After a choppy 2025 for insurance M&A, EY expects Canadian deal activity to pick up modestly this year – but not surge.
Ron Stokes (pictured), financial services transaction leader at EY Canada, said the baseline expectation is that there will be modest acceleration in Canadian insurance M&A. He emphasized that “this won’t be a boom but clearly stronger than 2025’s softened volumes.”
Scale-dominated strategic thinking last year, particularly across property and casualty transactions.
“Scale was the main driver of insurance M&A in 2025, with large property and casualty deals reflecting global megadeal trends,” Stokes told Insurance Business.
Canadian carriers increasingly pursued larger balance sheets and broader product offerings, mirroring global financial services consolidation aimed at efficiency and market reach.
Deal activity also reflected a growing appetite for international expansion. Stokes said that there was an increase in geographic diversification, as Canadian insurers pursued significant outbound transactions and expanded internationally. The trend reinforces Canadian insurers’ evolving role as global consolidators seeking new markets, distribution channels and operational capabilities beyond domestic boundaries.
While specialization remained present, it played a supporting role rather than driving overall transaction value.
“Specialization in sectors like cyber and MGAs played a secondary role, with niche deals present but not central to overall deal value.” These transactions typically provided targeted expertise or distribution advantages in fast-evolving segments such as cyber risk and managing general agents, without materially reshaping the broader deal landscape.
Technology, often a major M&A catalyst in other industries, was approached with notable restraint in Canada’s insurance sector. Buyers largely focused on strengthening core fundamentals rather than pursuing standalone digital acquisitions.
“When it comes to technology, it was not a key motivator for insurance M&A as buyers prioritized balance-sheet strength and broader product portfolios.” Digital capabilities remain important but are more frequently pursued through internal investment or integrated within larger transactions.
Strategic buyers overwhelmingly drove transaction activity. Corporate buyers, Stokes said, dominated activity in 2025, highlighting the active role of Canadian carriers in outbound consolidation. With private equity participation lower than in previous cycles, strategic acquirers gained additional leverage in transaction processes, particularly across the mid-market, where sponsor competition had previously inflated valuations and accelerated deal timelines.
Macroeconomic and regulatory forces continue to shape both deal availability and pricing dynamics. Interest rates proved to be one of the most influential variables in 2025. “Elevated interest rates limited smaller sellers and contributed to a mid-2025 slowdown in transaction activity, though late-year anticipation of rate cuts led to more assets returning to the market with stabilized valuations.”
In effect, higher borrowing costs initially constrained deal flow, while expectations of monetary easing later in the year helped revive transaction pipelines.
Capital regulations have also influenced portfolio restructuring across the sector. Regulatory capital requirements, such as LICAT and MCT, prompted targeted divestitures, with firms holding thinner capital reserves more likely to sell off non-core or higher-volatility business lines, Stokes said. These pressures have encouraged insurers to offload capital-intensive or volatile portfolios, contributing to a more segmented market in which certain risk categories trade more frequently.
Environmental, social and governance considerations are also playing a growing role in shaping transaction strategies. These factors are increasingly influencing which insurance assets are traded, Stokes noted.
He highlighted that “buyers are cautious with high-exposure property portfolios, while assets with lower volatility or strong ESG credentials (such as cyber and MGA), continue to attract higher valuations.”
Despite the influence of macroeconomic, regulatory and ESG pressures, pricing for high-quality assets has remained resilient. “Valuations for quality assets remain robust, as macroeconomic and regulatory factors are shaping the types of assets coming to market rather than significantly impacting pricing.” In other words, market selectivity is increasing, but premium assets continue to command strong valuations.
Looking ahead, EY identifies several key variables that will determine whether deal momentum strengthens in 2026. Interest rate policy remains the most significant factor. “A key swing factor will be the interest rate path,” Stokes said. “If cuts materialize as anticipated, mid-market deal activity should lift meaningfully.” Lower financing costs could improve transaction economics for buyers while encouraging more sellers to test the market.
Additional structural forces are expected to influence deal flow and execution speed. “Regulation and ESG will shape which assets come to market, while macro/geopolitics will determine how fast they transact,” Stokes added.
