AM Best is holding a stable outlook on Canada’s property and casualty (P&C) insurance industry, despite notable challenges from catastrophic events in 2023 and 2024.
While catastrophe activity remained manageable in the first half of 2024, Canada’s P&C insurers faced four significant events in the third quarter, potentially marking another record year for losses.
Catastrophe losses in 2023 reached an estimated CAD 3.1 bn, ranking among the five worst catastrophe years on record, trailing only inflation-adjusted losses in 2013 and 2016.
Canada’s P&C industry saw net income rise by 77.5%, from CAD 4 bn in 2022 to CAD 7.1 bn in 2023. Growth in underwriting income and a rebound in investment income fueled profitability, though rising expenses partially offset these gains.
The P&C sector in Canada continues to face challenges from an increasing frequency of extreme weather events, higher reinsurance costs, and ongoing pressures in the personal auto lines. AM Best emphasized the “pivotal role” Canada’s P&C reinsurance sector plays in supporting primary insurers as they contend with more frequent weather-related events.
AM Best observed that the Canadian market is heavily influenced by large international reinsurers offering extensive reinsurance products.
While the rise in catastrophic events has strained direct insurers, it has led to a hardening market for reinsurers, maintaining Canada’s appeal for global players.
Rosemarie Mirabella, director at AM Best
The agency cites several drivers for this outlook, including strong risk-adjusted capitalization, solid operating results, favorable combined ratios, growth in insurance service revenue, and improving investment returns.
AM Best upgraded the global non-life reinsurance industry outlook from stable to positive, citing strong profit margins, higher attachment points, and stricter terms and conditions following major repricing.
Canada’s P&C insurance market introduced notable changes in reinsurance terms, conditions, and program structures during the 2023 renewal season, leading to significant premium increases for primary insurers.
Regional insurers have been particularly impacted by additional reinsurance rate hikes following unprecedented wildfire seasons and increased flooding.
