Why Canada’s commercial market could start to firm up in 2026 H2

Given widening gaps between commercial property and liability exposures and commercial insurance premiums, one industry exec sees some select commercial lines starting to firm up in mid-2026, with a broader market correction happening in early 2027 if the trend continues.

“Through the rest of 2026, I would expect to see those NISR [Net Insurance Service Ratio] numbers continue to creep up as we see cost inflation, as we see business interruption timelines going up,” says Lasith Lansakara, vice president of strategy and product innovation at HSB Canada.

“I don’t think it would be a broad rate correction, but you’ll see selective lines starting to harden a bit by mid this year. And then I would expect by early next year again, if the condition continues — it’s hard to predict at this this point — but I’d expect to see broader rate correction towards the end of this year, early ’27 and mid next year.”

Lansakara was on a panel discussing the state of commercial lines at the Insurance Bureau of Canada’s 2026 InSight Summit conference held in Toronto on Apr. 1. He says reinsurers would likely start to price for cost inflation and longer business interruption times in July 1 renewals.

NISR is a measure of profitability. It adds a company’s gross insurance service ratio — a division of expenses (i.e., claims) by revenue (i.e., premiums) — and a reinsurance impact ratio. The reinsurance ratio is calculated by dividing net expenses from reinsurance contracts held by insurance revenue. Numbers greater than 100% mean a company is losing more money than it’s making.

MSA Research numbers shown at IBC’s InsightSummit show NISRs in aviation lines in several areas across Canada are higher than 100%. The same is true of Commercial General Liability lines (including products). In eastern Canada, the legal expense line has NISRs above 100%.

Lansakara was commenting on slides presented by Sarah Fong, vice president of MSA Research. The slides showed gaps between an increase in commercial liability and property exposures, and commercial insurance premiums collected.  

For example, although GDP growth in Canada was 3.2% in 2025, total commercial liability premiums ($5.8 billion in direct written premiums in 2025) declined by 1.6% overall.

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Similarly, non-residential construction investment in Canada rose 2.6% in 2025, but commercial property premiums (about $7.48 billion in direct premiums written) decreased by 0.13%.

“We’ve got commercial liability premiums, I’m tracking this against what we use as a proxy for exposure, that being the income-based nominal GDP,” Fong says. “This tracks a lot of things like salaries and revenues, things you would see come through as an exposure for liability.

“You can see, starting from 2021, liability premiums growth is leading and [nominal GDP growth] is following. And they’re pretty much tracking together until you see a bit of the flip in 2023, of the last couple of years.

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“And then, the exposure remains right around 5%, and it drops a little bit, down to 3.2% in 2025, whereas liability premiums really drop off there. We’re now into negative [premium] growth.

“And similarly, we’re seeing commercial property in 2021 coming out of the hard market period, premium growth was up, exposure was down. In the post-COVID period, that picks up — we’re using non residential construction investment here as proxy — and [premiums and exposure growth are] largely tracking together. But then again, as we get to 2025, you see that gap widening between the premiums and the exposure growth.”

Related: Safer air travel isn’t translating into profitability for aviation insurers

Based on these trends, Fong asked Lansakara, which specific commercial lines may start to firm up earlier than others?

Pricing for aviation is one of the possibilities, Lansakara says.

“It’s probably almost a crapshoot right now. I saw Emirates Airlines got coverage at about $100,000 to cover their whole fleet, whereas other airlines are getting it close to $70,000 to $100,000 per aircraft. That’s…a significant delta in pricing there. So it’s a complete crapshoot.”

Marine rates will likely firm up as well, Lansakara says, due to increased shipping exposures caused by the U.S. and Israel’s war against Iran.

“It’s really hard to price shipping because of the uncertainty caused by the war,” he adds.

“Even if you look at the conflict in the Middle East, there is talk now of the U.S. pulling back. And so if that happens, what happens to the Strait of Hormuz?”

Approximately one-fifth of the world’s oil is shipped through the Strait of Hormuz, which Iran has effectively closed to shipping traffic in response to the U.S. and Israel’s attacks.

“How much will those shipping costs to pass through [the Strait] with the freight persist? And even though we don’t rely on a lot of that oil in Canada, as the WTI Index goes up, that’s going to have impact to the energy we consume,” Lansakara says.

West Texas Intermediate (WTI), often referred to as the WTI Index, is a high-quality, light, sweet crude oil that serves as the primary pricing benchmark for North America, as Investopedia notes.