The Insurance Bureau of Canada (IBC) has renewed its warning that the labour gap is undermining P&C insurers’ ability to help policyholders restore homes and businesses quickly after natural catastrophes.
Canada’s skilled trades shortage is creating major challenges across industries, including the property and casualty (P&C) insurance sector, as demand remains high for a shrinking pool of workers. According to BuildForce Canada, more people are expected to retire from the construction industry than enter it over the next 15 years, increasing pressure on already‑stretched capacity.
For insurers, that is not a distant risk but a live operational constraint. After recent wildfire and flood seasons, carriers and independent adjusters have already reported difficulties sourcing contractors and remediation firms in some regions, contributing to longer claims lifecycles and elevated loss‑adjustment expenses.
According to IBC, addressing the shortage will require governments to refocus on skilled trades development and immigration, both of which they largely control through funding and policy decisions.
The federal government recently expanded its Express Entry immigration stream to fast‑track applications for workers in sectors with critical gaps, including research, transportation, the military, health care and social services. Ottawa has also said it hopes to attract more skilled trades workers, such as carpenters, plumbers and machinists, through the program.
While these are positive steps, industry observers have argued they are unlikely to be sufficient on their own, given the size of the projected shortfall and the added pressure from climate‑driven weather events. For insurers, that raises the prospect of “chronic catastrophe backlog” – where even routine weather events strain local rebuilding capacity, and large‑scale disasters create multiyear reconstruction pipelines.
Some carriers have already responded by building preferred contractor networks across wider geographic areas, pre‑agreeing surge capacity and using digital tools to triage and scope losses more quickly. However, those measures only partially offset the underlying shortage of licensed trades.
A new report from The Conference Board of Canada (now operating as Signal49 Research), Building Under Pressure: Skilled Trades Shortages and Rising Construction Costs, highlighted how shortages in the residential construction sector are feeding directly into higher housing and insurance claims costs.
Unless governments act, the report warned that labour shortages will worsen, drive up inflation and cost Canadians close to an extra $8 billion annually by 2045.
Job vacancies among skilled trades in the residential construction sector have grown at an average rate of 11% per year and are projected to increase to 13% per year between 2026 and 2045. By 2045, the shortage of skilled trades workers is expected to reach up to 32,000.
According to the analysis, that shortfall would likely push prices in the sector up by about 2.3% and add roughly $7.9 billion to the annual cost of residential renovations and repairs. The report also noted that the rising frequency and severity of natural catastrophes, along with growing housing demand, are adding further strain to an already limited labour pool.
Those forecasts translate directly into higher expected severity on home and small commercial claims, especially in catastrophe‑exposed regions. They also suggest that traditional assumptions about post‑event “normalization” of repair costs may need to be revisited if capacity remains structurally tight.
Skilled‑labour shortages feed directly into insurance claim costs too. Higher construction labour costs and longer rebuild and renovation timelines increase the size and duration of claims, particularly after severe weather events. These pressures are factored into insurers’ pricing models and ultimately influence premiums and affordability.
Persistent labour shortages can also mean longer periods of additional living expenses for displaced homeowners, extended business interruption for commercial clients, and higher loss‑adjustment expenses. In some recent Canadian catastrophes, business interruption periods have been driven less by policy time limits and more by how quickly contractors, materials and inspectors can be mobilized.
Reinsurers are watching the same trends. If post‑event loss development consistently runs higher than modelled due to constrained trades capacity, it could influence future catastrophe reinsurance pricing and attachment points for Canadian cedants.
While IBC supports government efforts to build the new housing Canadians need, the organization has cautioned that the lack of a clear plan to protect communities from wildfires, floods and other natural disasters will further exacerbate skilled labour shortages.
Industry stakeholders argue that investments in training and immigration must be paired with policies that reduce the physical risk of severe weather in the most exposed communities, support the long‑term sustainability of the home insurance market, and lessen the financial and emotional toll of natural disasters on households and businesses.
For insurers, that alignment would mean fewer large‑scale destruction events competing for the same limited pool of builders and restoration firms, and a more predictable environment for pricing property risk. Without it, the sector faces the prospect of paying more for every claim while also contending with political pressure over affordability and availability of cover in high‑risk areas.
Steps to increase the skilled labour force of the future, such as the recent Express Entry expansion, are broadly welcomed by insurers. But IBC and others stressed that they need to be complemented by measures that make Canada a leader in preparing for, responding to and recovering from natural catastrophes – or claims costs and consumer bills are likely to continue rising, even in years without record‑breaking disasters.
