A typical response is to boost premiums above the speed of inflation – sometimes well above it – but experts say insurers are also increasingly excluding coverage for some risks, increasing deductibles and reducing their exposure to higher-risk areas.
As Morningstar DBRS said in a November report, “The Canadian market is showing early signs of tightening coverage.”
Insurers reduce the chance in severe weather zones
While insurers haven’t completely withdrawn from certain areas, some have reduced their exposure.
“We have rebalanced in some regions with higher levels of severe weather,” TD CEO Raymond Chun said in the course of the bank’s most up-to-date earnings call. “Where we had higher concentrations in some high weather zones, we mitigated.” Instead, the bank is targeting growth in regions with lower disaster risk, Chun said.
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Definity Financial Corp., which said it’s Canada’s fourth-largest property and casualty insurer after completing its $3.3 billion acquisition of Travelers last month, has also taken steps to retreat into higher-risk areas. Chief Executive Officer Rowan Saunders said at the corporate’s analyst conference in November that it had worked to rebalance the portfolio, moving latest business to less disaster-prone areas and reducing concentration in areas with higher risk rankings.
He said the exertions of moving away from higher risk is essentially done, but it is going to be a continued effort. “It’s just consistently good portfolio management.”
Pressure to rebalance portfolios increased after costs skyrocketed from already high levels in recent times, particularly attributable to record losses of $9.4 billion in 2024. But it is much from an isolated incident.
What rising insurance claims mean for homeowners
According to a report from TD, average personal property damage between 2020 and 2024 was nearly twice as high as before, while the variety of catastrophic weather events averaged 15 per yr, up from about two per yr within the Eighties.
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“Increasing insured personal property damage is placing a significant burden on Canada’s home insurance sector,” economist Likeleli Seitlheko said within the report.
In response to the prices, insurers are raising deductibles for perils like hail to greater than $10,000, reducing coverage or just not offering it for certain risks like flooding, he said. “In the worst case, there is simply no insurance coverage for certain risks,” said Seitlheko.
Despite the increasing risk of flooding, there are still gaps in supply
Flood protection, introduced in Canada only a few decade ago, was patchy and limited in higher-risk areas. According to Public Safety Canada, Quebec has the best variety of flood-prone properties, followed by Ontario and British Columbia.
The Insurance Bureau of Canada estimates that about 1.5 million households, or about 10%, cannot purchase flood insurance, while for many who can, premiums can increase by as much as $15,000 per yr.
But even that’s an overestimate of how many individuals might be insured, said David Nickerson, who studies real estate economics at Toronto Metropolitan University. “The industry says 90% of Canadians have flood insurance. That’s a gross exaggeration. Maybe as high as 50%, due to the nature and isolation of high-risk areas.”
Part of the issue is incomplete and outdated data to know which areas are in danger, Nickerson said, which is why the federal government is spending lots of of hundreds of thousands of dollars updating flood maps.
The industry absorbs shocks while consumers pay more
While insurance firms have quite a lot of sources of knowledge, they will still face concentration risks, as TD did with the 2024 Calgary hailstorm, Nickerson said. “They were faced with this huge loss and retreated to replenish their financial reserves.”
Alberta has been a hot spot for losses, where events akin to the $3 billion hailstorm and Jasper wildfire in 2024 caused industry operating costs to exceed premium revenue by nearly 20% that yr, the TD report said.
