A new report from the Insurance Bureau of Canada (IBC) has warned that Canada’s insurance system is facing increasing pressure from the growing severity and frequency of wildfires.
The IBC has urged Canadian policymakers to learn from California, which experienced devastating wildfires earlier this year amid an insurance crisis that has left one in 10 California homes uninsured. As wildfire threats increase in Canada, the IBC emphasized the importance of maintaining access to insurance and taking steps to address growing risks for long-term stability.
The IBC report outlined how pricing restrictions in California contributed to a 300% rise in policies written by the state’s insurer of last resort between 2020 and 2023, and how approximately 3.6 million homeowners had their policies canceled or not renewed during that period.
A key factor was insurers’ inability to properly assess the growing risk of catastrophic events. "California’s insurance crisis did not happen overnight,” said Celyeste Power, president and CEO of IBC. “It was the result of years of increasing wildfire risk, inadequate government investment in resilience, and regulatory restrictions that limited insurers’ ability to price risk effectively. The lesson for Canadian policymakers is clear: rate suppression cannot replace proper risk mitigation."
Canada has experienced a notable increase in insured catastrophic losses from wildfires, rising from an average of $84 million annually between 2003 and 2014 to $706 million over the past decade. In 2024, Alberta reported over $1 billion in insured wildfire losses.
Canada’s insurance system has managed to include wildfire coverage in standard home insurance policies, helping to avoid the widespread uninsured issue seen in California. Despite this, the increasing frequency and severity of extreme weather events is contributing to higher premiums.
The IBC urged the Canadian government to take steps to reduce future pressure on the insurance sector by investing in resilience infrastructure, improving land-use planning in high-risk areas, promoting wildfire resilience measures, and updating building codes.
"The time for action is now," Power said, emphasizing that without proactive measures, Canada may face challenges in the future similar to those seen in California’s insurance market.
