Canada’s reinsurance market remains a pillar of stability for the country’s property and casualty (P&C) insurers – but that stability now comes at a higher price, as global hardening and record catastrophe losses drive tighter terms and greater selectivity.
According to AM Best, reinsurers continue to view Canada as an attractive and well-disciplined market – one that has endured record losses while maintaining strong capitalization and a steady flow of capacity.
At AM Best’s recent market briefing, Alan Murray (pictured left), director at the rating agency, said that while global reinsurance pricing remains firm, the Canadian segment stands out for its relatively low volatility and prudent underwriting standards. “Reinsurers continue to see Canada as a stable and profitable environment to operate in,” Murray said. “Even with recent catastrophe activity, the level of discipline and capital strength in the market has sustained confidence.”
The global reinsurance market has hardened sharply over the past three years, driven by higher losses from secondary perils, inflation, and a reassessment of climate risk. That trend has affected Canadian insurers, but not to the same degree seen in more volatile regions.
Reinsurance costs for Canadian cedants have risen, and attachment points – the level where coverage begins – have moved higher, forcing primary carriers to retain more risk. Yet capacity has remained available, especially for companies with strong loss histories and diversified portfolios.
Murray noted that reinsurers are becoming more selective in how they price and structure coverage, increasingly differentiating between cedants based on their exposure management, loss experience, and underwriting quality. Those with stronger portfolios are benefiting from more stable pricing and terms.
AM Best’s data show that even after a record $9.2 billion in insured catastrophe losses in 2024, the Canadian reinsurance segment maintained a combined ratio of roughly 92.6%, a level that still reflects overall profitability. Analysts credited both disciplined underwriting and improved investment returns, as higher yields offset some of the claims burden.
Reinsurance capacity continues to be supported by strong global capitalization and steady financial performance among major reinsurers. AM Best noted that balance sheets remain robust, with the top global groups reporting capital adequacy well above regulatory requirements.
However, reinsurers have become increasingly selective, particularly in catastrophe-heavy regions and sectors exposed to climate risk. Cedants in those segments face tighter terms, higher retentions, and closer scrutiny of their catastrophe models.
Cristian Sieira (pictured centre), senior financial analyst at AM Best, said the emphasis on quality is now central to reinsurance negotiations. He said reinsurers are adopting a more granular, differentiated approach to pricing and portfolio evaluation. Rate changes are increasingly tailored to each cedant’s specific risk profile and exposure to secondary perils, rather than applied uniformly across the market. This growing selectivity, he noted, is expected to continue, particularly in property lines where loss volatility has been highest.
Despite the firmer terms, capacity remains available for insurers with strong fundamentals. Canada’s market reputation for conservative reserving, prudent risk selection, and low legal volatility has made it a preferred destination for global reinsurers seeking stable, well-managed business.
The use of alternative capital – including catastrophe bonds and insurance-linked securities – has continued to provide flexibility to the global reinsurance system, though inflows remain cautious. AM Best said new capital is entering slowly, mostly from existing reinsurers reinvesting profits rather than from new entrants.
Globally, higher fixed-income yields have boosted reinsurance investment income, helping to offset underwriting volatility. For Canadian cedants, this has meant that while rates remain elevated, reinsurance remains both accessible and financially viable.
Despite higher global costs, reinsurers continue to view Canada as a stable and profitable market, Murray said. Capacity remains available for local carriers, supported by the country’s relatively lower loss volatility and consistent performance compared to other regions.
Despite global uncertainty, AM Best’s outlook for Canada’s reinsurance sector remains stable, reflecting its sound capitalization, consistent profitability, and trusted market reputation. Analysts expect pricing to stay firm through 2025 – but note that the combination of higher costs, stricter underwriting, and growing selectivity will continue to test even the strongest cedants in the year ahead.
