As we approach 2025, the Canadian insurance markets for both commercial and personal lines present distinct contrasts, driven by a myriad of factors ranging from natural catastrophes to market dynamics.
The personal insurance market in Canada is bracing for what is set to be its worst year ever in terms of insured losses due to natural catastrophes in 2024. Climate change has exacerbated the frequency and severity of events such as floods, wildfires, and severe storms, leading to unprecedented claims. This surge in claims is expected to result in a hardening market, characterized by increased premiums and stricter underwriting standards.
Homeowners and tenants may face significant premium hikes as insurers respond to the elevated risk environment. Insurers are working tirelessly to improve their weather modelling and underwriting of risks. The result will be challenges in the overall affordability of personal insurance, with some homeowners even struggling to find available coverage. Moreover, the industry will likely see an uptick in efforts to enhance loss prevention and mitigation strategies, encouraging policyholders to adopt more resilient measures to protect their properties.
Auto insurance continues to grapple with its own set of challenges; rising repair costs, increased frequency of accidents, and the growing prevalence of vehicle thefts are putting upward pressure on premiums. These premium increases are being met by regulators, governments and consumer advocacy groups screaming for fair pricing. Insurers are reaching their limit on working with governments who insist on artificially capped auto insurance premiums that result in rate inadequacy and unprofitability. Auto reform in Alberta and Ontario, in particular, will steal headlines in 2025.
In contrast, the commercial insurance sector is experiencing a phase of market softening as we head into 2025. The influx of additional capacity into the Canadian market has led to more competitive pricing and broader coverage options for businesses. This increased capacity stems from both domestic and international insurers recognizing the growth potential within Canada, and as a way to mitigate the high vulnerability of personal property to NatCat losses.
Businesses stand to benefit from a more favourable pricing environment, enabling them to secure comprehensive coverage at reduced costs. However, this softening market also presents challenges for insurers striving to maintain underwriting discipline and profitability.
