Insurance Marketplace Realities 2026 – Canada Casualty

• In a capacity-abundant marketplace, growing importance around visiting stagnant general liability policy limits that haven't kept pace with rising medical and rebuilding costs, creating a coverage gap that heightens exposure to over-limit losses, especially in catastrophic claims, opening the potential for unknown shortfalls.
• Growing consideration to alternative risk transfer structures — such as captives, group programs and parametric insurance — as buyers seek more flexible, cost-effective ways to manage coverage and secure adequate limits amid rising costs and market constraints.
• Markets continue to push for tighter policy language and exclusions, especially when looking to address emerging risks that look to limit cover offer but fall short against new and aggressive competition or fall back to lenient stance in their efforts to combat retention of book.

• Initiating July 1, 2026, Ontario will shift from a bundled auto-insurance system to a modular one, allowing consumers to select specific accident benefit coverages based on their needs and budget ^[1]. While this change offers flexibility and potential cost savings, it also introduces the risk of underinsurance if consumers opt out of essential coverage without fully understanding the implications. Insurance providers will look to focus on the redesigning of products and updated pricing models, while insurance brokers will need to navigate these changes, ensuring clear communication with insurance buyers to avoid reputational damage and regulatory issues.
• Telematics and pay-per-kilometer models are gaining traction, where these models offer personalized pricing and encourage safer driving habits.
• Shifts in consumer behavior continue with economic pressures pushing consumers to shop around more aggressively and a growing demand for flexible, digital-first insurance experiences.

• While capacity remains available, insurers are becoming more selective, especially for risks with U.S. exposure, where nuclear verdicts and social inflation are driving up claims.
• Demand for umbrella and excess liability coverage is rising as businesses seek higher limits to meet contractual obligations and protect against large losses, especially in high-risk industries or those with U.S. exposure, while insurance buyers are increasingly requesting more from data-driven analytics to guide total limit-buy selection and optimize coverage strategies.

• As geopolitical tensions contribute to a more unpredictable future global environment, insurers continue to reassess their underwriting approach for companies with international supply chains, foreign operations or U.S. liability exposure, even in the absence of immediate claims trends or spikes.
• Insurers remain on the lookout for Canadian-U.S. trade war that could prompt a more expedient return to hard-market conditions fueled by increases to cost of goods used in claims (e.g., auto-parts, materials), driving up claims severity and translating to premium increases and policy limit adjustments.
• While Canadian insurers remain well-capitalized, prolonged volatility could lead to more conservative investment strategies and reduced underwriting appetite.
• Insurers are rewarding businesses that demonstrate resilience planning, such as alternative sourcing strategies, crisis protocols and quantified exposure modeling, which can lead to enhanced coverage terms and pricing stability in a volatile environment.

• Third-party litigation funding is expanding in Canada, enabling investors to profit from financing lawsuits. This largely unregulated trend is driving up the volume of claims, prolonging litigation timelines, increasing defense costs and raising the overall cost of liability claims, particularly in commercial sectors like healthcare, retail and construction that are more prone to legal action.
• Class-action lawsuits are becoming more common, driven by aggressive legal advertising and a broader awareness of legal rights.
• These developments are prompting insurers to reassess liability pricing and policy wording.
• As a result, strategic risk management remains essential, and buyers should proactively manage legal exposure by reviewing contracts for liability clauses, maintaining strong documentation and compliance protocols and exploring alternative dispute resolution methods to avoid costly litigation.

Following the second-worst recorded year for Canadian wildfires, the impacts of extreme weather disasters are no longer considered isolated incidents but recurring threats, prompting insurers to reassess their exposure and risk models.

• Municipalities and public entities in such high-risk zones, particularly affected by higher deductibles, narrower coverage and limited appetite for available liability protection.
• Insurers are tightening underwriting and applying stricter exclusions for climate-related risks, including wildfires and environmental liability.
• Insurers are investing in climate risk modeling using predictive analytics and historical data to better assess exposure and price policies accurately.
• This shift is helping insurers maintain financial stability but also means more granular underwriting, which can disadvantage buyers with poor risk profiles or outdated infrastructure.