Competition remains fierce among Canada’s largest life insurers, but the industry’s balance sheets and risk management strength continue to support a stable outlook, according to Edward Kohlberg (pictured left), director at AM Best.
Speaking at the firm’s recent market briefing, Kohlberg said the Canadian life sector is dominated by four major players – Manulife, Sun Life, Great-West Life and iA Financial Group – which together represent more than half of the market. Their intense rivalry, particularly in group benefits and wealth business, has left smaller and mid-sized companies struggling to penetrate core segments. “For the small and mid-size companies, it’s tough to penetrate market growth,” he noted, though he acknowledged that some have succeeded by finding niche opportunities.
Despite strong capitalization, Canadian life insurers face persistent macroeconomic challenges. According to AM Best’s latest sector analysis, key headwinds include increased investment-risk concerns, high technology spending, and robust market competition that continues to pressure margins.
Kohlberg said technology costs, in particular, have become a permanent fixture rather than a one-time modernization expense. “It’s only going up more,” he said, recalling that even after major digital upgrades over the past decade, insurers are still spending heavily to improve operations, distribution, and customer experience.
Potential further interest-rate cuts could also squeeze investment returns. While lower rates are not necessarily negative for insurers, Kohlberg said the speed of change matters. Companies must respond carefully through asset-liability management to maintain profitability and manage crediting rates on long-term products.
Against those headwinds, AM Best pointed to several powerful tailwinds supporting Canadian life companies: solid capitalization, strong enterprise-risk-management (ERM) capabilities, and continued profitability. Kohlberg said the industry’s capital discipline was forged after the global financial crisis, when insurers took a hard look at risk exposure and strengthened balance-sheet protection.
Diversification also remains a critical advantage. The large Canadian groups have expanded across product lines – from group and individual insurance to retirement and health – and geographically, through operations in Asia, the US and Europe. Kohlberg noted that global diversification is viewed positively in AM Best’s rating assessments, provided companies stick to lines where they have proven expertise.
Life-insurance premium growth and consistent earnings have reinforced this position. “Premium growth will see it in the numbers,” Kohlberg said, referencing continued demand for protection products through 2025.
AM Best analysts identified five structural trends defining the life and annuity landscape across North America:
Despite economic uncertainty, AM Best maintains a stable outlook for the Canadian life sector, citing prudent regulation, strong capital levels, and disciplined financial management. Kohlberg emphasized that measured growth and diversification remain key to sustaining performance. “Growth isn’t always a good thing,” he said. “If you’re growing too fast and don’t have the capital for it, that could be a pretty big negative – but that’s not the case here in Canada.”
The regulator’s oversight was also credited as a stabilizing factor. The Office of the Superintendent of Financial Institutions (OSFI) continues to provide robust capital and risk-governance guidance, reinforcing confidence in Canadian insurers’ solvency positions.
According to AM Best, none of the 24 Canadian life entities it rates fall below A-, with most clustered in the A to A+ range – an indicator of the sector’s enduring balance-sheet strength.
Kevin Varvaro (pictured centre), senior financial analyst at AM Best, said the “big four” insurers have demonstrated steady dividend growth and disciplined capital management. Dividend payouts have continued to climb over recent years, even through market volatility.
A newer trend, Varvaro added, is the increased use of share buybacks, with all four major insurers repurchasing between 2% and 5% of their outstanding shares in 2025.
Debt financing remains within expectations, with leverage ratios stable and capital adequacy metrics strong. The industry’s focus on capital-light products and fee-based income has also supported consistent profitability.
Varvaro highlighted that AM Best’s capital adequacy ratio (BCAR) scores for Canadian life insurers remain among the highest globally, averaging 996 on the agency’s scale – solidly within the “strongest” category. Recent changes under IFRS 17, allowing 75% credit for contractual-service-margin (CSM) capital, have further bolstered those scores.
