Canada’s property and casualty insurance market is entering spring 2026 from a position of strength, but organizations face a risk environment that remains far from simple, according to a new industry report.
Aon plc released its Spring 2026 Canadian Insurance Market Update on Monday, outlining a marketplace where capacity is abundant and competition is intensifying, yet underlying threats – from climate-driven catastrophes to geopolitical instability – continue to test insurers and their clients.
“Capacity is ample across many lines, and both domestic and international insurers are actively deploying limits into Canada,” said Russell Quilley, head of commercial risk and chief broking officer in Canada for Aon.
“For many organizations, this is translating into more favourable pricing, broader coverage, and greater flexibility to reshape program structures that were constrained in prior years. At the same time, the risk environment remains complex. Current conditions represent an important window for clients to strengthen their insurance and risk financing programs.”
The report, which covers commercial property, liability, financial lines, and natural resources sectors, finds that the Canadian P&C market closed 2025 with a net insurance service ratio of 84.6%, according to data from MSA Research, a measure of profitability that tracks the relationship between claims costs and insurance revenue.
Global insured catastrophe losses reached an estimated US$127 billion in 2025, marking the sixth consecutive year such losses exceeded US$100 billion, according to the report.
Canada, however, experienced comparatively modest loss activity, with the largest domestic event – a winter storm and melt event across Ontario and Quebec in late March and early April – generating roughly $500 million in insured losses. That reprieve allowed the Canadian industry to replenish earnings following record catastrophe losses in 2024.
Global reinsurance capital reached a record US$760 billion by year-end 2025, the report states, driven by retained earnings, unrealized gains on bonds, and new inflows into sidecars and catastrophe bond markets. That surplus of capital has intensified competition, with supply outpacing stable demand and most reinsurers targeting growth despite some erosion in expected returns.
In commercial property, underwriters remain sharply focused on severe convective storm, flood, wildfire, earthquake, and windstorm exposures, particularly in known Canadian hotspots, the report notes. Accounts with strong risk management, accurate valuations, and limited catastrophe exposure are seeing meaningful rate relief, while properties with adverse loss histories or combustible construction continue to face tighter terms.
The financial lines sector – covering directors’ and officers’ liability, employment practices liability, and crime – is increasingly shaped by artificial intelligence governance risks, according to the report. Insurers are probing AI use cases and controls more closely, with weak or absent AI governance described as an early warning sign for future claims and regulatory exposure.
On the alternative risk front, the report identifies a growing interest in captives, parametric covers, and structured programs as organizations seek greater long-term control over cost and coverage amid expectations of future market volatility.
The Canadian Insurance Market Update was authored by Aon’s commercial risk and broking team in Canada.
