Skip to Main Content

climate, Insurance Industry

Canada must shield against growing wildfire risk to avoid fate of California

Apr 7, 2025 | NATIONAL
Canada must shield against growing wildfire risk to avoid fate of California

New report finds Canada’s insurance system more stable than California’s, but faces threat from slow pace of adaptation by government

Insurance Bureau of Canada (IBC) is calling on Canadian policymakers to learn from the underlying factors that led to California’s insurance crisis that left 1 in 10 California homes uninsured. Even before January’s devastating wildfires in the Los Angeles area, catastrophic weather events and restrictive insurance regulations had become a financial risk for homeowners. As Canada’s risk of wildfire continues to grow, all orders of government must take immediate action to improve resilience to reduce the human and financial toll of wildfires.

"It was heartbreaking to watch how the wildfires impacted so many people, and caused so much devastation to property and businesses," said Celyeste Power, President and CEO, IBC. "This is a tremendously difficult time for those impacted and I commend everyone involved in the recovery effort. Wildfire devastation alone causes significant pain and turmoil, but to then hear that so many Californians were not covered by insurance turned catastrophe into crisis."

In its new report, "Lessons for Canadian Policymakers from the California Insurance Crisis," IBC highlights the factors that led to a 300% increase in the number of policies written by the state’s insurer of last resort between 2020 and 2023. The report also looks at why approximately 3.6 million homeowners' policies in California were not renewed between 2020 and 2023. Chief among those factors: pricing restrictions that did not allow insurers to accurately price growing catastrophic risk.

"California’s insurance crisis did not happen overnight. It was the result of decades of significant growth in wildfire risk, paired with inadequate government investment in resilience, and the imposition of restrictions that prevented insurers from accurately pricing risk," added Power. "The lesson Canadian policymakers must draw from the California insurance crisis is clear: rate suppression cannot be a substitute for risk mitigation."

The report notes that Canada’s average annual insured catastrophic losses (those which result in insured losses of $30 million or more) from wildfire have seen a staggering increase, from an annual average of $84 million between 2003 to 2014 to an annual average of $706 million in the past decade. Alberta has been particularly hard hit, experiencing more than $1 billion in insured wildfire losses in 2024, largely the result of the wildfire that destroyed over one third of the homes and businesses in the town of Jasper.

The report finds that, unlike in California, insurance for wildfire is widely available in Canada and is standard in all home insurance policies. This widespread availability is partly due to the absence of the kinds of regulated price restrictions that contributed to California’s insurance crisis. However, the increasing severity and frequency of severe weather events in Canada is applying pressure within Canada’s home insurance market and on premiums, which IBC says creates added urgency for governments to make Canada more resilient.

"The time for action is now," added Power. "Governments must invest in infrastructure that defends against severe weather, adopt land use planning rules that ensure homes are not built in high-risk areas, facilitate FireSmart’s wildfire resilience practices in high-risk communities, and implement long-delayed building codes that better protect homes and livelihoods."

About Insurance Bureau of Canada

Established in 1964, Insurance Bureau of Canada (IBC) is the national industry association representing Canada’s private home, auto and business insurers. Its member companies make up the vast majority of Canada’s highly competitive property and casualty (P&C) insurance market.

As the leading advocate for Canada’s private P&C insurers, IBC collaborates with governments, regulators and stakeholders to support a competitive environment for the P&C insurance industry to continue to help protect Canadians from the risks of today and tomorrow.

IBC believes that Canadians value and deserve a responsive and resilient private P&C insurance industry that provides insurance solutions to both individuals and businesses.

For media releases, IN Focus articles, or to book an interview with an IBC representative, visit ibc.ca. Follow us on LinkedIn, X and Instagram, and like us on Facebook. If you have a question about home, auto or business insurance, contact IBC’s Consumer Information Centre at 1-844-2ask-IBC. We’re here to help.