Rate decline continues in Canadian commercial lines

Softening in the Canadian commercial insurance market continues, with commercial rates falling 4% on average in the second quarter of 2025 compared to the previous year, according to Marsh McLennan’s latest Global Insurance Market Index.

This is the sixth consecutive quarterly decrease in Canada and follows a 3% decline in 2025 Q1, Marsh said in a Thursday press release.

“Increasing insurer competition, including from new entrants, is currently the main catalyst behind rising market capacity, more favourable rates, and broader coverage options.”

The Marsh Canada Insurance Market Rates report found rates dropping in all major product lines.

Commercial property insurance rates saw the biggest decline at 6%, reflecting an increasingly competitive market that has led to improved terms for some clients, “including notable increases in sub-limits and coverage enhancements.

“Key discussion points included tariff impacts, valuation methods, and wildfire risks,” the report says. “Financial implications of tariffs may impact industries such as automotive, steel, and aluminum, necessitating thorough examination of supply chain exposures.”

As an indication of market competitiveness, insureds exposed to significant natural catastrophes, with poor claims experience, or that presented engineering concerns also experienced rate reductions due to increased insurer competition, Marsh adds.

Eighth consecutive decline

Canadian casualty insurance rates decreased 2%, the eight consecutive quarter of declines. However, complex risks, especially in heavy industrial and energy sectors, and those with significant U.S. and transportation exposures, typically experienced rate increases.

As well, an influx of new managing general agents in domestic, London, and Bermuda markets added capacity, primarily in excess layers, the report says.

“Exclusions for per- and polyfluoroalkyl substances (PFAS) were common,” the report says. “Insurers expect organizations with known exposures to show commitment to reducing usage and have a replacement plan.

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“The issue is expanding beyond the U.S., with Canada proposing to declare most PFAS products as ‘toxic substances.’”

The report also took wildfires into account saying, “wildfire coverage is evolving, and clients should not assume the availability of future coverage. Other exclusions and sub-limits varied by risk class and included climate change, wildfire, failure to supply (energy/utilities), mental anguish, concussion, sexual abuse, biometrics, human trafficking, and cyber risk.”

Cyber insurance rates decreased 3% year-over-year in the second quarter as insurer competition and capacity remained strong. Marsh says clients took opportunities to enhance coverage, reduce retentions, and secure rate reductions.

Rate reductions in excess layers in the 3% to 10% range drove program savings, with excess pricing significantly lower than underlying layers. Coverage options broadened, including the removal of co-insurance requirements and enhanced sub-limits; clients with improved cybersecurity were generally able to negotiate lower retentions.

Claims frequency remained consistent and severity decreased.

Financial and professional lines rates also declined by 3% in the second quarter.

“Some insurers withdrew directors and officers (D&O) liability capacity where they considered pricing inadequate,” the report says. “While some program layers experienced rate reductions, some insurers began to resist further decreases after three years of generally declining rates.”

Excess insurers were also increasingly interested in moving down the tower structure.

Fiduciary rates remained stable in the face of litigation regarding excessive fees and imprudent investment choices. Employment practices liability rates and exposure also remained stable.

“Mounting competition between insurers and the attractiveness of underwriting Canadian risks are providing reduced pricing and broader coverage options for Canadian organizations,” says Marc Major, Marsh’s managing director and global placement leader for Canada, commenting on the report. “However, geopolitical issues, including tariffs and cross-border conflicts, and extreme weather, from flooding to wildfires, create new challenges and uncertainties.”

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.