Next in Canadian insurance 2025

Insurance executives are feeling the impacts of a changing climate. They’re about twice as likely (30%) as financial services CEOs as a whole (14%) to say their business is highly or extremely exposed to threats from climate change, according to our 28th Global CEO Survey. The findings come as insured losses from catastrophic events in Canada were the highest on record in 2024 at $8.5 billion, according to Catastrophe Indices and Quantification Inc. (CatIQ).

The volatility of these costs is difficult to reflect in pricing models on a timely basis, so physical climate risk will be a significant focus for insurers in the coming year. This is paramount for property and casualty insurers, but life insurance companies are also starting to examine the relationship between climate change, health and mortality. They’re also focusing on assessing the various types of transition risks involved in the shift to a low-carbon economy and understanding the broad implications for their long-term strategies, including climate-related opportunities to create value.

When it comes to physical impacts, insurers need to collect more and better data and improve their climate and catastrophe risk modelling. It’s important to map out where catastrophes are most likely to occur, better understand the costs and choose where they’ll place their insurance dollars. Companies must also rethink whether historical trends are indicative of what the future will bring, account for decarbonization taking longer than previously assumed and consider scenarios with a higher increase in average temperatures than currently planned for.

A shifting landscape for sustainability reporting

Insurance companies are also facing sustainability reporting requirements that continue to evolve and are moving from voluntary to mandatory frameworks in Canada and globally. Responding to the Office of the Superintendent of Financial Institutions’ B-15 guideline on climate risk managementOpens in a new window and completing the standardized climate scenario exercise was a priority for Canadian insurers in 2024 and will continue to be on the agenda through 2025. 

While this reporting could be resource-intensive, it can yield business benefits in supporting insurers to better identify, assess and manage climate risks, all with the goal of ensuring greater resilience. For example, completing the standardized climate scenario exercise can help insurers build capacity to perform a fulsome climate scenario analysis, which is one of the principles of the B-15 guideline. This analysis spans an insurer’s entire value chain and is much more rigorous and valuable than what they've done in the past. It’s important to build capacity to perform this exercise on an ongoing basis, as climate regulations will likely continue to strengthen and evolve.

Staying ahead of what’s next

Looking ahead, insurers that have identified their greenhouse gas emissions related to their operations and investments can turn their attention to the emissions profile of their insurance portfolios. They may also want to explore ways to be more proactive in managing insurable losses by working with governments to encourage zoning and development practices that better account for climate-related impacts.

Learn more

• Climate risk and insurance: The case for resilience (PDF)Opens in a new window (file size: 0.84 MB)
• More than property is at stake: Climate change’s impacts on life, health and long-term insurance liabilities (PDF)Opens in a new window (file size: 2.4 MB)
• The evolving ESG landscape for Canadian insurers (PDF) (file size: 2.4 MB)
• Sustainability and climate change servicesOpens in a new window

Insurance companies have been proactively investing in foundational digital, cloud and data capabilities. While the focus of these investments was initially to match consumer expectations formed by experiences in other markets, they have quickly expanded to areas further into the value chain, such as underwriting and claims. Insurers are also investing in more complex product lines as they pursue digital integration with complementary adjacent services like home renovation and health care.

Insurers are also moving quickly to invest in advanced technologies like generative artificial intelligence to enhance productivity, reduce risk and make better decisions. We saw evidence of their optimism about AI possibilities in our 28th Global CEO Survey, in which 52% of insurance CEOs said the technology would increase their company’s profitability this year.

At the same time, Canadian insurance companies are continuing to pursue mass cloud adoption for their core technologies. Many have migrated their data repositories and are now working to shift their key applications to the cloud while remaining cautious of the security risks involved. This concern was reflected in our 2025 Digital Trust Insights Survey, in which insurers rated cloud security among their three biggest threats and the one they felt least prepared to address.

