By Chris Munro

April 16 - (The Insurer) - Canada’s P&C market remains well capitalized with healthy competition and ample capacity, even in the wake of the record C$9.1 billion ($6.5 billion) of insured catastrophe losses that the country suffered in 2024, Aon has outlined in a new report.

In Aon’s Spring 2025 Insurance Market Update Canada, the broker said the country’s P&C market “has proved remarkably resilient” as it faces myriad factors including geopolitical risks, domestic challenges and extreme weather events.

“The impact of U.S. tariffs adds another layer of complexity,” Aon said.

The broker said overall market conditions are becoming more favorable for Canadian P&C clients, but there remains “a clear divergence” between those that have well-performing and desirable risk profiles and those which have more acute risk attributes.

“Capacity is adequate for most risks and continues to grow in targeted areas, although there is still limited appetite for natural catastrophe-exposed and historically challenged risk profiles,” Aon said.

“Insurers' growth ambitions are shaping pricing strategies, with rate reductions influenced by factors such as previous marketing efforts, risk control measures, and loss history,” it added.

With the current market conditions, Aon said clients can raise their limits, expand their coverages and address any non-concurrent terms within their programs that arose under previous hard markets.

However, as Aon explained, the challenges facing the Canadian P&C market from geopolitical risks, domestic challenges and extreme weather events, along with the potential impact of U.S. tariffs, mean that carriers could impose stricter underwriting discipline or capacity restrictions.

But Canadian insurers will meet those challenges from a healthy position.

“Premium increases and improved returns on investments in recent years has strengthened insurers positions,” Aon said.

‘PROFITABLE TOP LINE GROWTH’

At the same time, Aon said that as interest rates continue to slow, Canadian insurers are pressured to seek profitability in top line growth.

The broker said Canadian P&C carriers are expanding their market share by broadening their appetite for different segments and negotiating terms and conditions to retain business.

Underwriters, Aon said, “are showing greater flexibility to remain competitive”, while being mindful that growth must be balanced with profitability.

As such, Aon said underwriting remains disciplined, with referrals becoming standard practice.

“Fulsome submissions with comprehensive underwriting information are essential for securing superior terms, and there is additional pressure on insureds to implement mitigation activities against natural catastrophe losses,” the broker said.

‘REINSURERS RESPOND TO CATS’

Reflecting on 2024, Aon highlighted that Canada suffered its worst ever year for insured catastrophe losses, with the C$9.1 billion suffered coming in well ahead of the previous record of C$5.1 billion in 2016.

A severe hailstorm in Calgary generated an estimated $3.3 billion in insured damage, and is now the second costliest event in Canadian history, behind the Fort McMurray wildfire in 2016.

“Canada's events were of a magnitude to impact most catastrophe reinsurance programs,” Aon said.

“Many buyers recovered at least one loss from their towers and reinsurers made a significant loss on their catastrophe books in 2024,” the broker added.

In response to those losses, reinsurers have taken a more cautious approach to Canadian cedants, Aon said.

Reinsurers of loss-affected programs sought to renegotiate pricing and structures, with a focus on retention levels.

Those programs that suffered heavy losses were hit with what Aon said were “substantial risk-adjusted increases” that generally ranged from 10% to 40%.

For those programs that generated limited losses, renewal experience was stable with risk-adjusted increases of 10% or below.

The best-performing programs renewed slightly below flat, Aon said.

Reinsurers generally renewed their shares on programs, provided pricing increases and structure changes met their expectations for loss-affected programs, the broker noted.

“A welcome development for buyers of Canadian reinsurance was increased interest from non-domestic markets such as Bermuda,” said Aon.

“This helped to limit the scale of increases for loss-affected programs, and also meant that programs that had performed well in 2024 were able to avoid 'broad-brush' increases being applied to the whole Canadian market,” it added.

With the changes in reinsurers’ views of the Canadian market, Aon said primary carriers – and in particular personal lines writers who bore the brunt of 2024’s catastrophe losses – will need to adjust their underwriting practices and pricing to manage heightened risk of natural disasters.

“This could lead to higher premiums for policyholders and a more cautious approach to coverage offerings,” Aon suggested.