Smoke and Fears

Change has been the only certainty for Canadian insurers in 2023 Tiana Zhao and Bryan Liu

It has been an eventful year for insurance companies across Canada. They’ve experienced everything from a rise in liquidity risks and high-interest rates to regulatory changes and wildfire smoke. This article looks at four trending topics in 2023 for Canadian actuaries.

Rising Interest Rates and High Inflation

For more than a decade, Canadian insurers have operated in a low interest rate environment. With a combination of factors, including a changing economic situation, geopolitical events and lingering effects of a global pandemic, central banks worldwide have taken actions to stabilize the economy by adjusting interest rates. The Bank of Canada (BoC) raised the policy rate by 4.25% from March 2022 to March 2023. The two-headed challenge of high inflation and increased interest rates has significantly affected all economic sectors, including the insurance industry.

A rising interest rate environment has far-reaching effects on the Canadian insurance industry, with an immediate impact on insurers’ balance sheet positions and risk management practices, as well as on product profitability and policyholder behavior. For life insurers, it’s advisable that a proper liquidity risk management framework be put in place, which can help manage the effects of potential higher lapses and depressed asset values. Insurers also must adapt their product development and pricing efforts to the changing economic and financial realities all Canadians face.

Climate-related Risks

Climate-related risks also are increasingly top of mind for insurers and pension funds. One key takeaway from COP15 (UN Biodiversity Conference) and COP27 (United Nations Climate Change Conference) is to leverage the financial sector’s force and hold businesses and institutions accountable to achieve net-zero commitments, which means our economy either emits no greenhouse gasses or offsets its emissions through environmentally friendly actions.

For Canadian insurers, this means integrating environmental, social and governance (ESG) as part of financial analysis. It also means screening companies based on ESG characteristics, values and ethical considerations to encourage sustainable investing. Assessing and mitigating climate risks across the business must be done as well.

InsurTech and Automation

InsurTech was defined in “InsurTech: A Guide for the Actuarial Community” as the use of emerging hardware, software and user interfaces to address inefficiencies or opportunities in the insurance value chain. It also noted that the term “InsurTech” is often used in the context of “InsurTech startups.” Still, InsurTech should be more than just startups—it can represent an “ecosystem of focused, innovation-based companies.”

We are seeing an increasing number of startups trying to improve the insurance value chain’s weak links with emerging technologies such as distribution, sales, underwriting and claims.

However, there is a risk of losing control of algorithms. An Australian general insurer was to repay $550 million over pricing misconduct due to system failures in delivering on pricing promises. It is important for insurers to have adequate oversight and control over the pricing promises made or delivered by the distributors of their products.


The U.S. Centers for Disease Control and Prevention defines long COVID as long-term effects caused by COVID-19 infection. It can include a wide range of issues that could last for weeks, months or years. It occurs more often in people with severe COVID-19 illness, but anyone infected with the virus that causes COVID-19 can experience it.

For insurers, this could mean an increase in disability income claims due to long-term COVID-related disorders and the potential burden of certain diseases, leading to an increase in both life and critical illness diseases.


As an actuary, it is important to be adaptable to emerging trends in the industry. The future of actuarial science will not stay unchanged—it will be full of opportunities for us to explore.

Tiana Zhao, FSA, CERA, ACIA, is a senior associate actuary on the international pricing team at Sun Life. She is also a contributing editor for The Actuary Canada.
Bryan Liu, FSA, FCIA, is an actuary at Milliman’s Life and Financial Services Practice, providing ERM and M&A consulting services to clients across Bermuda, the United States and Canada. He chairs the SOA’s Actuary of the Future section and sits on the editorial board for The Actuary Canada.

Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries or the respective authors’ employers.

Copyright © 2023 by the Society of Actuaries, Schaumburg, Illinois.