A new international report warned that Canada’s growing fossil fuel production is undermining global climate targets and driving up insurance risks as extreme weather grows more destructive.
The Production Gap Report, published by three climate research organizations, showed that governments are planning to produce 120% more fossil fuels in 2030 than is consistent with the Paris Agreement’s 1.5°C target. Canada’s planned increase in oil production ranks among the steepest globally, placing it fifth among major producers.
For the insurance industry, these production trends translate directly into higher catastrophe losses.
Canadians are already facing the consequences through heat waves, floods, droughts, and wildfires that damage homes and communities. Those losses show up in rising insurance premiums, in the destruction of property, and in growing affordability pressures. Insured losses in Canada reached more than $9 billion in 2024, the highest ever recorded.
According to a report from The Canadian Press, the policy environment also adds further strain.
The federal government has repealed the carbon price and paused electric vehicle mandates, while Alberta has frozen its industrial carbon price and Saskatchewan has extended the lifespan of coal plants. At the same time, tens of billions of dollars are being directed to new fossil fuel infrastructure, including the Trans Mountain pipeline. These decisions reinforce emissions growth and delay resilience efforts, heightening risks for insurers and policyholders alike.
In California and Florida, insurers have already scaled back coverage or exited markets entirely in response to mounting climate losses and regulatory constraints. Both states now face shrinking insurance availability and significant affordability challenges, particularly in wildfire and hurricane-prone areas.
The Canadian market is not yet at that point, the report said, but escalating climate claims combined with policy uncertainty could push it in a similar direction.
Meanwhile, renewable technologies such as solar, batteries, and electric vehicles are expanding rapidly and have become the cheapest source of new power in much of the world. Despite this, Canada continues to double down on fossil fuel expansion, locking in physical and financial risks that insurers will have to absorb.
For insurers, the outlook is increasingly clear as unchecked fossil fuel growth is expected to intensify the frequency and severity of catastrophic events, force a rethink of underwriting and pricing, and potentially create pressure for greater public intervention in disaster recovery if private markets retreat.
