Canada’s financial system remains resilient, but geopolitical instability is creating a more complex and fragile risk environment for insurers, according to Peter Routledge, superintendent of Office of the Superintendent of Financial Institutions.
Speaking at a recent fireside chat hosted by Bank of America, Routledge said the Canadian economy is holding up “reasonably well,” even as growth slows and unemployment rises. However, he emphasized that the main risks facing financial institutions are increasingly tied to global instability rather than domestic conditions alone.
“But we’re operating in a more complicated and uncertain environment than before due to recent instability, including evolving conflicts internationally,” he said.
Routledge noted that geopolitical tensions can ripple through the financial system by shifting trade flows, funding markets and business confidence – factors that directly affect insurers’ operating environment and risk exposure.
“OSFI must respond to geopolitical uncertainty and the way global tensions can shift economic conditions, trade flows, funding markets, and business confidence,” he said.
Cyber risk is a key channel through which those geopolitical pressures are materializing. Routledge warned that periods of global instability tend to coincide with a rise in cyber incidents, increasing the vulnerability of financial institutions as they become more reliant on technology and third-party providers.
“History shows that geopolitical shocks often correlate with increases in cyber incidents. This is a risk that keeps me up at night,” he said.
These threats are not only operational but systemic, he added, with the potential to disrupt trust and financial stability while exposing insurers to financial losses and reputational damage.
While Canada has so far absorbed recent volatility, Routledge signalled that maintaining resilience will depend on how well institutions adapt to a risk environment increasingly shaped by geopolitical forces.
