Canada’s top financial regulator says the greatest risk facing insurers isn’t necessarily climate change but the shockwaves from a rapidly shifting geopolitical order – a transformation he warned will upend asset valuations and force companies to rethink diversification strategies.
Peter Routledge, superintendent of financial institutions at the Office of the Superintendent of Financial Institutions (OSFI), told delegates at the National Insurance Conference of Canada (NICC) that the industry is living through a moment of “weeks where decades happen.”
“We’re in the middle of a period of extraordinary transformation in our geopolitical environment, and that’s going to trigger an extraordinary transformation of Canada’s economic model,” Routledge said. “It feels like 1989… when every headline seemed to blow your mind. That’s what this period feels like now.”
Political realignments, supply chain upheavals, and financial shocks that once unfolded over a generation are now compressing into months, if not weeks, he said. For executives who typically plan around long-run cycles, that acceleration means more abrupt adjustments and far less predictability.
For insurers, he said, the consequence is clear: the asset side of balance sheets will become more volatile as global markets adjust to fractured supply chains, shifting alliances, and sudden changes in trade or investment flows. The risk is not gradual erosion but non-linear shocks that can rapidly reprice assets.
“What does this new environment mean to the assets in your portfolio backing your liabilities?” he asked. “I expect there to be non-linear changes in valuations of those assets tied to how the world is reorienting itself. Diversification and surveillance over your portfolio are critical – making sure you’re not betting, inadvertently or intentionally, your company on any one asset.”
While the message was blunt, Routledge added a note of cautious optimism, arguing that Canada’s financial system has the depth to weather these shocks.
“The good news – the optimistic news – is I wouldn’t trade my job with any other regulator anywhere else in the world,” he said. “Canada has a resilient financial system, with the talent and the capital liquidity to make that pivot and to help the economy make that shift.”
Even so, he stressed that the adjustment will not be quick. “We’re not finished with the transformation in geopolitics,” Routledge said. “It’s going to take a few years after that for the country’s economy to really adapt.”
Although Routledge emphasized geopolitics as today’s most urgent risk, he acknowledged that climate change remains a defining challenge – one that P&C insurers have been ahead of other financial sectors in confronting.
As previously reported by Insurance Business, he told NICC delegates that three-quarters of P&C insurers already use geolocation data to evaluate climate-related risks in their products, compared with just a quarter of banks. That frontline experience, he said, gives insurers a head start in quantifying flood, wildfire, and other exposures, and in building the “common-sense financial analysis” needed to make climate risk decisions more resilient.
The next frontier, Routledge argued, will be transition risks as the global energy mix shifts. Unlike physical perils, these risks are unlikely to unfold gradually. “A warmer planet will increase transition risk, but it’s unlikely to be monotonic or linear,” he said. “It’s likely to be non-linear, with sudden shifts in the energy mix – and Canada needs to be at the forefront of understanding that.”
Celyeste Power, president and CEO of the Insurance Bureau of Canada (IBC), who joined Routledge on stage, said the twin themes of climate and geopolitics underscore how rapidly the industry’s operating environment is shifting.
“Between the transformation we see on geopolitics and on climate – and what we’re seeing happening with severe weather across the country – we might be seeing quite a lot of weeks where a decade’s worth of change is happening,” Power said. She emphasized the value of maintaining open dialogue between the industry and the regulator at such a time.