The keys to accelerating tech modernization at Canadian insurance companies

Cybersecurity is a significant issue for insurers more broadly, as shown by the large proportion (74%) of insurance respondents to our 28th CEO Survey who identified this as at least a moderate threat to their businesses. Information security is a critical factor in adopting new technology like generative AI as trust and innovation go hand in hand. Without the trust engendered through proper data security and governance, adoption can slow, operational resilience can suffer and companies may struggle to achieve the full value from technology transformation.

To accelerate outcomes from generative AI investments, insurers can more deeply integrate the technology into their operational fabric by adopting a factory model to support use-case delivery. This involves focusing on execution once business units identify operational improvement areas. We also know there are significant workforce considerations, highlighting the value of making generative AI tools available to all employees. Canadian insurance company employees who took part in our most recent Hopes and Fears Survey identified this as a key reason why they hadn’t been using generative AI tools, with 34% citing lack of access to them as a barrier.

By swiftly identifying and acting on areas for technological enhancement, insurers can position themselves to build a competitive advantage through their modernization efforts. Proceeding decisively and adaptively, while incorporating feedback from both customers and internal stakeholders, can help insurers capture the full value of their investments in new technologies such as generative AI.

Learn more

• 2025 Global Digital Trust Insights
• Building trust through data privacy 
• Building sustainable GenAI ROI in insurance (PDF)Opens in a new window (file size: 0.83 MB)
• How Canada’s insurers can win the race for talent and skills
• Hopes and Fears Survey
• Cloud engineering and cloud transformation consulting

We’re also seeing change in the insurance technology (insurtech) space as insurers look to focus on their core areas of competitive advantage while partnering with other players with capabilities that can make their offerings even more compelling. While insurtech players once had ambitions to compete with incumbents, many are now looking to partner with them by providing functions such as chatbots, AI applications, analytics and pipeline management.

For insurers, new collaborations are opening up opportunities to build new sales channels, capture more customer lifetime value and perform functions outside their core business. In fact, two-thirds (66%) of insurance respondents to our 28th Global CEO Survey told us they’ve collaborated with other organizations to at least a moderate extent in the past five years.

Beyond partnerships, some insurers are building an ecosystem by acquiring adjacent businesses. For instance, a property and casualty insurer might acquire a home repair business to gain insight into customers while providing them with a value-added service. Similarly, virtual healthcare consultations and other service delivery methods have become standard customer offerings in the life and health sector following the COVID-19 pandemic.

Harnessing new sources of value

Insurers are also looking for new partners and models for embedded insuranceOpens in a new window. Current offerings typically occur as a link out to a provider, such as with flight insurance offered at the time of ticket purchase. But models may evolve to become more similar to warranties that automatically come with the product.

Before entering these partnerships, it’s important for insurance companies to think about what they excel at that creates value for their customers as well as the new capabilities they need. They can then choose to look at ways to build those capabilities internally or access them through a partnership or outsourcing arrangement.

Learn more

• The next stage of digital transformation for Canadian insurers
• Business model reinvention: Ecosystems/platform playOpens in a new window
• When is the right time to reinvent your business?Opens in a new window
• Global M&A trends in financial servicesOpens in a new window
• 2025 Canadian M&A outlook

After spending considerable time and resources implementing the changes needed to comply with International Financial Reporting Standard (IFRS) 17, Canadian insurers now face additional major global and domestic tax changes that will affect many of them this year.

Last year, Canada enacted the Global Minimum Tax Act, designed to bring Canadian organizations in line with the Organisation for Economic Co-operation and Development’s Pillar Two framework. Organizations affected by Pillar Two have new compliance and reporting obligations for the 2024 calendar year.

While the additional taxes may impact the economics of key metrics such as earnings per share and net income, the new requirements will also raise operational costs due to the time and resources dedicated to understanding and complying with a new global tax framework. Complying with the new rules will require insurance companies to collect large amounts of new data across their domestic and international businesses, touching every corner of their global operations. At the same time, uncertainty around the application of the new rules has led some companies to rethink significant decisions or growth opportunities such as acquisitions and business expansion.

