Wildfires Renew Volatility of Natural Catastrophe Losses for Canadian Insurers: Morningstar DBRS

Navigating a New Normal: Morningstar DBRS

Chicago, IL (June 12, 2025) – Morningstar DBRS has released a new report, titled “Navigating a New Normal: 2025 Wildfires Renew Volatility of Natural Catastrophe Losses for Canadian Insurers.” This commentary discusses the potential financial and credit implications of the ongoing wildfire season for the Canadian P&C insurance industry.

The 2025 wildfire season will likely be another active and costly chapter for Canadian P&C insurers. However, given the lessons learned in recent years, strong capitalization, reinsurance protections, and disciplined underwriting, we anticipate the industry to be able to absorb this latest wave of losses without a material impact on credit profiles.

Key Highlights:

• Canada’s 2025 wildfire season has rapidly escalated, with over 2.8 million hectares already burned, adding pressure to an industry still absorbing 2024’s record catastrophe losses.
• While the Canadian P&C insurance industry remains well capitalized, the increasing frequency and severity of wildfires are testing the limits of underwriting models and reinsurance strategies.
• The current trajectory suggests that wildfire-related losses may surpass previous records, prompting a re-evaluation of risk management and pricing strategies.

“The recurrence of major wildfire seasons, particularly in regions previously considered low risk, is raising broader questions around insurability and the protection gap”, said Marcos Alvarez, Managing Director, Global Financial Institution Ratings. “Canada has so far avoided the extreme pricing or coverage dislocation seen in California, where property insurers have withdrawn or limited their offering in the midst of high losses and regulatory price constraints”.

Learn more or access the report.

Overview

As of June 2025, Canada’s wildfire season is once again testing the resilience of the property and casualty (P&C) insurance sector. With more than 1,800 wildfires having already burned over 2.8 million hectares, the 2025 wildfire season is likely to become one of the most destructive on record, already outpacing both the comparable period in 2024 and the 10-year average.

Particularly severe fires in Manitoba, Saskatchewan, Alberta, and Ontario have caused extensive evacuations and infrastructure damage. The Canadian Interagency Forest Fire Centre elevated the national preparedness level to 5 on May 29, indicating the highest wildfire activity and resource mobilization level. Authorities have evacuated more than 32,000 residents because of wildfires this year.

According to the Insurance Bureau of Canada, the current wildfire season follows a historically damaging 2024, during which insured losses from weather-related catastrophes reached $8.5 billion. Jasper’s wildfire in July to August 2024 alone caused more than $1 billion in insured damages, while flooding in Québec and Ontario and hailstorms in Alberta pushed the total loss figure to unprecedented levels. Despite the renewed threat, we continue to view the credit fundamentals of Canadian P&C insurers as stable. Even in 2024—Canada’s costliest year for insured catastrophe losses with more than $7 billion across just four events—the industry absorbed the shocks with minimal negative credit rating actions. Although we anticipate 2025 wildfire-related losses to create earnings pressure on the Canadian P&C insurance industry, we do not expect them to pose a material capital event or a threat to credit ratings—unless the season significantly worsens or affects urban centres.

Access the full report from Morningstar DBRS.

About Morningstar DBRS

Morningstar DBRS is a leading provider of independent rating services and opinions for corporate and sovereign entities, financial institutions, and project and structured finance instruments globally. Rating more than 4,000 issuers and 60,000 securities, we are the fourth-largest credit rating agency in the world.

Morningstar DBRS empowers investor success by bringing more transparency and a much-needed diversity of opinion in the credit rating industry. Our approach and size allow us to be nimble enough to respond to customers’ needs in their local markets, but large enough to provide the necessary expertise and resources they require. Market innovators choose to work with us because of our agility, tech-forward approach, and exceptional customer service. For more information, please visit dbrs.morningstar.com.

Source: Morningstar DBRS

Tags: Insurance Bureau of Canada (IBC), Morningstar DBRS, Natural Catastrophes, wildfires