Canada’s federal budget has established the Canadian Earthquake Insurance Facility, a government-backed financial backstop for the P&C insurance sector following a catastrophic earthquake, closing a gap the industry has pressed Ottawa to address since at least 2016.
Prime Minister Mark Carney’s budget, titled “Masters of Our Destiny,” proposes $142.1 billion Canadian in multiyear spending and tax breaks. For the insurance industry, the most consequential commitment is the earthquake facility. It would provide emergency funding of up to $50 billion to the property and casualty insurance sector following an extreme earthquake. Legislation to establish it will be introduced in Parliament, with both the Insurance Bureau of Canada and the Insurance Brokers Association of Canada set to participate in design and implementation discussions as the process advances.
The scale of Canada’s unaddressed seismic risk makes the announcement significant. The IBC estimates that a severe earthquake could generate insured losses of approximately $52.6 billion - significantly exceeding the $35 billion threshold at which a single catastrophic event could overwhelm the P&C market and contribute to insurer failures. Canada’s P&C industry holds approximately $50 billion in capital to cover all claim types across the country - auto, home and business combined - based on earlier industry research, meaning a major seismic event could exhaust the entire sector’s capital base.
Coverage penetration compounds the systemic risk. Uptake remains around 50% to 65% in British Columbia and just 4% to 7% in Quebec. Federal scientists typically place the probability of a magnitude 8 or greater Cascadia earthquake in the next 50 years at around 30%.
In April 2026, the IBC submitted a detailed proposal to Finance Canada modelled on the structural principles of the US Terrorism Risk Insurance Act - a rules-based, pre-agreed cost-sharing formula applied to extreme earthquake losses. The 2025 budget committed to consultations. The 2026 budget commits to legislation. The IBC noted that Canada had been the only G7 country with significant seismic risk without a federal solution in place.
The budget also amends the mandate of the Office of the Superintendent of Financial Institutions to embed competition as a formal consideration alongside financial stability. OSFI’s existing approach has focused on competition primarily through supervisory flexibility rather than as a formal mandate objective. The amendment would require OSFI to give explicit weight to proportionality, compliance burden and market impacts when making regulatory decisions - a change the IBC said would help foster a more competitive regulatory environment without compromising financial stability.
The budget also advances the Financial Crimes Agency through Bill C-29 - a separate but related commitment the IBC has separately welcomed as a mechanism for tackling the estimated $3-5 billion annual cost of insurance fraud in Canada.
Celyeste Power, president and chief executive of the IBC, said: “IBC welcomes the federal government’s commitment to introduce legislation that would address the financial and economic risks posed by a major earthquake. This is a critical step toward better protecting Canadians and strengthening Canada’s financial resilience in the face of one of the country’s most significant disaster risks.
“For decades, the property and casualty insurance industry has called for a government response to Canada’s systemic earthquake risk, as Canada is the only G7 country with significant seismic risk without a solution in place. Today’s announcement marks a significant milestone toward a stronger, more resilient Canada.”
IBAC president Jessica Asano, a broker based on Vancouver Island, said the Facility would have direct impact for clients in the highest-risk areas. “As a broker on Vancouver Island where the threat of an earthquake is ever-present, I know the Canadian Earthquake Insurance Facility will give people real peace of mind,” she said. “IBAC has been sounding the alarm on earthquake risk for several years. Our sustained advocacy and collaboration with industry and government have helped shape a solution that will better protect families in high-risk areas.”
IBAC chief executive Peter Braid said the economic consequences of a major seismic event would reach well beyond the directly affected communities. “Earthquake risk should not be underestimated. British Columbia and Quebec face the highest probability, and the economic fallout would be devastating for those living in affected communities. But it doesn’t stop there; the resulting financial upheaval and instability would cascade throughout the national economy. All Canadians can be reassured by today’s announcement.”
