As costs caused by extreme weather continue to rise, Canada ‘s home insurance “safety net” is beginning to crack at the edges.
Although market competition remains healthy and Canada has avoided the “coverage deserts” emerging in the United States, insurers are reducing policy coverage in various ways to adapt to the changing risk environment. Raising premiums—often at rates higher than inflation, and sometimes significantly higher—is a common practice, but experts say insurance companies are also increasingly excluding certain risks, increasing deductibles, and reducing exposure in high-risk areas.
“The Canadian market is showing early signs of tightening protection,” Morningstar DBRS said in a report last November. Although insurance companies have not completely withdrawn from certain regions, some companies have reduced the scale of their related business. “We have rebalanced in some areas with high severe weather risk,” TD CEO Raymond Chun said in a recent earnings call.
“In areas with a high concentration of risk in certain severe weather zones, we have already made appropriate adjustments.” Chun stated that the bank is shifting its growth focus to regions with lower disaster risks. Definity Financial Corp. claims to have become Canada’s fourth-largest property and casualty insurer after completing its C$3.3 billion acquisition of Travelers last month. The company is also taking steps to moderately withdraw from high-risk regions.
In an analyst call last November, CEO Rowan Saunders said the company was adjusting its business portfolio, shifting new business to areas with lower disaster risk and reducing its concentration in high-risk areas. He said that the main work of transferring high-risk exposures has been largely completed, but this will be an ongoing process.
“This is simply a matter of ongoing, good portfolio management.”
The pressure to rebalance the business portfolio has increased after costs have soared further from already high levels in recent years, especially given the record $9.4 billion in insurance payouts in 2024. But this is not a one-off event.
A TD report indicates that between 2020 and 2024, the average loss of personal property is almost double that of the previous period, while the number of catastrophic weather events averages 15 per year, far higher than the level of about two per year in the 1980s. In the report, economist Likeliel Seitlheko stated, “The increasing losses in personal property insurance claims are putting enormous pressure on Canada’s home insurance industry.”
In response to rising costs, insurance companies have increased deductibles for risks such as hail to over CAD 10,000, reduced coverage, and even removed coverage for certain risks, such as floods. Seitlheko stated, “In the worst-case scenario, some risks are simply not covered by insurance.”
Flood insurance was only introduced in Canada about a decade ago, and its availability in high-risk areas has been limited. According to data from Public Safety Canada, Quebec has the highest number of properties at risk of flooding, followed by Ontario and British Columbia.
The Insurance Board of Canada estimates that approximately 1.5 million households (about 10% of the total) are ineligible for flood insurance; for those who are, flood insurance could increase premiums by up to $15,000 per year. But David Nickerson, who studies real estate economics at Toronto Metropolitan University, says that even this figure overestimates the actual number of people who can obtain insurance. “The industry claims that 90% of Canadians have access to flood insurance. This is an exaggeration.
Considering the specific circumstances of high-risk areas and the ‘red line’ system, in reality, only about 50% of people may have effective coverage.” Nickerson stated that part of the problem lies in the fragmented and outdated risk data, which is why the federal government is investing hundreds of millions of dollars to upgrade flood maps. Although insurance companies have access to multiple information sources, they can still face the problem of over-concentration of risk. Nickerson points out that TD experienced this during the Calgary hailstorm in 2024.
“They suffered huge, huge losses, so they scaled back operations to replenish their financial reserves.” Alberta has consistently been a focal point of losses. A TD report indicates that the $3 billion worth of hailstorms and the $1.1 billion Jasper wildfires in 2024 caused the province’s industry operating costs to exceed premium income by nearly 20% that year.
Despite the challenges, Nadja Dreff, Global Head of Insurance at Morningstar DBRS, said the industry remains stable. The massive losses in 2024 served as a stress test for the industry, demonstrating that insurers were well-prepared, although this preparation largely meant raising prices.
Dreff said, “From a consumer’s perspective, especially from the perspective of personal insurance, the situation is not optimistic, right?” “Because in order for insurance companies to absorb these losses, they had to raise individual insurance premiums, and that has indeed happened. We predict that this will continue into 2026.”
Statistics Canada data shows that between 2021 and 2025, home insurance costs (combined with mortgage insurance) rose by 31%, while the overall inflation rate was 15% during the same period. The TD report points out that the increase is even higher in areas with frequent claims: British Columbia saw an average increase of 68%, and Alberta saw an increase of 58%. However, with costs continuing to rise and insurance companies needing to ensure financial stability, there is no easy solution.
Dreff said, “Everyone is doing their best, while consumers are on the receiving end.” “The only way to truly get out of this situation is for the whole society to invest in climate resilience building.”
The Insurance Bureau of Canada also called for improvements in building standards and repair methods to make homes more resistant to extreme weather. “We must put on the brakes and stop the problem from getting worse, and really take building a more resilient nation seriously,” said Liam McGuinty, Vice President of Federal Affairs at the Insurance Bureau of Canada. He said that as Canada accelerates housing construction, it is essential to avoid building in high-risk flood areas and to enhance the resilience of homes to hail and wildfires.
McGuinty stated that, based on current trends, costs will continue to rise as climate change makes weather events more extreme. “We should pay close attention to this trend. All these costs will ultimately have to be borne by a certain group, right? And the ones who ultimately bear the costs are the policyholders, the people who pay the premiums.”