Rising compliance costs outpace revenue growth, putting pressure on Canada’s insurance sector
Regulatory compliance costs in Canada’s insurance sector have soared, with property and casualty (P&C) insurers reporting an 81 percent increase since 2022—nearly 13 times the rate of inflation and six times the industry’s own revenue growth, according to the Insurance Bureau of Canada (IBC).
Labour remains the primary driver, accounting for nearly three-quarters of the $753m in total costs for 2024, as per IBC’s latest Regulatory Compliance Cost Survey.
The number of full-time employees dedicated to compliance has jumped by 26 percent in just two years, reflecting the mounting pressure on insurers to meet both federal and provincial requirements.
The largest share of compliance effort—40 percent—is directed at meeting the demands of the federal solvency regulator, the Office of the Superintendent of Financial Institutions (OSFI), IBC reported.
“As Canada grapples with lagging productivity and seeks ways to strengthen its economy, taking a serious look at our fragmented and increasingly complex regulatory system makes good sense,” said Celyeste Power, president and CEO of IBC.
She emphasized that while other countries are streamlining regulation to boost productivity and growth, Canada’s system is becoming more costly and complex.
These findings echo a recent CD Howe Institute report, which noted that labour costs devoted to compliance across the broader financial sector rose from 16 percent in 2019 to 22 percent in 2024.
The report warns that Canada’s regulatory focus on stability and protection may be coming at the expense of innovation and competition, a stance increasingly out of step with international peers.
The impact of regulatory burden extends beyond insurers.
Statistics Canada data show that federal regulatory requirements grew by 37 percent between 2006 and 2021, a trend estimated to have reduced GDP growth by 1.7 percent and slowed employment growth by 1.3 percent.
Canada’s global competitiveness also lags, ranking 38th for burden of government regulation and 54th for internal labour mobility, according to the World Economic Forum.
In the life and health insurance sector, the Canadian Life and Health Insurance Association (CLHIA) reported that regulatory compliance costs reached $1.3bn in 2024, up 63 percent since 2019.
Labour costs accounted for 86 percent of that total, or $1.1bn—a 76 percent increase over five years. Non-labour costs made up the remaining 14 percent, equalling $180m.
In 2019, labour costs related to regulatory compliance were $640m. (All figures according to CLHIA, as provided to Benefits and Pension Monitor.)
IBC continues to advocate for reforms, including harmonizing oversight between federal and provincial regulators, updating capital rules for greater investment flexibility, and refocusing regulators’ mandates to promote competition and innovation.
As Power stated, “The harsh irony is that the effort to protect consumers can end up having the opposite effect.”