Key considerations for Canadian insurance companies

Complying with the new taxes will also create an opportunity cost as tax functions focus on interpreting the new rules rather than on tax planning and strategy for the company. Tax leaders will want to ensure they still have some team members dedicated to higher-value activities and, where possible, consider partners to support non-core tasks such as associated software development.

The good news is that two-thirds (67%) of insurance CEOs say they’ve intentionally designed their tax function (versus having it evolve in an unplanned way), according to our 28th Global CEO Survey, but this deliberateness may be challenged by the need to rapidly adapt to these new tax requirements. The new tax regime will require new internal data collection and reporting procedures, which may lead to some restructuring. And because the new taxes are jurisdictional, new company-wide procedures must be put in place to allow for data sharing between subsidiaries and divisions that haven’t previously shared information or reported jointly but will now be forced to do so by virtue of their shared location.

Where insurers operate in previously tax-advantaged jurisdictions, they may need to reconsider whether it still makes sense to maintain these operations. Given its international nature, the new tax regime might also affect the reinsurance industry, and this could result in costs being passed through that may be reflected in product pricing.

Assessing the impacts of new domestic tax rules

Canadian insurance companies must also analyze and assess the applicability of many new domestic rules, including a new regime for mandatory disclosure of certain transactions and new interest expense deduction limitation rules.

Canadian insurance companies don’t tend to be aggressive with tax transactions, so mandatory reporting isn’t likely to apply in many circumstances. Even so, they’ll still need to ensure they don’t inadvertently neglect to report a transaction that merits it since the penalties for non-compliance are significant and the rules are far-reaching.

Learn more

• How will you meet your Pillar Two data challenge? 
• The hidden compliance risks of Canada’s tax changes
• Pillar Two data input catalogue (PDF)Opens in a new window (file size: 4.8 MB)
• Global Reframing Tax Survey 2025Opens in a new window

The expanded use of data and technology to model and understand risk, including the emergence of AI, is turning risk modelling on its head, signalling the need for further investment by Canadian insurance companies. The industry may see a divide between companies able to harness the full power of data and AI and those struggling to make the investments required.

Some smaller and mid-size companies may lack the resources to invest heavily in data and AI, but they’ll need to understand its implications and potentially work with other players to access the required capabilities.

Besides adopting new technology, now is the time for insurance companies to rethink how they approach risk modelling. It needs to move beyond being a tool for compliance and start being used for strategic insights that allow for differentiated offerings in the market. Companies that move to this next level will have a strategic advantage over their competitors.

Looking beyond what-if scenarios

Scenario testing is another major trend for Canada’s insurance industry. Driven by regulatory requirements, insurers have done a good job when it comes to performing scenario and stress testing on their organizations. Now, they’re trying to better understand the implications of key risks, such as increased natural disaster activity or another pandemic.

Until now, questions have focused on what-if scenarios. Now, companies need to start asking themselves what the new normal for claim activity is given the changing likelihood of events such as increased wildfire activity or flooding. As history becomes a less valuable predictor of the future, companies that can best adjust for future trends will be well-equipped to understand evolving risks in different locations across Canada.

Empowering actuaries with more data

Data will be key to modelling corporate and product risk. There's access to more data now than ever, and deriving business insights from that information will be a significant trend over the coming years. Actuarial and finance teams will draw on this data and modernize their models accordingly.

So far, data analytics investments have focused primarily on the front end to enable more targeted marketing and sales efforts. The opportunity now is to make investments in the back end to give actuaries and finance professionals access to more data and drive critical insights for CEOs and other senior business leaders.

These investments are key to implementing new pricing models, which 70% of insurance respondents to our 28th Global CEO Survey told us they’ve been pursuing. They’re particularly critical to enabling more dynamic pricing of property and casualty policies, in which real-time claim activity is incorporated into actuarial modelling. This can only happen if all of an insurer’s systems—such as claims and pricing—are connected.

Learn more

• A new era for insurance risk modelling and pricing
• Migrating risk models to the cloud
• Risk modelling services