Though Canada’s property/casualty (P/C) insurers faced average catastrophe activity during the first half of 2024, four major events in this year’s third quarter should lead to another record year for losses, according to a new AM Best report.

Losses due to catastrophe events in 2023 are estimated to have reached CAD 3.1 billion, making it one of the five worst catastrophe years on record, trailing only inflation-adjusted catastrophe losses in 2013 and 2016, the report noted.

Despite the bleak year of losses, AM Best maintains its stable outlook on Canada’s P/C industry based on solid risk-adjusted capitalization levels, supported by strong operating results, favorable combined ratios, growth in insurance service revenue, and improving investment returns.

“Canada’s P/C insurance industry managed to achieve favorable financial results, with net income up an astounding 77.5 percent, from CAD 4.0 billion in 2022 to CAD 7.1 billion in 2023,” said Rosemarie Mirabella, director, AM Best. “Profitability was driven by growth in underwriting income and a resurgence in investment income, partly counterbalanced by rising finance expenses from insurance contracts, as well as general and operating expenses.”

The rating agency warned that Canada’s P/C segment will continue to face challenges from growing frequency and severity of extreme catastrophe weather events, continued increases in reinsurance coverage costs and ongoing pressure in the personal auto lines business.

Earlier this year, AM Best upgraded its market segment outlook for the global non-life reinsurance industry to positive from stable. This upgrade reflected the industry’s strong profit margins, higher attachment points, and tighter terms and conditions following a period of significant repricing.

“Canada’s P/C market made extensive changes in the terms, conditions, and structures of reinsurance programs during the 2023 reinsurance renewal season, leading to significant premium increases for primary insurers,” Mirabella said. “The unprecedented wildfire season throughout the year and the increase in flooding events, concentrated regional carriers have been disproportionately impacted by additional reinsurance rate increases.”