Canadian commercial insurance renewal rates decelerated sharply in the first quarter of 2026, with the overall average increase falling to 1.67%, less than half the 3.85% recorded in Q1 2025, according to the final edition of the Applied Commercial Index, the industry's benchmark for commercial premium rate changes.
The Q1 result marks the steepest year-on-year deceleration since Applied Systems launched the index and confirmed that the softening cycle underway since mid-2024 has intensified considerably. Marsh's Global Insurance Market Index recorded a 6% decline in Canadian commercial rates during Q1 2026, citing surplus capacity and strong insurer appetite as the primary drivers of competition in the property market, with most quota-share placements over-subscribed.
"The Q1 2026 results reflect a significant acceleration of the market softening we've been tracking over the past several quarters, with overall renewal rates dropping to 1.67% — less than half of what we saw in Q1 2025," said Steve Whitelaw, SVP and general manager, Canada, at Applied Systems.
Rate trends varied across commercial lines. Business and professional services was the only segment to record a quarter-on-quarter increase, with premium renewal rates rising to 2.43% in Q1 2026 from 1.83% in Q4 2025. Construction, erection and installation services fell to 1.56% from 2.52%. Hospitality services dropped to 0.43% from 0.96%. Real estate property declined to 1.02% from 1.68%, and retail services eased to 2.39% from 3.12%.
Aon's Spring 2026 Canadian Insurance Market Update found that insurers are now competing actively for quality commercial accounts, particularly in primary casualty, with new entrants and established markets broadening appetite, stepping up line sizes and sharpening terms.
The Canadian commercial liability market ended 2025 with a net insurance service ratio of 81%, underscoring the strong profitability supporting this competitive posture.
In commercial property, increased capacity and improved insurer results are supporting broader coverage discussions and more flexible program structures for well-managed risks. However, underwriters remain acutely focused on perils including severe convective storm, flood, wildfire, earthquake and windstorm in Canadian hotspots, with data quality and up-to-date valuations key to unlocking improved terms.
While casualty insurance rates in Canada declined 5% overall in Q1 2026, marking the 11th consecutive quarter of declines, risks exposed to the US and other complex exposures saw selective rate increases, some double-digit, with US auto liability underwriting tightening significantly, including higher attachments and shared loss structures.
Commercial auto also remains a hard-market holdout, with Alberta's combination of rate caps and rising claims costs having driven several insurers to exit the provincial auto market entirely, reducing competition and limiting choices for fleets operating in that province.
The market dynamic in 2026 is starkly two-speed. Applied Systems' separate Rating Index found that personal auto premiums rose 11.1% year-on-year in Q1 2026, while personal property premiums rose 8.6%, with Alberta recording the steepest increases at 21.3% for auto and 16.2% for property.
Whitelaw described a growing divergence in the personal lines market, with Alberta continuing to lead rate increases while moderation is beginning to emerge in provinces like Quebec.
That divergence reflects deeper structural pressures. Canada's 2025 wildfire season was projected to be the country's second-worst on record, with over 7.25 million hectares burned, reinforcing ongoing insurer caution around catastrophe-exposed personal lines risks.
Canada recorded an unprecedented $8 billion-plus in insured catastrophe losses in 2024, with inflation in construction costs continuing to push rebuilding expenses higher, squeezing insurer profitability in property lines even as commercial rates soften.
The Q1 2026 report is also the last. Applied Systems has confirmed it is discontinuing the Commercial Lines Index as it reimagines how it delivers market intelligence aligned with its evolving commercial lines roadmap. The company has directed readers to the Canadian Personal Lines Index for continued market insights in the interim.
The index has served as one of the Canadian market's primary benchmarks for commercial rate movements since its introduction, and its discontinuation removes a reference point brokers and carriers have used to track and contextualize renewal conversations. Applied's decision to pause rather than retire the format suggests a successor product is in development, though no timeline has been provided.
