Navigating a New Normal: 2025 Wildfires Renew Volatility of Natural Catastrophe Losses for Canadian Insurers

This commentary discusses the potential financial and credit implications of the ongoing wildfire season for the Canadian P&C insurance industry.

Key highlights include

-- Canada's 2025 wildfire season has rapidly escalated, with over 2.8 million hectares already burned, adding pressure to an industry still absorbing 2024's record catastrophe losses.

-- While the Canadian P&C insurance industry remains well capitalized, the increasing frequency and severity of wildfires are testing the limits of underwriting models and reinsurance strategies.

-- The current trajectory suggests that wildfire-related losses may surpass previous records, prompting a re-evaluation of risk management and pricing strategies.

"The recurrence of major wildfire seasons, particularly in regions previously considered low risk, is raising broader questions around insurability and the protection gap", said Marcos Alvarez, Managing Director, Global Financial Institution Ratings. "Canada has so far avoided the extreme pricing or coverage dislocation seen in California, where property insurers have withdrawn or limited their offering in the midst of high losses and regulatory price constraints".