Canada faces a significant earthquake threat over the next 50 years, putting the country’s property and casualty (P&C) insurers and the broader financial system at risk, according to the Insurance Bureau of Canada.
The federal government’s 2025 budget included a commitment to consult with federally regulated insurers on measures to stabilize the insurance sector in the event of an extreme earthquake, marking a critical step for the P&C market.
For over a decade, Canadian insurers have advocated for a public-private earthquake insurance framework that combines private coverage with a government-backed reinsurance layer. Such a structure would ensure sufficient capacity to cover catastrophic losses while protecting the solvency of insurers. Without a coordinated solution, insurers could be forced to rely heavily on reinsurance, and a severe earthquake could exhaust capital reserves, triggering company failures and placing pressure on the wider financial system.
Earthquake coverage is available but uptake remains low, around 50% to 65% in British Columbia, and just 4% to 7% in Quebec. Low participation leaves insurers exposed, as premiums alone may be insufficient to cover claims from a major seismic event. The Property and Casualty Insurance Compensation Corporation (PACICC) offers a policyholder safety net, but even this could be overwhelmed in a high-magnitude event, creating systemic risk for the insurance sector.
According to the IBC, catastrophic earthquake scenarios in Canada could result in tens to hundreds of billions in economic losses, affecting buildings, infrastructure, and business continuity. Insurers warn that without a federal backstop and structured public-private approach, even well-capitalized P&C companies could struggle to manage claims, threatening both policyholder protection and market stability.
Global models, including Japan, New Zealand, and California, demonstrate that public-private insurance partnerships can provide both financial capacity and rapid recovery support. Canadian insurers said a similar framework is essential, combining industry expertise with government support to ensure resilience.
The 2025 federal consultation offers a pathway to such a solution, enabling insurers to engage on risk assessment, coverage design, and reinsurance structures while protecting Canadians from catastrophic losses.
