Canadian businesses are finally seeing some relief from commercial insurance costs, but the improving market comes with an important warning: companies with connections to the United States still face significant financial risks from lawsuits and large liability claims.
Aon’s Fall 2026 Canadian Insurance Market Update, released October 19, finds that strong competition among insurers, healthy financial results and abundant available capital are helping businesses secure more favourable insurance terms heading into 2027.
For companies with strong safety records, that can mean lower premiums, higher coverage limits and greater negotiating power.
However, the outlook remains complicated by American litigation, severe weather, cybersecurity threats and supply chain disruptions. While insurance is becoming more affordable for many Canadian businesses, the cost of protecting against certain risks remains stubbornly high.
Canadian Businesses Are Gaining More Negotiating Power With Insurers
Canada’s commercial insurance market is entering a more favourable period after years of uncertainty involving inflation, natural disasters and changing business risks. According to Aon’s October 19 assessment, the country’s property and casualty insurance sector remains financially strong, supported by profitable insurers, healthy reinsurance markets and substantial capital available to cover business risks. Russell Quilley, Aon’s head of Commercial Risk and chief broking officer for Canada, says competition is creating opportunities for companies with strong risk-management records to negotiate improved coverage and stable or declining rates.
The change is particularly meaningful for businesses approaching annual insurance renewals. A manufacturing company with a clean claims history, for example, may have more insurers competing for its business than during a less competitive market. That competition can create opportunities to increase coverage limits or negotiate fewer restrictions without substantially increasing insurance spending. However, Aon emphasizes that favourable outcomes depend on individual risk profiles. Businesses with significant losses, hazardous operations or complicated international exposures may not receive the same benefits as companies considered safer to insure.
Independent Industry Data Confirms Insurance Prices Are Falling
Aon’s findings are supported by separate commercial insurance pricing data from Marsh, another major international insurance broker. Marsh’s Global Insurance Market Index found that average Canadian commercial insurance rates declined 7% during the second quarter of 2026, following a 6% decrease in the first quarter. Property insurance recorded an 8% reduction, while casualty coverage declined 4% and cyber insurance fell 6%. These figures reflect Marsh’s client portfolio during that period, rather than a guaranteed reduction for every Canadian business or a new October pricing measurement.
The wider global picture also shows insurers competing more aggressively. Marsh reported that commercial insurance rates fell 6% worldwide in the second quarter, marking the eighth consecutive quarterly decrease. Strong financial results, lower reinsurance costs and available capital helped explain the trend. For a company spending hundreds of thousands of dollars annually on insurance, even a modest reduction can free up money for equipment, hiring or debt repayment. However, a lower insurance rate does not necessarily guarantee a smaller total premium. Expanding operations, rising property values or purchasing additional protection can still increase the amount a business pays.
U.S. Litigation Risks Remain a Major Problem for Canadian Companies
Despite improving conditions at home, Canadian companies doing business in the United States face a different insurance environment. Aon identifies American liability exposure as an important concern for insurers, particularly because litigation costs and large legal settlements can make future claims difficult to predict. A Canadian company does not necessarily need to operate a large American factory to face these risks. Depending on its activities, products, contracts and the applicable law, selling machinery, supplying components or providing services south of the border can create potential exposure to American legal proceedings.
Consider a Canadian equipment manufacturer supplying machinery to an American customer. If an accident involving that equipment leads to a product liability claim, the resulting investigation, legal defence and potential settlement could become financially significant. Insurers therefore examine far more than the company’s Canadian safety record. They may evaluate its American sales, contractual responsibilities and previous claims before deciding how much protection to offer. Marsh similarly reports that Canadian businesses with substantial U.S. exposure encountered tighter insurance capacity, higher attachment points and selective rate increases during the second quarter. This means improving domestic insurance prices do not automatically extend to every company’s cross-border activities.
