What’s on Dec? | Episode 24 | Canada insurance market outlook

Stream this episode and others in our series on Spotify!

Canada’s insurance sector faced a myriad of complex risks this year, from major catastrophe losses, changing MGA regulation, fast-moving AI and cyber threats, and persistent auto theft.  

Nevertheless, the sector must navigate these changes while still maintaining its financial strength for clients, consumers, and business partners.  

In this episode, Greg Williams, managing director at AM Best provides an in-depth outlook on the risks shaping the current insurance landscape in Canada.  

He explains how insurers still posted strong results in 2024 — despite weathering a record-breaking $9 billion in insured catastrophe losses that year — thanks to proactive measures like pricing adjustments, stricter underwriting, and improved Cat modelling. 

He explains how secondary perils are shaping underwriting strategies and whether reinsurers still view Canada as a stable market.  

In the wide-ranging discussion, Greg also talks MGA regulation in Canada — and offers lessons from the U.S. model and how ratings agency assessments can assist. 

He also examines insurers’ AI adoption by highlighting governance and liability risks, and weighs in on evolving challenges in auto theft. 

Audio transcript  

Intro | Alyssa DiSabatino:

Hi, I’m Alyssa DiSabatino, reporter at Canadian Underwriter and co-host of our podcast series, “What’s On Dec?” Recently, I sat down with Greg Williams from AM Best to get his take on Canada’s insurance market outlook. We talked about the current trends shaping the country’s insurance sector, including catastrophe losses, MGA regulation, evolving AI risk, and auto theft. This episode is sponsored by AM Best.

Alyssa DiSabatino:

Today, Greg Williams from AM Best will be giving us a Canadian insurance market outlook. So just to kick us off, Greg, maybe we can begin with the catastrophes. So Canadian insurers paid out more than $9 billion in property losses from catastrophes in 2024, which is the highest loss year on record by far. Yet, companies still kind of posted strong results. So maybe you could kind of walk us through how they managed that.

Greg Williams:

Sure, yeah. Yeah, thanks for the question. So when we think about the $9 billion in Cat losses and how companies were able to withstand that, I think we have to take a look at historical results. So these Cat losses are nothing new. Yeah, it was elevated obviously in 2024, but companies had time, they saw what was happening and they took proactive measures to guard against some of the Cat activity that took place. So while they weren’t able to mitigate all of it, they did produce an underwriting profit and they did it through pricing adjustments. They adopted and maintained more risk underwriting initiatives, whether it be through implementing higher deductibles, whether it be going to actual cash value on roofs, and they also adopted more technology around Cat modelling and where you can write versus where you can’t write. So if you think about all the initiatives that companies have done leading up to 2024, I think that’s really helped soften the blow from what they saw in 2024. And then on top of that, not only have companies achieved the underwriting profitability, investment results have definitely helped their overall results. So if we take a look at their yield, companies’ yields in Canada, they have increased, especially in 2024. I think investment income was up in the neighborhood of 35%. And then companies have also repositioned their portfolios to achieve better interest rates.

Alyssa DiSabatino:

So going back a couple points, you said insurers are kind of looking at where they can write and can’t write. So is there anywhere in specific that you’re seeing insurers not wanting to write, maybe any specific perils or regions?

Greg Williams:

Yeah, I think you get into some of the wind hail areas, maybe in Alberta, we’ve seen that. So I think it also has some areas where there’s earthquake exposure where companies may have shied away from that. But, I think it’s more in that secondary peril area that we’re starting to see. If you take a look at secondary perils, they continue to make up the vast majority of insured losses. So I think that’s where a lot of the activity’s happening, whether they, if companies need to pull back or maybe just implement some of those underwriting initiatives I just mentioned.

Alyssa DiSabatino:

And after that record NatCat loss year in 2024, 2025 is probably, again, trending toward that $3 billion kind of insured NatCat mark, which is kind of something of a new normal in Canada. So I guess as a ratings agency, I mean, what measures are you kind of expecting companies to take to reduce those large scale NatCat losses?

Greg Williams:

Yeah, I think what we’ve seen is companies have been acting responsible in terms of what they’re doing in terms of underwriting initiatives. I think one area that companies, obviously they can do pricing, they can do underwriting initiatives, but more of around proactive measures, working with their policyholders to maybe flood proof their home or reduce the wildfire risk by removing shrub around the house. So I think it’s more of that that companies need to do more of and whether that be offer premium credits, which we have seen for policyholders that act in this responsible manner, that’s something that companies should continue to do. But in terms of the basic blocking and tackling, we continue to see companies do that and we expect them to keep up with it as we enter 2026 fairly soon.

Alyssa DiSabatino:

Still in the catastrophe vein, but maybe moving over to reinsurance. I mean in 2023, insurers experienced really high reinsurance renewals. Reinsurers were pulling back from covering secondary perils. They were, you know, raising attachment points and, and reinsurance premiums skyrocketed. Certainly, you know, given the rise of wildfires and floods and kind of other perils in Canada, is this country still seen as a good risk for reinsurers or has that changed?

