Canadian P&C Insurers Face Growing Catastrophe Risks
Morningstar DBRS reported that Canadian property and casualty (P&C) insurers remain financially strong, maintaining solid capital margins and growth potential. However, they face mounting exposure to natural disasters and the resulting financial losses.
Climate Risk as the Top Challenge
At the Credit Outlook Toronto 2026 conference, Marcos Alvarez, Managing Director of Global Financial Institution Ratings at Morningstar DBRS, emphasized that climate-related threats pose the most serious challenge for the P&C sector.
“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,” said Alvarez.
Record Losses from Natural Disasters
In the previous year, Canadian insurers faced record natural catastrophe losses estimated at about $9.3 billion. A major contributor was the Jasper wildfires, which ranked among the country's most costly events, second only to the 2016 Fort McMurray fire.
Wildfire activity continues to intensify in Canada, with the burned area increasing annually. Fires are spreading closer to populated regions, worsening potential losses for insurers with exposure across home, automobile, and commercial sectors.
Financial Impact and Risk Management
Return on equity for P&C insurers increasingly depends on the scale of natural catastrophe exposure. This trend highlights the urgency for insurers to find new ways to transfer or mitigate growing climate risks, both domestically and worldwide.
Author’s Summary
Canadian P&C insurers remain stable but face rising losses from climate-driven disasters, prompting an urgent need for more advanced risk transfer strategies.