. The Canadian Trucking Alliance (CTA) welcomed the federal government’s announcement and urged the provincial governments to step up their efforts to tackle the “Driver Inc.” system.
Numerous fatal accidents in recent years have involved heavy vehicles operated by companies using the “Driver Inc.” scheme.
Banking competition
Despite the postponement of the statutory review, many changes to the Bank Act are included in the recent federal budget. The government announced its intention to propose a plan in the coming year to “create a more competitive and innovative financial system.”
Ottawa wants to increase competition in the banking sector. Several of the proposed measures focus on fee transparency for consumers charged by financial institutions.
A regulation under the Bank Act will be introduced to ensure “distribution channels for brokered deposits are not unduly limited,” which will give smaller banks access to this market.
A bill will also be introduced to advance open banking to complete the Consumer-Driven Banking Act.
The federal government also plans to include a data-mobility right in the Personal Information Protection and Electronic Documents Act to facilitate data sharing across the economy.
