Are liability claims taking a chunk out of commercial insurers’ profitability?

We’ve all heard about Canada’s softening commercial lines market, but what about the liability segment? That’s profitable too, according to 2025 Q3 industry results from the Property and Casualty Insurance Compensation Corporation (PACICC).

This finding may seem counterintuitive, given recent talk of rising litigation, social inflation and third-party litigation funding in Canada.

But as of 2025 Q3, the Commercial Property and Liability insurance segments remain the most profitable among Canada’s property and casualty insurers, PACICC’s vice president of finance Jeff Stewart writes in the association’s quarterly Solvency Matters report. Commercial Property and Liability have year-to-date Net Comprehensive Combined Ratios (NCCRs) of 90% and 88.5%, respectively.

“This sustained profitability continues to fuel speculation of a softening market, as competitive pressures and available capacity drive rate reductions,” Stewart writes. “Notably, Newfoundland and Labrador in Commercial Property, and Yukon in both Commercial Property and Commercial Liability, are the only regions reporting NCCRs exceeding 100%, highlighting a very limited number of localized challenges amid an overall favourable environment.”

NCCR is a key measure of underwriting profitability that incorporates insurance service expenses, reinsurance costs, general and operating expenses, as well as net insurance and reinsurance finance expenses relative to net insurance revenue. A result above 100% reflects an underwriting loss and signals the line of business is eroding the industry’s capital base.

Diverging directions

Unlike commercial lines, underwriting performance in Canada’s private passenger auto insurance market remains notably weak, Stewart writes. During the first nine months of 2025, the NCCR exceeded 100% in every province and territory except Quebec, Ontario and the Northwest Territories. “Although the industry-wide result has improved by 5% compared to the prior year, these negative results continue to highlight an unsustainable trend.”

Last year’s long, widespread wildfire season in Canada significantly impacted personal property insurance outcomes across Newfoundland and Labrador, Ontario, Manitoba and Saskatchewan. “These provinces reported NCCRs exceeding 100%, with Newfoundland and Saskatchewan experiencing the most pronounced deterioration, surpassing 130%,” Stewart writes.

The Canadian P&C insurance industry as a whole delivered strong underwriting results in 2025 Q3, supported by lower Insurance Service Expenses (down 3.3%) and higher Insurance revenues (up 6.6%) compared to 2024 Q3. This drove a $2.5 billion increase in the Net Insurance Services Result (up 37.4%) versus the same period a year ago.

A major factor was net expenses from reinsurance contracts held, which surged 366.9%, reflecting an unfavourable $4 billion shift in the balance between reinsurance premiums paid and claims recoveries.

“This change was largely welcomed by insurers, as it relates to a sharp decline in catastrophic losses, from over $9 billion in Q3’24 to just above $2.1 billion in Q3’25,” Stewart writes. “The shift in reinsurance cash flows highlights a reversal from last year, when reinsurers absorbed significant volatility to stabilize the market, and reflects a much more profitable primary property market environment this year.”

For the first nine months of 2025, Canadian P&C insurers delivered strong profitability, posting a return on equity of 15.7%. “This represents a notable improvement over the 13.3% recorded during the same period in 2024, and exceeds the industry’s 50-year long-run average by approximately 5.5%.

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Jason Contant

Jason has been an award-winning journalist with Canadian Underwriter for more than a decade, including the past three years as associate editor and, before that, as digital editor for seven years.