Canada’s P&C industry is staring down rising climate losses and a widening protection gap – but unlike its G7 peers, it has no government‑backed safety net for catastrophic risk.
“Canada is the only G7 country in the world that has no form of government-supported backstop for climate risk,” said Mark Lipman (pictured right), president of the Americas at Lloyd’s. “We are an outlier, and I don’t mind saying I think government should be ashamed of it.”
Lipman’s blunt assessment came during a climate‑risk presentation alongside Lisa Guglietti (pictured centre), EVP and COO, P&C insurance solutions, at Co‑operators, at an industry event in Toronto. Both executives argued that without a federal‑provincial backstop for the most extreme events, the system is taking on a level of tail risk it cannot sustainably bear – and pushing more households and businesses into the protection gap.
Guglietti warned that last year was already the costliest on record for Canadian insurers, with industry catastrophe payouts estimated north of $9.2 billion. Multiple events – including the Calgary hailstorm, flooding in southern Ontario, Hurricane Debby and the Jasper wildfire – contributed to the total, she said.
“In 2024 we’ve had two times the number of major weather claims [compared to what] we saw the year before,” she noted, adding that July and August alone saw a 406% increase in weather‑related claims versus the company’s 20‑year average for those months.
“These are not opinions. These are facts, and the facts cannot be ignored,” Guglietti said. “Severe weather is becoming more frequent, and it’s becoming more financially damaging.”
The impact, she stressed, is falling hardest on households that can least absorb it. One‑third of Canadian households that have experienced an extreme weather event report a negative impact on their financial situation, with the effect “disproportionate for vulnerable households.”
On current trends, she said, many clients who can afford insurance today might not “be able to actually find or afford that same insurance in the future.” As insurers raise premiums to keep pace with growing claims, more people will end up under‑insured or uninsured, widening the protection gap – the difference between the losses people face and the coverage or recovery mechanisms they have in place.
“The protection gap is here. It is widening,” Guglietti said. “Without change, it’s at the point where the relevance of our business model will become questionable going forward.”
Both Lipman and Guglietti pointed to work underway through PACICC – the Property and Casualty Insurance Compensation Corporation – and industry discussions with Ottawa on what has been dubbed a National Flood Insurance Program that is increasingly broadening into an all‑perils nat‑cat conversation.
“Our hope is that there is something that we can work [on] in terms of a public‑private partnership, in terms of nat‑cat, particularly for the higher‑risk tail‑end type events,” Guglietti said. “This is not for your hailstorm or your small event. This is for the types of things that could burn down the industry.”
Lipman agreed the priority should be a backstop that kicks in for truly systemic events, with earthquake at the top of the list from a solvency standpoint.
“From our policyholders’ perspective, it doesn’t really matter whether it’s fire or rain or flood, it’s all horrible and important,” he said. “But from a solvency issue – what can the industry actually survive – it’s earthquake that has the real potential to topple the entire industry if we don’t get some kind of cooperation from government.”
He was clear that carriers are not asking Ottawa to take over the business.
“I would say… our number one mission and desire is that government, particularly federal but also provincial, engages with the industry, and we collaborate on that kind of a backstop – not that the industry would ever abdicate responsibility,” Lipman said. “We would certainly be the ones doing the work, handling the claims, doing all the administration. But… the risk is systemic, and we need the government in Canada to be involved.”
Guglietti cautioned that a poorly designed backstop could simply entrench bad incentives and become another unsustainable subsidy. For anything other than earthquake, she said, the scheme must actively push toward risk reduction, not just cheaper premiums.
“It has to incent the right behaviours,” she said. “It can’t be something that just suppresses premiums and makes it affordable, but doesn’t have a way out.”
“If you put a pool in place and all it does is subsidize premiums and not get at the risk problem, it becomes unsustainable,” she added, pointing to the history of facility‑type arrangements that have ballooned when underlying risks were not addressed.
That means any Canadian nat‑cat facility would have to be tightly linked to mitigation and resilience – everything from climate‑resilient rebuilding standards and land‑use decisions to municipal infrastructure like storm‑water systems and flood mapping. Guglietti noted that Co‑operators has already embedded “build back better” features into its property program at no extra premium for eligible policies, and is trying to treat resilience as a business opportunity, not just an expense.
