AM Best, the credit rating agency and provider of insurance industry analysis, has retained its stable outlook for Canada’s property and casualty (P&C) insurance sector, pointing to strong capital positions, better underwriting performance and consistent investment income.
In its latest report, Canada Property/Casualty: Strong Earnings and Improved Underwriting Results Underpin Stable Outlook, AM Best said the Canadian P&C market maintained its profitability during 2025. The agency attributed the improvement in underwriting results partly to a reduction in catastrophe activity compared with the previous year.
AM Best also identified the growing use of technology and data analytics as factors supporting the sector’s outlook. According to the agency, insurers continued to benefit from investment income generated by relatively high fixed-income yields, despite interest rates having broadly stabilised.
AM Best cautioned that the industry still faces a number of risks that could affect future profitability. The agency highlighted the rising frequency and severity of climate-related catastrophes as a continuing concern. It also reported that personal motor insurance profitability remained constrained by higher vehicle repair costs and increased vehicle theft, although AM Best said there were indications that these pressures were beginning to ease.
“Sustaining profitability going forward will depend on the industry’s ability to be agile and refine its risk management practices and leverage technological innovations, including artificial intelligence,” commented Alan Murray, Director, AM Best.
The agency also pointed to developments in Canada’s regulatory landscape. AM Best said federal regulatory supervision, led by the Office of the Superintendent of Financial Institutions (OSFI), continues to focus on areas including operational resilience, cyber security practices and governance relating to artificial intelligence.
At provincial level, AM Best said regulators are introducing significant changes to motor insurance arrangements, adding another factor for insurers operating in the Canadian market to consider.
Financial results cited by AM Best indicate that the sector expanded its insurance revenue during 2025. Gross insurance revenue increased by 5.6% to CAD 97.4 billion, while net insurance revenue rose by 6.0% to CAD 76.1 billion. Over the same period, insurance service expenses declined by 6.3% to CAD 79.4 billion.
AM Best described the Canadian P&C insurance market as highly concentrated, with several large national insurers accounting for a substantial proportion of the market. The agency said the scale of these businesses, together with continued consolidation, remains an important competitive factor.
AM Best’s report also considers the potential effects of geopolitical developments and wildfire exposure on Canadian insurers. The agency highlighted the expanding role of managing general agents and brokers, noting that these market participants are increasingly being used by insurers seeking greater flexibility in capital deployment and opportunities to broaden their market presence.
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