May 21, 2025 — Canada’s p&c policyholder protection provider said the first steps have been taken to secure a liquidity backstop mechanism to mitigate the risk of systemic contagion after a major insured-loss event such as a serious earthquake.

The Property and Casualty Insurance Compensation Corp. reported in its latest quarterly Solvency Matters newsletter that it has formed a working group to define key objectives, establish an optimal trigger scenario and craft a simulation exercise to illustrate the scope and scale of the potential challenge posed by a major earthquake.

PACICC CEO Alister Campbell said officials from the Office of the Superintendent of Financial Institutions have agreed to participate before the end of 2025 in a desktop exercise similar to one conducted last year in B.C.

In 2024, PACICC and the B.C. Financial Services Authority collaborated on exercises to simulate scenarios beyond simple insolvency — including those involving potential regulatory intervention or wind-up. The simulations were part of a broader effort to improve contingency planning and ensure proper emergency preparedness for B.C.’s p&c insurers.

PACICC has been pushing for a government backstop mechanism for earthquake risk for more than a decade. It said Canada remains the only developed nation with significant earthquake risk exposure that has no government backstop in place.

The consumer protection provider has also been exploring whether the potential exists to access capital markets for debt financing in a circumstance where greater liquidity may be required than is available through its general assessment mechanism.

Mr. Campbell said PACICC has now obtained high investment-grade ratings from two major global rating agencies and is working on what next steps may be necessary on that front.

PACICC has also gained approval from its members to broaden its legal authority to require the reporting of information regarding reinsurance programs.

“Historically, we have had authority to secure required information on capital, to facilitate solvency monitoring,” Mr. Campbell said.

“But now we were asking to have clear line of sight into contingent capital as well, in order to enhance the accuracy of our systemic risk modelling.”

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