Canada’s home insurance market is facing increasing strain as the costs associated with extreme weather events continue to rise, leading insurers to adjust policies and premiums. While the Canadian market hasn’t yet experienced the coverage gaps seen in the United States, a tightening is evident, with insurers increasingly raising premiums, excluding certain risks, and increasing deductibles.
The trend reflects a broader challenge: escalating financial losses from climate-related disasters. In 2024 alone, insured catastrophe claims reached $9.4 billion, a record high. This follows a pattern of increasing losses, with the average personal property loss between 2020 and 2024 nearly doubling compared to the previous period, according to data from Toronto-Dominion Bank. The frequency of catastrophic events has also risen, averaging 15 per year compared to around two in the 1980s.
Toronto-Dominion Bank (TD) is already responding by rebalancing its portfolio. “We’ve rebalanced in some of the higher severe weather regions,” said Raymond Chun, TD’s chief executive, during a recent earnings call. “Where we had a higher concentration in some of the high severe weather zones, we’ve moderated.” The bank is now focusing on growth in regions with lower catastrophic risk.
Definity Financial Corp., Canada’s fourth-largest property and casualty insurer, has also taken steps to reduce exposure in high-risk areas. Chief executive Rowan Saunders explained during a November analyst call that the company has been actively shifting new business towards less catastrophe-prone areas and reducing concentration in higher-risk zones. This portfolio management effort is ongoing.
The adjustments aren’t limited to geographic repositioning. Insurers are also increasing deductibles, sometimes up to $10,000 for risks like hail damage, reducing coverage for specific perils, and even declining to offer coverage altogether for certain risks, notably flooding.
The situation is particularly acute in Quebec, which has the highest number of properties exposed to flood risk, followed by Ontario and British Columbia. Approximately 1.5 million Canadian households, roughly 10 percent of the total, are currently unable to obtain flood insurance, according to the Insurance Bureau of Canada. For those who can secure coverage, premiums can add up to $15,000 per year.
However, the 10 percent figure may be an overestimate. David Nickerson, who studies real estate economics at Toronto Metropolitan University, suggests the actual number of households unable to obtain flood insurance is closer to 50 percent, due to the specific and often poorly documented risk profiles of high-risk zones.
A key challenge is the fragmented and outdated nature of data used to assess risk. The federal government is investing in updating flood maps, recognizing the need for more accurate information. Even with access to various data sources, insurers can be caught off guard, as demonstrated by TD’s significant losses from the 2024 hailstorm in Calgary.
“They took huge losses and therefore decided to pull back to rebuild their financial reserves,” Nickerson noted.
The pressure on insurers is compounded by the fact that the costs of extreme weather events are accelerating. While the sector has demonstrated resilience, absorbing the financial shocks, this resilience has largely translated into higher premiums for consumers. Morningstar DBRS’s Nadja Dreff anticipates further premium increases in 2026.
Between 2021 and 2025, home insurance costs (including mortgage insurance) rose by 31 percent, outpacing overall inflation of 15 percent, according to Statistics Canada. Regions experiencing a higher frequency of claims have seen even more substantial increases, with British Columbia and Alberta experiencing average increases of 68 percent and 58 percent, respectively, over the past five years.
The Insurance Bureau of Canada is also advocating for improved building standards to enhance resilience to extreme weather. “We need to put a brake on the worsening of the problem and take a serious approach to building a more resilient country,” said Liam McGuinty, vice-president of the IBC.
As Canada aims to accelerate housing construction, McGuinty emphasized the importance of avoiding building in flood-prone areas and proactively preparing for risks such as hail and wildfires.
The current trajectory points to continued cost increases as climate change drives more frequent and severe weather events. “We should be very concerned about this trend, as all of these costs will have to be borne by someone. It’s the insureds, the premium payers, who are bearing these costs,” McGuinty concluded.
