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Raising premiums above the rate of inflation—sometimes steeply above—has been a common response, but experts say insurers are also increasingly excluding coverage of some risks, raising 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 coverage tightening.”
Insurers trim exposure in severe weather zones
While insurers haven’t withdrawn from areas entirely, some have thinned their exposure.
“We’ve rebalanced in some of the higher severe weather regions,” said TD chief executive Raymond Chun during the bank’s most recent earnings call. “Where we had a higher concentration in some of the high severe weather zones, we’ve moderated.” The bank is aiming for growth in regions with lower catastrophic risk instead, said Chun.
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Definity Financial Corp., which says it’s Canada’s fourth-largest property and casualty insurer after closing a $3.3-billion takeover of Travelers last month, has also taken steps to pull back in higher-risk areas. Chief executive Rowan Saunders said on the company’s November analyst call that they had worked to churn the portfolio, shifting new business to less catastrophe-exposed areas and reducing concentration in areas of higher peril scores.
He said the heavy lifting on shifting away from higher risk is largely done, but it will be a continuing effort. “That’s just ongoing good portfolio management.”
Pressure to rebalance portfolios rose after costs spiked in recent years from already elevated levels, most notably 2024’s record $9.4 billion insured losses. But it’s far from a one-off.
What rising insurance losses mean for homeowners
According to a report from TD, average personal property losses between 2020 and 2024 were nearly double the prior stretch, while the number of catastrophic weather events averaged 15 a year, up from around two per year in the 1980s.
“Growing insured personal property losses are placing considerable strain on Canada’s home insurance sector,” said economist Likeleli Seitlheko in the report.
In response to the costs, insurers are raising deductibles to upwards of $10,000 for perils like hail, reducing coverage, or simply not offering it for some risks such as flooding, he said. “In worst case situations, insurance coverage is simply not available for certain perils,” said Seitlheko.
Coverage gaps persist despite growing flood risk
Flood coverage, which was only introduced in Canada about a decade ago, has been patchy, with limited availability in higher risk areas. According to Public Safety Canada, Quebec has the highest number of properties at risk of flooding, followed by Ontario and British Columbia.
The Insurance Bureau of Canada estimates that about 1.5 million households, or about 10%, can’t get flood insurance, while for those who can, it can add as much as $15,000 a year to premiums.
But even that’s overestimating how many can get coverage, said David Nickerson, who studies property economics at Toronto Metropolitan University. “The industry says that flood insurance is available to 90% of Canadians. That’s a gross exaggeration. Maybe 50%, effectively, because of the idiosyncratic nature and redlining of high-risk areas.”
Part of the problem is patchy and outdated data to know which areas are at risk, said Nickerson, which is why the federal government is spending hundreds of millions of dollars to upgrade flood maps.
Industry absorbs shocks while consumers pay more
While insurance companies have a variety of sources of information, they can also still get caught out with concentration risk, as TD did in the 2024 Calgary hailstorm, said Nickerson. “They got pasted with that huge, huge loss, and so they withdrew to replenish their financial reserves.”
Alberta has been a focal point of losses, where events like the $3 billion hailstorm and $1.1 billion Jasper wildfire in 2024 led to industry operating costs exceeding premium revenues by nearly 20% that year, according to the TD report.
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The Canadian Press
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