Skip to Main Content


How mounting cost pressures affect Canada’s personal property insurance market

May 9, 2024 | By: Cecilia Omole, Manager, Policy Development, IBC
How mounting cost pressures affect Canada’s personal property insurance market

While overall inflation pressures are easing, the longer-term trends and key metrics affecting home insurance tell a much different story.

A prime example of this is recent actions taken by the Property and Casualty Insurance Compensation Corporation (PACICC). PACICC is a not-for-profit guarantee fund financed by the property and casualty (P&C) insurance industry. It is accountable to government regulators, and exists to protect insurance policyholders and claimants in the unlikely event of the failure of a P&C insurer in Canada.

Recently, the board of directors of PACICC approved implementation of new inflation-adjusted limits for personal property lines.

According to PACICC Board chair Dave Oakden, the move followed a major research project incorporating more than 750,000 anonymized claims files from member insurers, representing more than 80% of the Canadian P&C insurance industry. The project’s objective was to understand the scope of current property and auto coverage and the impact of inflation on levels of consumer protection.

While Canada’s P&C industry is well capitalized, the rising cost of property insurance claims compelled PACICC’s action to increase limits. Data compiled by Statistics Canada and Insurance Bureau of Canada (IBC) sheds light on the underlying cost pressures affecting Canada’s personal property market. The data reveals that a series of contributing factors – namely, the growing cost of rebuilding and repairing damaged property and the increasing frequency and severity of natural catastrophes – are driving up the cost of home insurance.

Residential construction costs soaring

Home replacement costs (costs to rebuild an entire house from the ground up) have increased 23% since January 2019. Homeowners’ maintenance and repair costs (costs related to maintaining the structural integrity of a home) have increased by 18%. Both have exceeded the rate of core inflation over that same period.

Perhaps most significantly, residential building construction costs (a contractor's price reflecting the value of all materials, labour, equipment, overhead and profit to construct a new building) have soared by 61% since January 2019, a staggering increase with ripple effects that go well beyond home insurance.

Natural catastrophe frequency and severity disproportionately affect personal property insurance

The steady and significant increases in natural catastrophe frequency and severity are also exerting unrelenting pressure on home insurance costs.

In 2023, for the second year in a row, Canada exceeded $3 billion in insured damage from natural catastrophes and severe weather events. Nationally, insured damage from severe weather events reached over $3.4 billion in 2023.1 Adjusted for inflation, five of the worst years for insured losses in Canadian history have occurred within the last eight years (2016, 2020, 2021, 2022 and 2023).

The bulk of natural catastrophe-related claims and insured losses (approximately 60%) resulted from home insurance claims.2 Prior to 2016, which was an exceptionally challenging year for wildfires in Western Canada, the average annual losses for personal property due to natural catastrophes were $990 million, and the annual average number of claims was around 57,000.

Those figures were shattered between 2017 and 2023, as annual average personal property losses due to natural catastrophes were approximately $1.55 billion and 89,000 claims. That represents a 56% increase in annual average losses.

Global severe weather events add another layer of cost pressures to insurance in Canada. Insurers across the country use global reinsurers (insurance providers for insurers) to help limit their exposure to financial risk from major events. However due to escalating losses from catastrophic events worldwide, some reinsurers have changed the way they distribute the risks they take on. It appears that many have reduced capacity and increased the cost of reinsurance in those regions where catastrophic risk is highest including California, Florida and, unfortunately, some regions of Canada. As a result, rising reinsurance costs have compounded the inflationary pressures in Canada. Expecting these loss trends to continue, IBC has advocated for a national partnership with governments on catastrophe risks, starting with flood and earthquake. Such partnerships exist elsewhere around the world.

Skilled labour shortages in the construction industry compound the challenge

In addition to cost pressures due to inflation and catastrophic weather, recent Statistics Canada data finds that despite recent declines in skilled trade vacancies, significant demand remains for trades helpers and labourers who assist skilled tradespersons at construction sites. This is important, especially when it comes to the added costs associated with the amount of time needed to complete home repairs and rebuilds when insurable losses occur.

Unfortunately, the situation may only worsen. According to a March 2024 report by BuildForce Canada, between 25,000 and 28,000 workers in the construction industry are expected to retire every year until 2033. Construction demands over the same period will require the labour force to expand by 88,400 workers. BuildForce Canada expects the industry will likely fall short of demand by 85,500 workers over the next decade.

The cost of property insurance is impacted in many parts of the country that have a higher risk of catastrophic weather events such as wildfires and floods. Property owners have many options available to ensure they have the right protection for the risks they face. The insurance industry is developing new and innovative solutions, and tools are available to help homeowners reduce their premiums and find insurance products that fit their budgets.

While PACICC’s recent actions are an acknowledgment that Canadian insurers are seeing property claims costs increase, there is ample capacity in the highly competitive market.  The best way to manage home insurance rates is for policyholders to understand their risks and work with their insurance representatives, who are well equipped to help insurance customers explore their options and secure the coverage needed to protect their homes.

1IBC analysis with data from Catastrophe Indices and Quantification Inc. (CatIQ).


About This Author

Cecilia Omole is the Manager of Commercial Policy within the Policy Development department at Insurance Bureau of Canada (IBC). In this role, Cecilia leads IBC’s public policy work with the insurance industry to find solutions to problems affecting commercial clients, business owners, stakeholder groups, and related concerns raised by governments and regulators. Cecilia has a Master’s degree in Public and International Affairs from York University and holds the Canadian Risk Management (CRM) designation from the Global Risk Management Institute.