Greg Williams:

Yeah, it’s a good question and I think maybe the best way to put this is in context. So even in Canada’s worst Cat year, it was $9 billion. Globally, in 2024, it was $140 billion of insured losses. So again, Canada still makes up a small percentage of the global losses. So when we think about what reinsurers see in Canada, we still think reinsurers view Canada as a strong market. It’s diversifying so it diversifies their risk from other global markets that have Cat risk. It’s very well regulated, insurance penetration is high, a stable environment, all those positives will factor in reinsurers’ view of Canada. So again, yeah, 2024 was horrendous from a Cat loss perspective, but again, there are positives that reinsurers look to the Canadian Canadian market to and feel comfortable with it. So yeah, we don’t expect reinsurers to pull capacity from Canada.

Alyssa DiSabatino:

Kinda switching gears a little bit, I wanted to talk a bit about MGA regulation. So I guess on background, you know, a Canadian MGA is suing its former CEO over alleged financial irregularities. The case has definitely caused a lot of discussion among regulators who are now kind of looking at different ways and kind of how MGA should be regulated. The case is still ongoing and everything is alleged and there’s been no final verdict, but kind of without commenting on case specifics, I mean, what changes do you kind of expect to see in MGA regulation in Canada? Or what changes would you like to see?

Greg Williams:

Yeah, it’s a good question. I was actually at the NICC conference and there was a session dedicated on MGAs, as you can imagine, that MGA came up in that discussion. and I think the views varied widely as to what will happen. There were some panellists who were of the view that, you know what, this is a legal matter, there’s fraud involved and the proper authorities are handling it and it’s not really something that needs to be further regulated from an insurance standpoint. So that that view was represented. There was also other views that talked about, well, we need more. Right now it seems to be more of a patchwork of regulations across provinces. Some require licenses, some don’t. In life/health, MGAs tend to be more regulated. I know Ontario is putting forth something in 2026. So I think there is, there’s the view that yes, there could be more regulation coming from this, maybe a much more cohesive regulation, but I think the jury’s still out as to how this will all play out because there are arguments on both sides of this. So I think it’s something that we have to wait and see to see how this plays out. But if you think about from an AM Best perspective, I don’t think we have a view definitively as to what regulations should apply. I think just like any regulations, there’s gotta be a balance. There’s gotta be a balance where there’s proper oversight, but at the same time it can’t be unduly prohibitive to innovation because that’s where MGAs really excel is innovation and being nimble. So a proper balance has to be found out. So in the meantime, while they figure that out, while the market figures that out, AM Best has rolled out our own view of delegated underwriting authorities. So not only do we offer credit ratings on the insurance company side, we offer what we call performance assessments for delegated underwriting authority enterprises, UAEs, which encompass MGAs. And so we’ve offered that service over the last couple years. There’s about 10 publicly assessed MGAs on our website. And what we do is meet with the MGAs and we talk to, there’s five key categories that we take a look at, which is underwriting capabilities, governance, internal controls, financial condition, depth and breadth of relationships, and organizational talent. And so we get comfortable with the MGA and then we perform the assessment and make that public. And so while it’s not a credit rating and it doesn’t talk about the ability to service policyholder obligations, what it does is provide our view of that MGA’s ability to provide services to insurance carriers.

Alyssa DiSabatino:

You’re based in the US. You know, how are MGAs regulated there and how does it kind of differ from how we do it here in Canada?

Greg Williams:

Yeah, so if I think about the USA, the USA MGAs are basically regulated at the state level through what’s called an MGA Act, which is a model act that was developed by the National Association of Insurance Commissioners. So, it’s a model act. And so what’s happened is that most states have adopted this model act, but each state has maybe some variations for their specific concern. Now that MGA Act really talks about three critical areas. So when we talk about the MGA Act covers licensing. So MGAs need to be licensed. It talks about the contract between the MGA and the insurance carrier. So what needs to be in that contract. Such as termination clause or trust accounts or fiduciary accounts, or if companies need, or MGAs need E&O policies. So that gets into the details and gets into the underwriting guidelines as well. So that’s really the governing, that contract between the insurer and the MGA is critical to the MGA Act. And then the third piece of that is just oversight of the MGA by the insurer. So it kind of just stipulates, okay, what kind of oversight that the insurer needs to do of the MGA. Usually that consists of audits because it really is the insurance company who will be on the hook for anything that the MGA does or writes. So they need to have oversight of the MGA. So that’s really how it’s structured in the US. When I think about Canada, again, as I mentioned before, it’s more of a patchwork at this point as to some provinces require licenses from a broker perspective, some don’t. And a lot of it is self-reporting. So I, again, I think US tends to be a little more advanced. But again, US has been in the MGA space for much longer and it’s much more material and becoming even more material to the US market. And I think what we’re seeing is that MGAs are starting to accelerate their presence in the Canadian market. And again, that will draw maybe additional scrutiny from a regulatory perspective.

