AM Best Says Canada's P&C Industry Can Absorb Another 2024-Scale Catastrophe Year, but Flags Ontario and Alberta Auto Reform, Tariffs and Casualty Pricing as the 2027 Watch List

Canada's property and casualty insurance industry is strong enough to take another year of catastrophe losses like 2024, or a worse one, without putting its stable rating outlook at risk, according to analysts at AM Best, the credit rating agency that specialises in insurers. The view was reported by Insurance Business Canada on October 29, 2026, based on comments from Alan Murray and Ravi Mittal of AM Best. It is a statement about the industry as a whole, not about any one company, and the article does not give the loss figures or capital ratios behind it. This summary therefore sticks to the reasoning the analysts described.

The headline view

Murray described the industry outlook as quite a robust one. In the rating agency's terms, an outlook is a view of the likely direction of ratings over the coming year, and a stable outlook means that AM Best does not expect widespread upgrades or downgrades. The analysts' point was that catastrophe losses have been running ahead of 2025 levels in 2026, yet the same framework still supports a stable outlook. They said that a repeat of the 2024 experience, or something worse, would be absorbed by the industry without threatening that outlook. The article does not state what the 2024 losses were, so readers who want numbers will need to consult industry data sources.

The framework, in plain language

AM Best assesses insurers using four building blocks: balance sheet strength, operating performance, business profile and enterprise risk management. Balance sheet strength is the capital an insurer holds against its risks. Operating performance is the ability to earn profit from underwriting and investments. Business profile covers the range and concentration of the business. Risk management covers how the company identifies and controls its exposures, including reinsurance purchasing. The analysts said that the same framework applies to the question of catastrophes, so the industry's resilience comes from capital and earnings, not from any special treatment.

What supports the outlook

Several supports were named. First, reinsurance conditions have been competitive since the 2023 renewals, a period in which primary insurers could buy protection more cheaply and on better terms than in the tightest years. The analysts cautioned that such conditions will not last forever, which means that the benefit could shrink if catastrophe losses push reinsurers to raise prices. Second, claims discipline has improved, and the analysts said that artificial intelligence is part of the reason, helping insurers manage claims more effectively. The article does not describe the specific tools or measure the savings. Third, higher rates have strengthened earnings. Fourth, investment income has been steady, which helps results when underwriting is weaker.

The 2027 watch list

The analysts also named risks to monitor into 2027. The first is catastrophe frequency and severity themselves, because a run of large events could test the industry even if it can absorb one bad year. The second is auto insurance reform in Ontario and Alberta, where changes to how claims are paid and priced could shift results. The third is tariffs, which can raise the cost of vehicle parts and building materials and so increase claim costs. Fourth, casualty lines such as directors and officers liability, errors and omissions, and employment practices liability are under pricing pressure, mainly in the United States, according to the analysts, and the concern is that softer pricing there could spill over into Canadian results. Fifth, defence costs for casualty claims in Quebec were flagged. Sixth, construction pressure in Toronto was named as a concern. Finally, claims inflation and climate risk continue to run in the background.

Earnings event or capital event

The key question for any bad year is whether it would be an earnings event or a capital event. An earnings event means that profits fall or turn into a loss, but the capital base remains sound and ratings are unchanged. A capital event means that losses are large enough to erode capital and force companies to raise funds, cut risk or accept lower ratings. The analysts' message, as reported, is that a repeat of 2024 would be an earnings event for the industry. The article does not give the capital ratios, such as the Minimum Capital Test used by Canadian regulators, that would let readers check this themselves.

What it means for buyers

For policyholders, a stable industry outlook is reassuring in that insurers should be able to pay claims. It does not mean that premiums will stop rising. The factors on the watch list, particularly climate-driven losses, reinsurance costs and claims inflation, are pressures on pricing, and the analysts' comment on reinsurance suggests that cheaper protection should not be assumed to last. Businesses buying casualty cover may see different pricing trends from property buyers, since the analysts describe pressure on rates in some casualty lines.

Limits of the report

This article relies on a trade-press report of an analyst interview, not on AM Best's full report, and it contains no figures for losses, capital or premiums. AM Best is a rating agency whose views are opinions, not guarantees, and the outlook concerns the industry in aggregate, so individual insurers may differ. It is general information and not financial advice.