Canada’s P&C and life insurers are going into 2027 from a position of strength, but catastrophe losses are set to rise over time and growth at home remains hard to find, according to analysts at Morningstar DBRS.
Speaking at the rating agency’s Credit Outlook Toronto conference on October 14, senior vice president Victor Adesanya said the Canadian P&C sector has very strong balance sheets, capital ratios and revenue generation, along with consistent profitability, despite geopolitical volatility and US tariff headwinds.
“We haven’t seen anything so far this year that has given us the opinion that profitability will not continue into the new year,” Adesanya said. He said the double-digit returns on equity seen over the past five quarters could continue in 2027, and that the market is likely to see more competition and more mergers and acquisitions.
The main long-term pressure on P&C insurers is catastrophe risk. DBRS noted that 2024 was exceptional, with more than $9 billion in insured catastrophe losses from events including the Toronto flash flooding, the Jasper wildfire and the Calgary hailstorm. Losses in 2025 and the first half of 2026 normalized, but Adesanya said losses are expected to rise over time. He said underwriting risk selection, pricing and how insurers manage that growth will be key credit considerations.
This year’s events have tested that.
After the September 2 storms in Toronto and southern Ontario, DBRS issued a preliminary industry loss estimate of $1 billion, saying basement flooding and hail claims could take longer to develop and widen the range of outcomes.
CatIQ’s initial estimate for the same event was $563 million. DBRS said insurers’ strong results in 2025 and the first half of 2026 would allow them to absorb the losses without pressure on their credit profiles.
On the life side, vice president Patrick Douville described the past four years as a period of resilience to external events, supported by strong equity markets and generally favorable interest rates. Rate volatility, historically a major driver of life insurers’ results, has been much less damaging recently.
Growth in Canada has been harder to find, he said, pushing some of the largest insurers to look to the US and Asia. Insurers are also favoring products that use less capital, fee-based products and wealth management, and are being cautious about deploying capital, focusing instead on dividend increases and share buybacks.
The panel also discussed artificial intelligence. Douville said AI could improve efficiency in distribution and make advisory channels more responsive to customers, potentially giving some companies an edge over peers. For P&C insurers, AI is increasingly being used in underwriting, claims and operations, while also changing the cyber risk landscape that P&C insurers cover.
“Companies can’t afford not to invest in AI one way or another,” said Nadja Dreff, senior vice president and sector lead for global insurance and pension ratings.
Dreff said AI is no longer a source of competitive advantage, but can become a disadvantage for companies that adopt it too late. She added that controls, governance and data privacy safeguards remain critical.
For brokers, the outlook points to continued carrier profitability and capital, which supports the soft commercial conditions Aon described in its latest market update. More M&A among carriers could also reshape market relationships. The gap between DBRS’s and CatIQ’s estimates for the September storm is a reminder that early catastrophe numbers can move significantly as claims develop.
