Canada's federal financial regulator just laid out its risk roadmap for the year ahead - and insurers should pay close attention to what made the list.
On April 14, 2026, the Office of the Superintendent of Financial Institutions released its Annual Risk Outlook for fiscal year 2026-2027. The document names real estate secured lending risk, non-bank financial institution risk, and funding and liquidity risk as the top risks facing the Canadian financial system. It also includes a supervisory strategy specific to the insurance sector - and that is where things get interesting for anyone holding a licence.
OSFI describes an industry that continues to demonstrate resilience but faces no shortage of complications. Geopolitical uncertainty, rapid technological change, catastrophe-related losses, competitive pressures, and elevated integrity and security risks are all shaping the environment in which insurers now operate, grow, and distribute their products. Competitive forces, the regulator notes, are accelerating shifts in operating and distribution models and inorganic growth strategies, contributing to increased execution risks.
Investment risk is getting particular attention. OSFI flags that continued market volatility exposes insurers to reinvestment and valuation risk across asset classes. Private market assets are also taking up more space in insurer portfolios - and the regulator is not entirely comfortable with that trend, describing what it brings as increased opacity, complexity, and potential illiquidity constraints. Expect OSFI to examine private credit holdings closely, with a focus on their impact on earnings, capital, and the effectiveness of risk oversight.
Life insurers have a different set of concerns on the table. OSFI reports increased volatility in policyholder behaviour losses - lapses and surrenders, specifically - and while these remain modest relative to total available capital, the regulator warns that shifts in policyholder behaviour can carry real implications for earnings, capital adequacy, and in some cases, operational integrity. For certain life insurers, OSFI plans to assess policyholder behaviour risk, asset and liability management, and liquidity.
Property and casualty insurers are dealing with underwriting pressure from another direction. Claims inflation, particularly in auto insurance, continues to push costs higher, and a softening commercial lines market is testing financial and operational soundness. For selected P&C companies, OSFI will conduct thematic monitoring of cyber insurance underwriting and the emerging coverage of AI in underwriting.
The supervisory strategy is organized around four areas: business risk, financial resilience, operational resilience, and risk governance. On business risk, OSFI will monitor insurers' strategic direction and business model evolution, including the integration of AI into core operations, and continue assessing exposure to geopolitical risks and execution risks tied to inorganic growth.
On financial resilience, OSFI plans targeted reviews of select insurers' own risk solvency assessments, including follow-up on recommendations from prior ORSA work. The regulator will also keep watching how the shifting housing market affects mortgage insurers and will monitor catastrophe risk resilience across the industry.
Operational resilience gets its own set of priorities. OSFI intends to carry out cyber and technology risk reviews for selected insurers, continue intelligence-led cyber resilience testing at larger companies, and monitor how insurers are integrating AI and managing business integration. Every insurer, regardless of size, can expect scrutiny of cyber incident response and overall preparedness.
On risk governance, OSFI will examine whether boards are effectively overseeing risk appetite frameworks and how those align with strategy, financial plans, and capital plans. The regulator will also look at governance around complex technology and business transformations, and at combined oversight functions - focusing on whether controls related to independence and stature are doing their job.
OSFI also highlights its administrative role under the Insurance Companies Act, where lead supervisors conduct risk assessments and provide approvals for more than 1,100 transactions each year related to the vested asset regime for branch insurers and related party reinsurance under the DA-21 regime.
For internationally active insurance groups where OSFI serves as group-wide supervisor, the regulator will coordinate with foreign authorities to share risk insights and participate in supervisory colleges of international insurers operating in Canada. Crisis readiness rounds out the agenda, with insurance supervisors supporting the development of recovery planning expectations and crisis management group processes focused on these international groups.
Superintendent Peter Routledge struck a direct tone in the accompanying news release: "Canadians can be confident that OSFI acts early, transparently, and decisively to strengthen financial system resilience in an uncertain economic and geopolitical environment."
The Annual Risk Outlook is published once a year in the spring. If risks in the financial system evolve significantly, OSFI may release an update in the fall. The regulator is also seeking input on a new Credit Risk Management Guideline, with comments due by July 29, 2026, and updated liquidity adequacy requirements targeting specific retail deposit categories take effect May 1, 2026.
For insurers, the takeaway is straightforward. OSFI has laid out where it plans to look, and it is not being coy about it.
