The Canadian P&C insurance industry endured insured catastrophe losses amounting to $3.1 billion in 2022, ranking it as the third costliest year in history. However, despite this significant setback, Canadian insurers managed to achieve a robust performance, boasting a combined ratio below 90%. This positive outcome can be attributed to advantageous pricing conditions and favorable adjustments in prior year claims reserves, resulting from conservative loss estimates during the peak of the COVID-19 pandemic.

Nevertheless, the Canadian P&C sector is adapting its pricing strategies to accommodate new loss patterns resulting from natural disasters, and it is anticipated that insurance premiums will continue to rise due to a more challenging international reinsurance market. As Canada grapples with increasingly severe and frequent extreme weather events, there is a growing concern that certain areas of the country may become financially burdensome to insure against natural catastrophes or even deemed uninsurable.

To mitigate these risks, most Canadian P&C insurers have progressively relied on treaty and facultative reinsurance markets to minimize their exposure to catastrophic events. However, global reinsurers also face substantial losses from natural disasters, leading to higher reinsurance costs for specific geographic regions or risks. Consequently, the availability of reinsurance protection for Canadian insurers at reasonable prices may be limited.

In order to address these challenges, it is crucial to implement risk reduction measures, including the development of more resilient infrastructure, stricter construction zoning and building codes, and more stringent criteria for determining suitable locations for construction. The Canadian government’s recent announcement of a flood management strategy highlights the need for a similar framework to effectively address the increasing impact of wildfires in the country.