Large American Lawsuit Awards Are Driving Insurance Costs Higher
One of the biggest concerns involves what the insurance industry calls social inflation. The term describes increases in liability claims costs that cannot be explained solely by ordinary economic inflation. Factors may include changes in litigation practices, legal expenses and the size of court awards. Swiss Re Institute estimated in its 2025 emerging-risks research that non-economic factors accounted for 57% of the growth in U.S. liability claims costs over the preceding decade. That finding helps explain why American liability insurance can remain expensive even when other commercial insurance categories become more competitive.
Insurers are particularly concerned about unusually large jury awards, often called nuclear verdicts when they reach US$10 million or more. Research published by the U.S. Chamber of Commerce Institute for Legal Reform examined 1,288 such verdicts from 2013 through 2022. These awards do not necessarily represent final payments, since judgments may be appealed, reduced or settled. Nevertheless, their potential size influences how insurers assess exposure. For a Canadian company selling products across the border, the possibility of a severe liability claim can affect insurance pricing long before any lawsuit occurs. The challenge is balancing legitimate compensation for injured parties with the financial uncertainty created by increasingly expensive litigation.
Commercial Property Insurance Is Improving Despite Weather Risks
Commercial property insurance is one of the areas where Canadian businesses are seeing more favourable conditions. Aon’s Fall 2026 update describes increased insurer capacity, greater flexibility and opportunities for well-managed properties to secure broader protection and higher limits. Competition among insurers can be particularly helpful for businesses with updated building valuations, comprehensive maintenance records and documented measures to reduce potential damage. A warehouse operator or manufacturing facility with effective fire protection and flood-mitigation plans may have a stronger position during renewal negotiations.
However, Canada’s exposure to natural disasters remains a substantial concern. The Insurance Bureau of Canada reported that severe weather caused approximately C$8.5 billion in insured damage during 2024, the most expensive year on record at the time. Although losses were lower in 2025, they still exceeded C$2.4 billion. Wildfires, floods, hailstorms and severe thunderstorms continue to influence how insurers evaluate Canadian properties. Aon warns that insurers are paying closer attention to vulnerable locations, accurate property valuations and the effectiveness of risk-reduction measures. Businesses in disaster-prone areas may therefore face stricter conditions even while commercial property insurance becomes more competitive elsewhere.
Cyber Insurance Is Becoming Cheaper, but Digital Threats Are Growing
Cyber insurance is another category experiencing more favourable pricing, even as businesses become increasingly dependent on digital systems. In September 2026, Aon reported that its Canadian cyber insurance clients experienced average second-quarter rate reductions of approximately 13% across coverage layers. However, Canadian middle-market clients saw a more modest average decline of 4%, with reductions flattening toward the end of the period. The difference illustrates how company size, insurance structure and exposure can influence the savings available to individual businesses.
Falling prices do not mean cyberattacks have become less dangerous. Aon continues to identify ransomware, data breaches, artificial intelligence-related vulnerabilities and dependence on outside technology providers as important concerns. A Canadian retailer relying on a single cloud platform, for example, could experience serious operational disruption if that provider suffers an outage or cyberattack. Even when a company maintains strong internal security, an external technology failure can interrupt sales and customer service. Insurers are increasingly examining how businesses manage third-party technology relationships, protect sensitive information and recover from disruptions. The opportunity for Canadian companies is to use more competitive insurance terms to improve protection rather than assuming lower premiums reflect a safer digital environment.
Commercial Vehicle Fleets Continue to Face Higher Insurance Pressure
Businesses operating commercial vehicles are not necessarily enjoying the same level of insurance relief as property owners or companies purchasing cyber coverage. Aon’s global market analysis identifies commercial automobile insurance as a category facing continued pressure from rising claims costs, vehicle repairs and more complicated technology. Marsh’s second-quarter findings similarly show that Canadian commercial auto coverage remained challenging, particularly for companies with complicated fleet operations or American exposure. These pressures are especially relevant to trucking, transportation and logistics businesses moving goods across the Canada–U.S. border.
