Insurers still coping with Alberta auto rate-cap consequences

Fallout from Alberta’s auto rate cap continues to reverberate across Canada’s property and casualty insurance sector, as evinced by Definity’s 2025 Q4 earnings report, which included a loss related to its Sonnet subsidiary’s 2024 exit of the auto business in the province.

During Definity’s fourth quarter 2025 earnings call with investors on Feb. 13, Tom MacKinnon at BMO Capital Markets asked about an approximately $10 million underwriting loss within exited lines for Q4. Definity’s chief financial officer Philip Mather confirmed it was related to exited lines in Alberta.

“You saw a loss of $10 million. That was driven by specific actions we took to strengthen the reserve position, I’d say specifically in relation to bodily injury amounts,” Mather said.  

“Really what we did there was we took the decision to reinforce that level of prudence as we exit the year. We now have a book that’s fully transitioned into runoff. There is no future premium coming through that book. There’s no ongoing new exposure.”

Related: Post-Travelers merger, Definity aims to be Top 3 insurer in Canada

Mather noted during the earnings call that it was Definity’s intent to leave 2025 with a robust balance sheet position against that exited business. Doing so helps mitigate the risk of future adverse developments.

“I would say we’re very confident in the closing position that we now exit, really to put that behind us, I think is the attitude that we took in closing the book. [And we are] looking forward to the reforms that should come into the province in [20]27,” he added.

In June 2024, Definity subsidiary Sonnet announced it would phase out its auto insurance operations in Alberta. At the time, it said Dec. 13, 2024 would be its intended date of withdrawal, when it would no longer issue new or renewal auto policies in the province.

Definity’s 2025 Q4 regulatory filings include a Management Discussion and Analysis (MD&A). It noted, “Following the date of withdrawal [from the province], Sonnet no longer issues new nor renewal auto insurance policies in Alberta…To reflect this decision, commencing July 1, 2024, we have prospectively reported Sonnet’s Alberta auto business as an exited line outside of operating results in our MD&A.” The MD&A said this change does not affect Sonnet’s underwriting of home insurance business in Alberta.

Travelers review

BMO’s MacKinnon also asked about the possibility of exiting Travelers’ business in Alberta, now that Definity’s acquisition of that company closed Jan. 2.

In short, “No,” said Mather, who added Travelers has an active broker broker-distributed business in the province. “I think their level of concentration in Alberta is pretty close to what we have today, you know they’re continuing to operate that environment,” he said.

“There might be historical business that they wrote, which we would consider to be more exited lines in nature. But we’ll be looking at the opening balance sheet. We’re going through that work right now. I’d say, similar to the Sonnet position, we’ll be looking to make sure we’re comforted on any back book there. But no, in connection with Alberta auto, they continue to move forward.”

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Phil Porado

Phil, an award-winning journalist with over 30 years of experience in financial topics, has been managing editor of Canadian Underwriter for more than three years.