Canada's property and casualty (P&C) insurance sector faces a mix of stability and challenges in 2026, with strong capital buffers and disciplined underwriting helping insurers manage risks from natural disasters, inflation and regulatory changes, according to a report from Morningstar DBRS.
While overall market fundamentals remain solid, consumers and businesses should be aware of factors that could affect premiums, coverage and claims experiences.
Commercial insurance rates are expected to continue declining, especially for large corporate accounts, as competition intesifies. Small and medium-sized businesses may see more stable or slightly rising rates, particularly in specialized or niche coverage lines. Insurers are focusing on maintaining profitability rather than aggressively chasing market share, meaning businesses could experience stricter underwriting and potential coverage adjustments to align with risk exposures.
Auto insurance remains an area of uncertainty, according to the report. In Alberta, rate caps have constrained premiums, and many insurers are reducing exposure until the province introduces a no-fault system in January 2027, which is expected to lower claims costs by reducing litigation expenses.
In Ontario, reforms beginning July 2026 will allow consumers to opt out of some mandatory accident benefits, potentially reducing premiums. However, it is unclear whether claims costs will drop proportionally, leaving some uncertainty for both insurers and drivers regarding coverage and affordability.
Natural catastrophe losses will continue to drive claims volatility. While 2025 saw relatively moderate catastrophe losses, past years have shown how quickly wildfires, flooding, hailstorms and severe convective storms can impact insurers. The report said that consumers and businesses in high-risk areas may see more frequent adjustments to deductibles, coverage limits and premiums to reflect elevated risks.
Overall, consumers and businesses should prepare for a mixed environment. According to the note, commercial and personal property insurance remains accessible but may come with more selective underwriting, while auto insurance could see temporary premium reductions with potential long-term uncertainty.
Companies and households in regions prone to extreme weather should carefully review policies, update coverage as needed and factor in potential claims volatility when planning for 2026, the report said.
