Canada continues to see expensive weather-related losses. Will this affect reinsurance capacity across the country?
In this market guide, our editorial team explores OSFI’s current reinsurance guideline and OSFI’s 2026 natural catastrophe bond notice. We also provide an overview of the Insurance Bureau of Canada’s 2025 loss review and an update on extreme weather from Statistics Canada’s updated extreme-weather analysis.
Does Canada Have a Reinsurance Capacity Shortage?
High reinsurance prices, higher attachment points and a true capacity shortage would affect insurers and policyholders differently.
Although the publicly available information reviewed indicates higher costs for insurance coverage, significant catastrophe losses, and tighter standards around reinsurance risk management, we do not have treaty-level detail on placements, price, and retentions. As a result, we do not believe there is sufficient information to conclude that there is a shortage of catastrophe or other forms of protection in Canada’s property/casualty insurance and reinsurance market.
What Reinsurance Capacity Actually Measures
| Measure | What it tells you | What it does not prove by itself |
|---|---|---|
| Treaty limit | The maximum potential amount that can be recovered under a reinsurance layer or under a reinsurance program | Reinsurance capacity does not tell you that this limit of coverage is affordable, or that every peril is covered. |
| Attachment point | The loss point at which the reinsurer begins paying. | It does not show that the primary insurer has little retained loss. |
| Cedant retention | The amount of risk that the insurer actually has between or before reinsurance layers. | A higher retention may be voluntary or involuntary. |
| Placement percentage | The percentage of a requested reinsurance program that could be subscribed by reinsurance underwriters. | It does not tell us whether the wording or counterparties achieved the goals of the buyer. |
What the Current Public Evidence Shows
| Evidence | Supported conclusion | Limit on the conclusion |
|---|---|---|
| IBC severe-weather losses | IBC has reported $9.4 billion (in 2025 dollars) for 2024 and more than $2.4 billion for 2025. | Annual insured damages do not measure reinsurance supply or treaty recoveries. |
| Statistics Canada consumer analysis | Home and mortgage insurance premium rates increased 45% from December 2019 to December 2025. | It would be wrong to suggest that reinsurance has been the only cause of the change. Insurance claims are a major factor, as are rebuilding and repair costs. |
| OSFI Guideline B-3 | Insurers that are federally regulated must manage their counterparty, contract, concentration, and recoverability risks. | The guideline does not show that foreign reinsurers have been leaving. |
| OSFI catastrophe- bond notice | Natural catastrophe bonds may be eligible for capital recognition, but this is only if they are approved and satisfy certain conditions. | We cannot say, based on current public evidence, how much capacity insurers are going to utilize through this permitted tool. |
It is entirely justified to be concerned about catastrophe exposures given losses seen in 2024. However, to say capacity cannot cope requires evidence.
How Catastrophe Pressure Can Reach a Home Policy
| Reinsurance or loss change | Possible insurer response | Possible policyholder effect |
|---|---|---|
| Higher retained losses below the treaty attachment | Catastrophe pressure may lead to higher primary-insurance premiums, tighter underwriting standards, and mitigation requirements being added to policies. | Higher prices, new policy terms such as inspection requirements, and more rigorous underwriting in exposed locations. |
| Higher reinsurance price | Catastrophe pressure can influence an insurer’s perception of what constitutes adequate rates and its appetite for particular businesses. | Catastrophe losses can lead to upward pressure that may contribute to premium growth on home insurance policies, although this is not necessarily on a dollar-for-dollar basis. |
| Lower limit or incomplete placement | Insurers may decrease risk concentration across home policies or use alternate policy structures in response to catastrophe pressure. | For selected risks, coverage limits or insurance availability may change. |
| Different wording or exclusions | Insurers consider which losses stemming from catastrophes will be passed along via reinsurance. | Catastrophe pressures do not automatically change your policy wording and the insurer is still obligated to live up to the promises made in your policy. |
| More capital-market protection | Catastrophe bonds and other collateralized risk-transfer instruments can complement standard reinsurance contracts in markets around the world. | New coverage does not automatically apply to a home unless a change is made to the primary insurance policy. |
Keep in mind, though, that this is not a way to know for certain whether catastrophe-related rate hikes in the reinsurance market caused your hike. If your rate went up, ask your insurer to explain why it increased your rates and changed your policy.
Read More: Read About Public Backstops for Catastrophe Risk
Guideline B-3 Is Now in Force
OSFI’s Guideline B-3 on the assumption or the ceding of reinsurance took effect on January 1, 2025. The guideline requires federally regulated insurers to have a documented reinsurance risk-management framework, conduct counterparty due diligence, negotiate legally enforceable reinsurance contracts, perform stress testing, and report regularly on reinsurance risks to senior management.
B-3 is currently in force and is not a potential obstacle to licensure. In this context, “unregistered” has a specific supervisory and capital-related meaning and does not have the ordinary connotation of being unlicensed or illegal.
What This Means for Homeowners
- Premium changes don’t necessarily result from the nationwide reinsurance situation. When your rate goes up or down, ask for details on what changed: Your location, home characteristics, coverage limits, or deductibles may have changed, or your policy may have different endorsements. A lower rate may be tempered by lower coverage or a higher deductible. Compare declarations pages from your old and new policies before you shop.
- Some, but not all, mitigation efforts qualify for a premium reduction. Before making improvements, ask your insurer whether they qualify for a credit. Save all receipts and documentation on home improvements. Make sure your home’s rebuild specifications are accurate and keep an inventory of your personal property current. Track home maintenance, including the roof, plumbing, electrical system, and water mitigation efforts.