How long to expect commercial property insurance softening, despite escalated losses 

Abundant reinsurance capital and market competition globally are contributing to the recent softening in commercial property insurance premiums, despite worsening climate-related losses. 

Canada’ P&C insurance industry can expect that trend to continue into the new year, says a recent Morningstar DBRS commentary.  

“The softening trend began in mid-2024 and has continued to accelerate, with commercial property insurance prices in 2025 Q2 declining by 7% compared to year-ago levels. The downward price trend is expected to continue into 2026,” reads the report. 

Wildfire activity in recent years has been above average in many parts of the world, driven in part by extreme heat and drought conditions globally. In Canada, the 2025 wildfire season is already the second-worst on record for area burnt, only behind 2023, when 17.3-million hectares were destroyed. 

DBRS warns wildfires are contributing to a higher number of insurance claims losses. But Canadian insurers may be off the hook — for now.  

What’s causing softening 

That’s because, despite record natural catastrophe-insured losses globally, prices continue to soften.  

“Some of the factors driving commercial property insurance premiums lower include softening reinsurance prices as well as the ambitious growth aspirations of insurers.” 

Ample reinsurance capacity from both traditional and third-party reinsurers, such as catastrophe bonds, is driving the softening of reinsurance prices, DBRS says. 

In Canada, a new form of third-party reinsurance capacity made waves earlier this year. TD Insurance sponsored the first-ever Canadian-based Cat bond in January 2025, covering Canadian perils of earthquake and severe convective storm to the amount of $150 million.  

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This Cat bond offers “another tool at [TD’s] disposal to diversify sources of protection and provide the best possible protection and pricing to our clients,” the insurer’s president and CEO, James Russell, said during a DBRS webinar in April.  

However, some of the largest reinsurers suggest third-party capital could prove unstable and might cause capacity to abruptly withdraw in the case of major catastrophic losses, DBRS cites.  

“This would most likely lead to sharp reinsurance rate corrections as witnessed most recently in 2023. Meanwhile, we expect that traditional reinsurance capital will continue to grow at a steady pace, supported by strong underwriting results, retained earnings, and solid investment returns,” DBRS writes.  

When the hard market returns

To continue a solid trajectory towards profitability, insurers and reinsurers will both need to maintain underwriting discipline. That requires “clear price differentiation between loss-free and loss-affected programs,” says DBRS.  

“For instance, insurers exposed to regions affected by recent wildfires will likely face higher [reinsurance] attachment points, lower aggregates, and stricter wordings.” 

The same type of differentiation is expected to be passed on to insureds by primary insurers with higher price increases for regions heavily affected by natural catastrophes. 

DBRS observed higher reinsurance prices for loss-affected programs at the 2025 renewals and expects the same in 2026. Loss-free portfolios can expect the same, or slightly better, reinsurance terms.  

In the long term, if worsening catastrophes continue to drive up claim costs, commercial property insurance prices may continue the upward trajectory seen prior to 2024, says DBRS.  

Alyssa DiSabatino

Alyssa Di Sabatino has been a reporter for Canadian Underwriter since 2021, covering industry trends, market developments, and emerging risks.