July 6, 2026 — Canada’s policyholder protection provider has raised its ‘tipping point’ estimate for systemic failure for the p&c industry from a catastrophic loss.
In the latest edition of its Why Insurers Fail series, the Property and Casualty Insurance Compensation Corp. warns that losses above $45bn from an earthquake in B.C. or Quebec would overwhelm the system without a federal backstop in place.
That’s up from $35bn in PACICC’s modelling from 2020 and $30bn in 2013.
PACICC president and CEO Alister Campbell said the estimate update is timely as discussions with the federal government about an earthquake backstop continue.
Grant Kelly, PACICC’s chief economist and author of the new report, said Canada has a strong, well-capitalized and competitive p&c industry, supported by significant reinsurance.
He estimated that Canadian insurers purchased about $37.5bn in catastrophe reinsurance in 2025, which is up 110% from 2013.
He said PACICC’s modelling shows that losses of up to $35bn would likely be manageable, while losses between $35bn and $45bn would severely strain the system. Above $45bn, PACICC assessments on surviving insurers could trigger broader failures.
Mr. Kelly said a federal cost-sharing mechanism could raise the systemic risk threshold to about $100bn.
He said the latest modelling is more precise than earlier versions because PACICC can now require member insurers to provide earthquake exposure and key reinsurance data.
PACICC’s analysis was focused on Quebec and B.C. because those regions have Canada’s highest earthquake exposures.
For Quebec, Mr. Kelly estimated that a $35bn loss event would leave 23 insurers financially distressed and five PACICC member insurers without identifiable additional capital or reinsurance.
PACICC’s required total assessment would be about $1.2bn and the system would be severely strained but general assessments would not cause additional insurer failures.
With a $45bn loss in Quebec, 31 insurers would be financially distressed and 21 member insurers would be assumed to fail. The required PACICC assessment would be about $33bn.
Mr. Kelly said that at that level, assessments on surviving insurers would cause all PACICC member insurers — already weakened by the catastrophe — to fail. That, he said, would be the tipping point in Quebec.
In B.C., a $35bn loss event would affect 101 member insurers, with 26 insurers falling below 100% minimum capital levels and eight assumed to fail.
The required PACICC assessment would be about $1.2bn.
The national market share of the distressed insurers would be about 14%, creating potential liquidity problems and likely delays in claim settlement.
With a $45bn loss event in B.C., Mr. Kelly estimated 35 insurers would fall below minimal capital levels and 21 member insurers would be assumed to fail.
The required PACICC assessment would be about $3.3bn, with failed insurers representing about 30% of the national market.
Mr. Kelly said that with this scenario, PACICC would be unable to collect that amount in the time required and the assessment would cause at least two additional insurers to fail. That would be the B.C. tipping point.
Mr. Kelly said the treatment of commercial and personal lines losses in PACCIC’s modelling has changed from earlier work.
Previous studies allocated 50% of expected claims to personal property.
The updated model assumes roughly $3 in commercial claims for every $1 in personal property claims in both B.C. and Quebec.
He said the change reflects discussions with earthquake modelling firms, reinsurance brokers, reinsurers and member insurers.
In B.C., higher personal property earthquake deductibles mean many personal property losses would fall below the deductible.
And Mr. Kelly noted that in Quebec, very few personal property policyholders purchase earthquake insurance.
Both regions remain exposed to fire- following losses, which would be covered under standard policies.
With the latest analysis, Mr. Kelly also tested whether PACICC could reduce systemic risk by issuing debt rather than immediately assessing surviving insurers.
PACICC secured private, high investment-grade credit ratings from two bond rating agencies in 2024.
Mr. Kelly said a PACICC bond could potentially raise the B.C. tipping point beyond $55bn because B.C. assessment requirements are below that amount.
But he said there is no realistic prospect of borrowing enough to push Quebec’s tipping point beyond $45bn..
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