Alyssa DiSabatino:

Insurers in Canada are adopting AI across their businesses, but I guess what big issues are you kind of seeing with how insurers are using AI and what risks, if any, could be created?

Greg Williams:

Yeah, it’s a good question. So we are seeing companies continue to accelerate the use of AI. So whether it be in underwriting, whether it be in claims, especially on the customer service standpoint, chatbots. So we’re definitely seeing that. But to your point, there are challenges, there are concerns that are brought up. So if you think about some of the challenges, you think about regulatory challenges. So right now, I think like most markets, Canadian regulators are trying to determine, okay, how do we go about regulating AI? So there’s a catch up period where maybe insurers want to use the AI but can’t because regulators haven’t caught up. So it might run afoul of regulators in terms of using some data in their pricing. So you have that, you have safeguarding data, a lot of privacy issues that arise from the use of AI. You have discrimination concerns when we talk about using certain data in pricing. And also, I mean, you think about how AI is being used on the other side by, by criminals and fraud, the increased fraud. So again, while companies may benefit from AI, eventually you also, as you mentioned, you have those risks, which I just covered. And then you also have, I mean it’s interesting you think about just something like a chatbot, and I know Air Canada had an issue where the chatbot provided wrong information through a hallucination, and so they were held liable. It was small claims court, but they were held liable for erroneous information that the AI chatbot gave. So you have those, you have liability issues arise as well. So there’s a whole host of risks that will emerge and companies just need to be aware of that and devise structures within their own internal organizations to safeguard against some of these risks.

Alyssa DiSabatino:

Yeah, I mean that’s a good segue too ’cause I mean, what steps could companies be taking to reduce those AI exposures that they may have?

Greg Williams:

Yeah, I think what they need to do is create a governance structure, that’s really what it comes down to. And when we think about a governance structure, we think about, okay, is there a formal AI governance in place? Are there committees within the organization to talk about AI? What internal controls are in place? How is sensitive data that’s necessary to develop AI being safeguarded? How are AI vendors chosen? What safeguards are in place for that? And how companies are integrating the AI into their underwriting distribution claims? And are they able to document benefits that are derived from that? Because when we go to companies, we want them to say, “Okay, yeah, we are using AI. Here’s how we’re using AI and here’s how it’s benefitting us from an AI perspective, and here are the controls we have in place to ensure that some of the risks aren’t exposed to our results.”

Alyssa DiSabatino:

Moving on to auto theft. I mean, across Canada, auto theft numbers are down, but just a few years ago, we kind of experienced this record high, $1.5 billion in auto theft losses. So even though it’s down now, I mean auto theft is transforming, hotspots are kind of moving from one province to another. Cargo theft is now starting to rise. So how much of this auto theft problem can really be solved?

Greg Williams:

Yeah. Well, let’s just start and say it is never gonna be completely solved. I mean you have criminal actors that will always be there and where there’s incentives, there’s always gonna be that. But that doesn’t take away from your point that what can insurers do, what can government agencies do to reduce that? And again, I, there are some positive signs, as you mentioned. I think through the first half of 2025, theft might have been down somewhere in the neighbourhood of 20% overall, maybe higher in some areas versus lower in others. So that’s a positive sign. I think it goes into some of that cooperation that we’re starting to see, not only through insurers, and government, and regulators. So we’ve definitely seen that, we’ve seen police target high theft areas, so that’s definitely helped. Insurers are taking underwriting actions in terms of pricing and also initiatives in terms of theft, anti-theft devices. Tags is an example that they’re using. So again, I think it’s gonna be a collaborative effort. Are we gonna see a total reduction of it? No. Are we going to see hopefully continued gradual declines? I think if this cooperation continues, yes, I think that’s kind of where we’re headed. And also it comes down to insurers. This kind of, this talks about the same thing we talked about with insurers and policyholders on the flood and wildfire, taking actions, proactive actions to mitigate the risk. And so what we would look for insurers to do with their policyholders on the auto side is the same thing, whether it is installing anti-theft devices or just being more cognizant of some of the areas that are high theft areas.

Alyssa DiSabatino:

So when we kind of talk about the progress that has been made in contributing to the auto theft decline, I mean the federal government in 2024 held a national auto theft summit and that definitely led to a lot of progress that we see now. But how do you think we can kind of keep that momentum going and make sure that progress isn’t lost and we can continue seeing it decline?

Greg Williams:

I think just keeping the dialogue continuing between the partners. I think there could be more maybe from an international standpoint. So if you think about where these vehicles wind up, it could be an international through the port. So maybe tightening port security is a potential avenue, international cooperation. And again, just continuing to have the open dialogue that’s been created from that 2024 summit. So I think those factors can maybe enhance the progress that’s been made already.

Outro | Alyssa DiSabatino: That wraps up today’s episode, sponsored by AM Best. We hope you enjoyed the discussion. Thanks for tuning in and we’ll see you next time on “What’s on Dec?”