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Canada’s property and casualty (P&C) insurers reported below-average financial results in the first quarter of 2025, with disappointing underwriting results driven by losses in personal lines, a new industry report says.

“The Net Comprehensive Combined Ratio for private passenger auto was above 100% in all 13 Canadian provinces and territories,” writes Grant Kelly, chief economist and vice president of financial analysis and regulatory affairs at the Property and Casualty Insurance Compensation Corporation (PACICC). A ratio greater than 100% indicates an underwriting loss.

And severe winter weather resulted in more than $700 million in catastrophic losses so far in 2025, Kelly writes in the article, ‘A poor start to the new year.’ That’s more than three times higher than the $200 million reported in the same period last year.

PACICC’s latest Solvency Matters report doesn’t outline the Cats that caused the $700 million in losses. But Insurance Bureau of Canada reported in mid-April that a severe storm and mid-winter thaw in February that struck parts of Ontario, Quebec and Atlantic Canada caused over $260 million in insured damage.

And that estimate doesn’t include damage from a late-March Ontario ice storm and from wildfires burning across the country.

In personal property, combined ratios were also high. The Net Comprehensive Combined Ratio for personal property in the first quarter was 117.8% in Newfoundland and Labrador and 100.8% in Ontario, Kelly writes. “Underwriting losses in personal property insurance are particularly worrisome due to the significant price increases that insurers have introduced over the past two years.”

Profits, ROE drop

The report notes Canadian P&C insurers saw a 33.7% decrease in profits in 2025’s first quarter compared to the same quarter last year. The industry’s return on equity (ROE) also fell from 15.6% in 2024 Q1 to 9.8% in 2025 Q1. The 2025 figure is slightly lower than the industry’s 50-year average ROE of 10.6%.

Two primary factors drove the decline in profitability. First, underwriting results worsened. Insurance Service Expenses in Q1 2025 were 9.7% higher than in the year prior, while Total Insurance Revenue grew by just 5.8% over the same period.

“The difference in growth rates between these two numbers reduced the industry’s Net Insurance Services [Ratio] to $2.4 billion — a drop of $527 million,” Kelly says. “This is 18% lower than the first quarter in 2024.”

The second major factor lowering the industry’s profitability was the adjustment to Net Insurance Finance Income or Expenses. Under IFRS 17, this represents the change in the carrying amount of insurance contracts arising from the time value of money and changes in financial assumptions.

“It is essentially the impact of movements in interest rates and changes in financial risk on an insurance company’s obligations,” says Kelly.

Interest rates in the first quarter of 2024 were 5%. Over the course of 2024, the Bank of Canada reduced interest rates to 3%. This meant that the future income insurers were expecting to earn on their reserves fell. This adjustment resulted in a $573 million increase in Net Insurance Finance Income or Expenses.

“To sum up, trends in interest rates and poor underwriting results in personal lines made the first quarter of 2025 a challenging period for Canada’s P&C insurers,” Kelly writes. “Of course, one quarter does not make or break a year.

“But the industry is not off to a good start in 2025.”

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Jason Contant

Jason has been an award-winning journalist with Canadian Underwriter for more than a decade, including the past three years as associate editor and, before that, as digital editor for seven years.