Canadian life and annuity companies have, for the longest time, been a story of consistency and diversification, according to AM Best researchers, commenting on the company’s market segment report entitled Canadian Life/Annuity: A Focus on Digitization Bolsters Growth.
The rating’s agency’s outlook for the industry remains stable, they add, as life sales continued to increase in 2025 and while insurers focus on digital transformation and improvement through the deployment of artificial intelligence (AI).
The report notes the industry’s prudent regulatory capital reserves, favourable earnings and underwriting, diversified lines of business, growing geographic footprint, favourable top-line growth and the industry’s focus on enterprise risk management as factors supporting its assessment.
Challenges include the inflationary pressures that policyholders face, uncertainty (although this is also noted as an opportunity, as the sentiment caused consumers to see an increased need for insurance), and the fact that operational risks, including cyber threats, are increasing as digitization continues.
Premiums reach record high
“Total Canadian life insurance new annualized premium reached a record high of $2.3 billion in 2025,” the report states. “This is a four per cent increase from 2024, mainly driven by whole life premiums.” These premiums grew 10 per cent and accounted for 70 per cent of the premium market share. “Within the whole life category, the participating whole life products remain the highest selling and represent 87 per cent of the new premiums sold.”
The report also notes a growing coverage gap where previously acquired policies are not keeping pace with inflation, “including higher mortgages and salaries,” they write.
Regulatory capital notably higher than supervisory targets
Finally, they note that insurers in Canada tend to maintain higher reserves than required by regulators: “The regulatory prescribed life insurance capital adequacy test (LICAT) from Canada’s Office of the Superintendent of Financial Institutions (OSFI) and the capital adequacy requirements guideline for life and health insurance ratios (CARLI) from the Autorité des marchés financiers (AMF) have been maintained by AM Best-rated insurers notably above supervisory targets,” they write. “The four largest Canadian L/A insurers have all maintained an operating LICAT above 125 per cent as of 2Q 2026.”
