Canadian P&C Insurers Confront Escalating Catastrophe Risks
Morningstar DBRS reports that Canadian property and casualty (P&C) insurers continue to show financial strength with solid capital buffers and growth prospects. However, they face an escalating challenge from natural catastrophes that pose mounting financial risks.
Climate Risk as a Primary Concern
At the Credit Outlook Toronto 2026 conference, Marcos Alvarez, Managing Director of Global Financial Institution Ratings at Morningstar DBRS, emphasized the growing exposure of P&C insurers to climate-related events.
“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, Canada recorded about $9.3 billion in natural catastrophe insurance losses, driven by numerous large-scale events, including the destructive Jasper wildfires—second only to the 2016 Fort McMurray fire in costliness. The total burned acreage in Canada continues to climb each year, increasing risks as wildfires spread closer to inhabited areas.
Impact on Financial Returns
The return on equity for Canadian P&C insurers is closely tied to their exposure to natural catastrophe claims. This link has become a critical issue within the broader context of global climate risk, placing pressure on insurers to explore reinsurance and other risk-transfer strategies.
Author’s Summary: Canadian P&C insurers remain financially sound but increasingly vulnerable to mounting climate-driven catastrophe losses threatening their long-term profitability.