Is Canada’s soft commercial market shifting to small businesses?

Canada’s commercial insurance soft market remains focused on the mid-market to large market space, but the small business space is seeing some movement, speakers said last week at Insurance Brokers Association of Alberta’s Convention 2026 in Banff.

Speakers at the commercial challenges panel agreed with moderator Catherine Cake, president of Drayden Insurance, that generally, the commercial soft market has been predominately felt in the mid-market space. However, they noted that insurers have differing views of what constitutes small business versus mid-market.

“I think for some of us, mid-market happens at a different premium threshold than others,” says Rosa Nelson, vice president of sales and business development for Intact Insurance. “Where we’ve mostly seen [the commercial soft market] is in that mid-market to large market space.

“A little bit is happening in the small business space, but I would say…we haven’t really noticed it as significantly as we have in some of the larger files.”

Stacey Mills, vice president of commercial lines – mid-market at Wawanesa Insurance, agrees that “it tends to be in that [$]100,000-plus space where you’re seeing 20, 30, 40% rate reductions.”

But the small business market is seeing some changes, says Jean Gauvreau, vice president of business development and branch operations at Portage Mutual.

“From our perspective, as we play in the more small package space, it’s been interesting towards the end of last year and probably into the first quarter here,” he says. “We’re seeing very aggressive competition at that price point…and even [on] some renewal terms.

“It is picking up there, although it’s not as pronounced as what you’re seeing on the on the larger accounts,” Gauvreau adds. “But certainly, we’re seeing it as a smaller carrier, for sure.”

A question of sustainability

But the continuing soft market is not sustainable in the long term. Cake asked panellists how long they believe it could realistically continue before it’s unsustainable, and what would be early warning signs.

Panellists agreed it’s difficult to put a timeframe on the shift away from the soft market, but offered some suggestions.

“I think we’re around the two-year mark from seeing a shift,” says Chelsa Materi, chief growth officer at Sandbox Mutual Insurance. “Could be sooner, could be a little longer.”

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She suggests the warning signs will be the same as “the last time the hard market came in”: pressure on pricing due to poor loss ratios, markets reducing their participation on subscriptions and markets pulling out of segments.  

“I don’t think it’s going to be that far out just because personally, I feel that the rates that we’re seeing are unsustainable,” Materi says. “I think that once the loss ratios catch up to those, that’s going to drive some pressure.

“It’ll be interesting to see what happens in the reinsurance market as well.”

Nelson agrees reinsurance will be one of the indicators as well as players entering or exiting the market.

“We’ve had a number of entrants in the last year or 18 months. That increases capacity,” Nelson says. “Should those entrants decide they don’t want to be here anymore, you’re going to see a shift probably in the market happen. At that point, results are going to catch up.”

Mills says she believes how quickly the market will harden depends on what happens to insurers’ results.

“It’s funny, as an industry, we kind of forget that less than two years ago, we had four of the largest Cat events in Canada only 27 days apart,” Mills says, referring to the record 2024 Cat year that cost the industry more than $9 billion in losses. “And yet, we still chase that top line.

“If there is a big event or two, then I think it will snap back really quickly…” she says. “[In] 12 to 24 months, I think we’re due for some weather.”

Jason Contant

Jason has been an award-winning journalist with Canadian Underwriter for more than a decade, including the past three years as associate editor and, before that, as digital editor for seven years.