On paper, the macro backdrop for Canadian insurers looks reassuring. Growth is positive, inflation is under control, and the worst tariff scenarios from the United States haven’t materialized.
Look closer, and the picture is less comforting: a country still heavily dependent on US demand, stuck in a long‑running productivity rut, and a federal push on infrastructure and competitiveness that insurers aren’t convinced goes far enough.
At a recent KPMG conference in Toronto, iA’s chief strategist and senior economist Sébastien Mc Mahon (pictured) described the current numbers as something close to “Goldilocks” – but only in a narrow sense.
“The current macro environment is growth or improving,” he said. “Last quarter, Q3 of this year, we hit about 0.5% growth… and inflation is under control. [If you put those] two together, that gives you something that is akin to what would be kind of a Goldilocks situation on the macro front.”
Canada, in other words, is not in recession, and inflation is no longer running away. For insurers making 10‑, 20‑ or 30‑year commitments with their balance sheets, though, “not in recession” is a low bar.
On trade, Mc Mahon said the direct hit from US tariffs has been less severe than many feared at the start of the year.
“The impact of tariffs from the US have been much less than we were expecting,” he noted. “Of course, they're brutal in some sectors… but overall, for a Canadian economy, it's not as bad as what we could have seen, and that begs the question: How can we become less reliant on the US?”
That underlying reliance is the deeper worry. Tariff measures can be negotiated or reversed; a structural dependence on a single trading partner – even a friendly one – is harder to unwind. For insurers who need diversified, reliable growth to match long‑dated liabilities, it also constrains where they can comfortably put money to work.
Mc Mahon acknowledged that Ottawa has, at least rhetorically, understood the problem.
“The federal government is talking about the right things and trying to get Canada's productivity to rise, to invest in infrastructure to get us out of this dependence,” he said. “But did they go far enough in the latest budget? I mean, we still have some doubts here.”
That doubt goes to the heart of the issue. Productivity, infrastructure and trade diversification all feature prominently in budget speeches and economic statements, but institutional investors want to see visible, investable progress, not just talking points.
Mc Mahon said Canada still “need[s] the spark” to get both public and private capital investing together and pull the economy out of its “unproductive situation.”
“It's a work in progress,” he added.
For an industry that prices risk and return over decades, “work in progress” is not a reassuring status update.
Productivity might sound like a technocratic obsession, but for life and P&C carriers it seeps into almost everything: the growth and credit quality of the companies whose debt and equity they hold; the tax base and fiscal health behind federal and provincial bonds; and, ultimately, the earning power of policyholders whose premiums fund those investments. A persistently “unproductive situation” means slower compounding, more fiscal strain and less room for policy missteps.
It also means Canadian insurers feel a greater need to diversify beyond their home market – even as they worry about over‑exposure to the United States.
Mc Mahon was careful not to overstate the near‑term risk. He described the global macro picture as “okay,” but added that this does not mean Canada is enjoying “financial conditions that are the most attractive in history.” In his view, that makes disciplined execution – on both public policy and corporate strategy – essential.
Later in the session, he made the connection between productivity, diversification and Canada’s trade posture even more explicit.
“If you're the federal government, you want to… ensure that you're as independent from the US as possible in the future, because this is a concentration risk for us,” he said. “There is nothing wrong with opening new ports and new pipelines… just to export as much as to the rest of the world. Because what Canada produces, the world needs.”
