With Canada’s 2025 wildfire season poised to become one of the most destructive on record following a historically damaging 2024, reinsurers are likely to re-evaluate their Canadian exposure, according to a recent report by Morningstar DBRS.
As of June 2025, Canada’s wildfire season is once again testing the resilience of the property and casualty (P&C) insurance sector.
More than 1,800 wildfires have burned over 2.8 million hectares so far, already outpacing both the same period in 2024 and the 10-year average.
Manitoba, Saskatchewan, Alberta, and Ontario have faced notably severe fires, resulting in extensive evacuations and significant infrastructure damage.
On May 29, the Canadian Interagency Forest Fire Centre raised the national preparedness level to 5 — the highest level of wildfire activity and resource mobilisation. Authorities have evacuated over 32,000 residents this year due to wildfires.
This active season follows a severely damaging 2024, when insured losses from weather-related catastrophes reached $8.5 billion. The Jasper wildfire from July to August 2024 alone caused more than $1 billion in insured damages.
Morningstar DBRS stated, “Despite the renewed threat, we continue to view the credit fundamentals of Canadian P&C insurers as stable.”
Even in 2024, the industry absorbed these shocks with minimal negative credit rating actions.
The report noted that reinsurers are likely to re-evaluate their Canadian exposure, especially if climate change causes seasonal wildfire activity to become structurally more severe.
While the 2025 wildfire season is ongoing, current loss trends suggest a similar pattern to 2024, when multiple severe events concentrated in Q3 caused spikes in combined ratios — particularly in personal property lines and especially if reinsurance attachment points are exceeded.
Morningstar DBRS highlighted that insurers have increased risk retention to manage reinsurance costs. While this approach improves cost control, it may expose insurers to greater earnings volatility in the short term and capital shocks in the event of tail risks.
Morningstar DBRS concluded, “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.
“Climate change and elevated catastrophe loss volatility are no longer outlier risks but core strategic concerns. Continued repricing, diversification, further investments in wildfire management and infrastructure adaptation will be key to maintaining the insurance market’s financial sustainability and the availability of coverage for vulnerable Canadian communities. In fact, the insurance industry is facing a strategic reshaping, with climate-related secondary perils becoming a structural feature of the Canadian risk landscape.
“The 2025 wildfire season underscores the need for the P&C insurance industry to continue adapting to a changing risk landscape characterized by more frequent and severe natural disasters.”
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