Key Takeaways
- Canada’s year-to-date area burned is slightly above the 10-year average, but the largest fires remain concentrated in remote areas of Northwestern Ontario and Northern Québec, limiting direct property and commercial insurance claims.
- Governments and insurers are strengthening wildfire loss-prevention initiatives. However, the absence of a dedicated government backstop program ultimately leaves insurers and policyholders exposed to extreme wildfire losses.
- Strong underwriting profitability, capital buffers, adequate personal property pricing, and improving reinsurance conditions leave Canadian P&C insurers well-positioned to absorb moderate wildfire losses.
A series of large wildfires in Northwestern Ontario has prompted evacuation orders, disrupted transportation, and generated widespread smoke and related air quality issues across several Canadian provinces and parts of the United States. Canada’s year-to-date area burned has reached approximately 2.95 million hectares, surpassing the comparable 10-year average of roughly 2.55 million hectares. While the situation warrants close monitoring, we do not believe the current wildfire activity is translating into a severe loss event for the Canadian insurance industry.
Moreover, Canadian insurers entered the 2026 season better positioned to absorb potential losses than in recent years. Nonetheless, we are in the midst of an active wildfire season, and conditions could change quickly through August. The ultimate impact on insurers will depend less on the total area burned and more on whether fires threaten major population centers and areas with significant concentrations of insured property.
Wildfires Shift Eastward
While nearly 900 wildfires are currently burning across Canada, the most significant 2026 fires have been mainly concentrated in remote areas of Northwestern Ontario and Northern Québec, where insurance penetration, property values, population density, and commercial activity are relatively low. Direct property claims are therefore likely to remain contained, and claims arising from evacuation orders, additional living expenses, and business interruption should also be manageable.
Meanwhile, British Columbia and Alberta—the provinces historically most exposed to costly wildfires—have experienced limited activity so far in 2026. Approximately 43,000 hectares have burned in British Columbia and 18,000 hectares in Alberta, well below their comparable 10-year YTD averages of roughly 373,000 and 380,000 hectares, respectively. The insurance risk is typically greater in these provinces because many communities—including Fort McMurray, Jasper, and several cities in Interior British Columbia—are in wildfire-prone areas with substantial concentrations of insured property. Indeed, most of Canada’s costly wildfires over the past decade occurred in either Alberta or British Columbia.
Wildfire Loss Prevention Is Improving, but Gaps Remain
In response to the increasing wildfire threats in recent years, governments and insurers have shifted toward a more integrated approach to prevent severe wildfire-related losses. Following the record 2023 wildfire season, the federal government expanded its preloss mitigation efforts through the FireSmart program, supporting vegetation management, property protection, and wildfire preparedness.
In 2025, Canadian federal and provincial governments and the Canadian Interagency Forest Fire Centre announced a combined investment of approximately $104 million to expand FireSmart programming and support community-based wildfire mitigation. Insurers are complementing these efforts by promoting FireSmart practices and investing in property-level loss prevention. While broader mitigation of wildfire risk exposure will take time, stronger coordination among governments, communities, and insurers should reduce claim severity and improve the industry’s resilience to future wildfire events.
However, Canada still lacks a dedicated public/private insurance backstop for sharing extreme wildfire losses, unlike the catastrophe-risk-sharing mechanisms found in some high-risk jurisdictions in the US and Europe. In 2026, policy discussions have advanced around federally supported catastrophe reinsurance, although the initial focus is on earthquake risk rather than wildfire. Consequently, wildfire-related losses continue to be absorbed primarily through private-sector insurance solutions offered to Canadians.
A Favorable Market Environment Leaves Insurers Well-Positioned
Canadian property and casualty insurers enter the 2026 wildfire season from a strong financial position despite the upward trend in catastrophe losses, as measured by the 10-year moving average of insured losses.
Generally adequate pricing, disciplined underwriting, and strong capitalization provide meaningful protection against losses from wildfire claims. Several years of premium increases in personal property have helped insurers respond to rising claims costs, inflation, and higher catastrophe frequency. The 2025 and first-quarter 2026 financial results of major publicly traded Canadian P&C insurers demonstrate their pricing discipline, with combined ratios below 95%.
Strong earnings have also enabled insurers to increase capital buffers and their capacity to absorb potential catastrophe losses. Reinsurance conditions have also become more favorable over the last few years, as abundant global reinsurance capacity and availability have led to reduced reinsurance prices in 2026, giving primary insurers greater flexibility to reduce earnings volatility and improve reinsurance program terms. On the other hand, commercial insurers remain under pressure from increased pricing competition. Still, we do not expect them to face high commercial claims related to the current wildfire season.
What Could Change the Insurance Story?
Overall, Canadian insurers appear well-positioned to absorb moderate wildfire losses, supported by strong financial and capital positions, including moderate catastrophe losses in the first half of 2026. A material industry-wide loss remains unlikely unless fires reach major population centers or several major loss events occur in quick succession. The existing Northwestern Ontario fires are unlikely to spread directly into Southern Ontario. The greater risk is that continued weather conditions ignite new fires closer to populated areas, leading to higher insurance claims.
A more severe outcome would entail significant losses across several provinces occurring simultaneously. Such accumulation could exhaust insurers’ annual catastrophe budgets, trigger reinsurance coverage, and increase reinstatement costs. In our view, a capital event remains a remote tail risk.