A Canadian trucking company delivering freight into Michigan or New York, for example, must consider liability exposure associated with operating vehicles in American jurisdictions. Serious collisions can involve substantial medical expenses, legal costs and potentially large settlements. Marsh found that U.S. casualty insurance rates increased 7% during the second quarter of 2026, even as overall American commercial rates declined. Insurers have consequently placed greater emphasis on vehicle safety programs, driver training, claims histories and telematics data. Well-managed fleets can still negotiate competitive terms, but companies with significant losses or inadequate safety documentation may face higher premiums, deductibles or restrictions on available coverage.
Businesses Can Use Falling Rates to Improve Coverage Instead of Just Saving Money
Aon’s findings suggest that the strongest opportunity for Canadian companies may involve improving insurance protection rather than simply negotiating the lowest possible premium. During periods of strong competition, insurers may be more willing to increase policy limits, reconsider deductibles or remove certain restrictions. Higher coverage limits can be valuable for businesses whose potential losses have grown alongside their operations. However, coverage details remain important because even a generous policy limit may offer limited protection if specific risks are excluded or subject to smaller sublimits.
For companies operating internationally, insurance contracts deserve particular attention. A Canadian manufacturer might need to confirm that its liability coverage responds appropriately to U.S. sales, while a technology company may want to review protection involving privacy claims or interruptions caused by outside service providers. Aon emphasizes the growing importance of clear contract language, reliable claims records and evidence of effective risk controls. The company also encourages businesses to use analytical tools to evaluate their exposure before deciding how much insurance to purchase. An inexpensive policy that leaves a major financial risk uncovered can ultimately prove more costly than comprehensive protection negotiated at a competitive price.
Alternative Insurance Strategies Are Attracting More Interest
Beyond traditional insurance policies, some Canadian businesses are exploring alternative methods of financing risk. Aon’s Spring 2026 Canadian market update identified growing interest in captive insurance arrangements, parametric coverage and structured insurance programs. Captive insurance generally involves a company or group establishing its own insurance entity to cover selected risks. Parametric coverage operates differently from conventional insurance by providing predetermined payments when an agreed event or measurement threshold occurs, subject to the contract’s conditions. These approaches can offer greater flexibility, although they require careful financial analysis.
Such arrangements are not suitable for every business. A captive typically requires capital, specialized expertise and ongoing regulatory compliance, making the potential benefits more relevant to organizations with sufficient scale or particular insurance challenges. Smaller companies may find greater value in improving their existing commercial policies. Regardless of the approach, Aon’s guidance emphasizes maintaining detailed risk information, evaluating possible losses and planning for unexpected events. Companies that understand their exposures are generally better positioned to negotiate with insurers. The current competitive environment provides an opportunity to review those arrangements before another major natural disaster, financial shock or deterioration in claims experience changes market conditions.
The Outlook for 2027 Offers Relief, but Not a Guarantee
Aon’s Fall 2026 assessment presents a broadly positive outlook for Canada’s commercial property and casualty insurance market entering 2027. Strong insurer and reinsurer finances, ample capital and increased competition are creating favourable conditions for businesses with manageable risks. For companies that have faced uncertainty over insurance expenses, the prospect of stable or lower rates offers additional room to plan investments and manage operating budgets. Yet the firm is careful to distinguish current market conditions from a guarantee that prices will continue declining indefinitely.
Several developments could reverse the trend. A costly natural disaster season could weaken insurer profitability, while larger legal settlements, cyber incidents or geopolitical disruptions could encourage companies to reassess the risks they are willing to cover. American liability exposure remains particularly significant for Canadian businesses operating across the border. The central message is therefore one of opportunity combined with caution. Insurance buyers have more leverage than they did during less competitive periods, but maintaining adequate coverage still requires careful planning. For Canadian companies, the greatest advantage may come from using today’s more affordable insurance market to prepare for the risks that remain difficult to predict.
