AM Best maintains stable outlook for Canada property/casualty insurance sector

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AM Best: Canada insurance outlook

Highlights

AM Best maintains a stable outlook for Canada’s property/casualty sector, projecting gross insurance revenue to rise 5.6% to CAD 97.4 billion and net insurance revenue up 6.0% to CAD 76.1 billion in 2025.
Decreased catastrophe losses and steady fixed-income yields improve underwriting profitability, while insurance service expenses are expected to decline 6.3% to CAD 79.4 billion.
Regulatory focus intensifies on operational resilience and AI governance as market remains concentrated, and consolidation and scale provide major insurers competitive advantages amid persistent climate and auto insurance challenges.

2025 earnings and underwriting support outlook

As reported by AM Best, its new report says Canada’s property/casualty segment continues to show resilience as stronger underwriting results and consistent investment income support sector performance.

The report says steady investment returns are being supported by elevated fixed-income yields even as interest rates largely stabilize. It adds that catastrophe activity moderates compared with the prior year, helping improve underwriting performance and bolster profitability across the segment in 2025.

AM Best says gross insurance revenue in the Canadian property/casualty industry rises 5.6% to CAD 97.4 billion in 2025, while net insurance revenue increases 6.0% to CAD 76.1 billion. Insurance service expenses, by contrast, decline 6.3% to CAD 79.4 billion.

Alan Murray, director at AM Best, says sustaining profitability going forward depends on the industry’s ability to remain agile, refine risk management practices and use technological innovation, including artificial intelligence.

Regulatory oversight and market pressures remain in focus

Despite the stable outlook, the report says challenges persist, particularly from the growing frequency and severity of climate-related catastrophes. Profitability in personal auto insurance also remains under pressure from higher vehicle repair costs and elevated auto theft levels, although those pressures show signs of moderating.

AM Best says Canadian regulators continue prudent oversight, led by the Office of the Superintendent of Financial Institutions, with supervisory frameworks placing more emphasis on operational resilience, cyber hygiene and governance around AI use. Provincial regulators are also rolling out major updates to auto insurance rules.

The report adds that Canada’s property/casualty market remains highly concentrated, with a small number of national insurers holding a significant market share. In that environment, scale and consolidation continue to provide competitive advantages, while geopolitical risk, wildfire exposure and the expanding role of managing general agents and brokers are shaping how insurers deploy capital and extend market reach.

In our earlier article on regulating agentic AI in retail financial services, we looked at how AI assistants are shifting from offering guidance to taking actions for consumers—and why that is prompting fresh scrutiny of current rulebooks. We highlighted concerns that applying traditional activity-based frameworks too rigidly could limit access to advice across areas such as investments, credit and insurance, while a more adaptive approach could preserve consumer trust and competitiveness.

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