Toronto, Ontario -- Economic conditions in Canada are expected to be more predictable in 2026 than in 2025, but insurers will have less room to absorb rising costs as interest rates fall and claims pressures remain elevated, a new market outlook from IG Wealth Management has found.
“If 2025 was a year of uncertainty, 2026 will bring clarity — not through the absence of noise, but through the strength of fundamentals,” said Philip Petursson, chief investment strategist at IG Wealth Management (pictured), who added that the risk of recession remains low as financial conditions stabilize.
Interest rates are central to that shift. Since mid-2024, the Bank of Canada has lowered its policy rate by about one full percentage point, bringing it to roughly 2.25 percent by the end of 2025, with further easing expected in early 2026.
For insurers, that change matters because premiums are invested largely in bonds, and lower rates reduce investment income over time, removing a financial buffer that helped offset higher claims costs in recent years.
At the same time, cost pressures have not disappeared. Labour shortages, specialized services and more complex loss events continue to push claims severity higher across property, auto and commercial insurance, even as overall inflation moderates.
Government spending, steady employment and ongoing investment in technology are expected to support economic growth, keeping exposure levels stable. However, those same forces also reinforce structural change rather than a return to earlier cost conditions, leaving insurers operating in a more predictable environment but with fewer levers to manage volatility.
