Canada’s life and annuity insurers are expected to see steady growth amid rising life insurance sales, according to an AM Best market segment report released Friday.
Canadian life insurance new annualized premium reached a record $2.3 billion in 2025, up 4% from the previous year. Whole life premiums rose 10% and accounted for 70% of the premium market, while participating whole life represented 87% of new whole life premium sold.
Sales growth was supported by digitization that made buying life insurance faster and more accessible, according to the report. Insurers are also increasingly using AI, including in underwriting.
However, the report said a life insurance coverage gap persists as existing policies fail to keep pace with inflation, higher mortgages and rising salaries. “This is where technology comes in to attempt to address these issues through innovation and streamlining the sales process,” it added.
AM Best maintained its stable outlook for the Canadian life and annuity industry, citing insurers’ regulatory capital strength, financial flexibility, favourable earnings and diversified businesses.
Headwinds include pressure on household budgets from inflation, uncertainty stemming from the Canada-U.S. trade dispute and growing operational risks, including cyber threats as insurers become more digital.
Operating results for the life and annuity industry improved in 2025. Pre-tax operating gains rose 4% to $19.7 billion, while post-tax gains increased 7% to $15.1 billion. Insurance revenue increased just over 2% to $102.8 billion.
This growth, along with a “modest” decline in insurance service expenses, helped push the insurance service result up 12% to $14.5 billion. Contractual service margin — representing profits expected in future periods — rose 6% to $73.3 billion.
Individual life insurance revenue grew 7% to about $31 billion, while group life remained the largest business line at more than $33 billion.
Canadian insurers also maintained strong capital positions. The four largest insurers all had Life Insurance Capital Adequacy Test ratios above 125% as of the second quarter of 2026.
All Canadian life and annuity insurers rated by AM Best had financial strength ratings of A- (Excellent) or higher as of Aug. 31. The rating agency reported no downgrades in the past 12 months.
Some noteworthy ratings include:
- Desjardins Financial Security Life Assurance received a new A rating in May.
- BMO Life Assurance’s issuer credit rating outlook was revised to positive from stable in January.
- Ivari was upgraded to an A financial strength rating in July following further integration into Sagicor Financial after its 2023 acquisition.
Insurers’ total assets rose 6.3% to $2.3 trillion in 2025. The investment mix remained stable, with bonds representing 67% of invested assets and below-investment-grade bonds accounting for about 2% of total bond holdings.