The federal budget released on Nov. 4 included a commitment to reduce regulatory burden on financial institutions.
For Canada's property and casualty (P&C) insurers, this could not come at a more critical time, with rising compliance costs increasingly squeezing insurers, driving up premiums and limiting product innovation.
A recent Insurance Bureau of Canada (IBC) survey found that regulatory compliance costs in the P&C sector surged 81% between 2022 and 2024, reaching $753 million in 2024. Internal labor accounted for nearly three-quarters of these costs, reflecting the increased staffing insurers must maintain to comply with both federal and provincial regulations.
The Office of the Superintendent of Financial Institutions (OSFI) alone accounts for 40% of compliance time, with the remainder spent on provincial market conduct requirements. Most insurers expect these costs to rise further in 2025.
This rapid growth in regulatory costs is affecting both insurers and policyholders. Insurers face rising overhead, reduced flexibility in product offerings, and higher operational risk. These pressures are passed on to consumers in the form of higher premiums, particularly for home, auto, and commercial property coverage.
Compared internationally, Canadian insurers spend a disproportionate share of operating costs on compliance — 17% in 2024 versus 6.5% for European insurers in 2017 — leaving less room for investment, innovation, or competitive pricing.
Canada’s insurance industry is regulated by 44 federal and provincial authorities. Many have expanded mandates and staffing in recent years, including oversight of non-financial risks, forcing insurers to scale internal compliance teams. In 2025 alone, insurers faced 38 active or upcoming consultations and regulatory initiatives, with IBC submitting 48 responses, surpassing last year’s total.
The duplication and complexity slow product development, constrain insurers’ ability to respond to emerging risks, and increase costs that ultimately affect policyholders.
The C.D. Howe Institute highlighted that Canadian financial regulators focus heavily on stability and solvency but less on innovation and competition. This limits insurers’ ability to introduce new products, invest in emerging markets, or adopt innovative risk-management solutions.
For smaller insurers, high compliance costs can act as a barrier to entry, reducing competition and limiting options for consumers.
