Since 2020, when it experienced the greatest recession in its history with a contraction of 5.4%, the Canadian economy has been steadily recovering, as stated by the credit rating agency. The economy of the country grew by 4.5% in 2021, and while this expansion is projected to slow down to 3.4% in 2022 and 1.8% in 2023, AM Best noted that the Worldwide Monetary Fund anticipates Canada to grow faster than any of its G7 predecessors in both years. In 2021, the nation's economy grew by 4.5%, and while this growth is forecast to slow down to 3.4% in 2022 and 1.8% in 2023, AM Best noted that the European Monetary Fund

But the year 2021 was not just about recovery – the year saw the spillover impacts of Russia's then impending attack of Ukraine, mounting geopolitical tensions, stricter cost of debt, higher inflation, depressed consumer and industry attitude, persistent supply chain comorbidities, housing market vulnerabilities, and a stagnation in consumer spending both domestically and globally, according to AM Best. But despite all of these challenges, the insurance companies in Canada have managed to maintain their leadership position.

According to the analysis by AM Best, the property and casualty (PC) market in Canada will continue to exhibit "excellent overall editorial achievement" and "strong risk adjusted capital requirements" during the entirety of 2021. Despite the pandemic, difficult macroeconomic conditions, and an increase in the number of weather-related catastrophes, the segment's operating performance has been improving each year for the past three years thanks to rising underwriting profits.

In its study, AM Best made the following observation: "Canada has handled the hurdles given by the COVID-19 epidemic for the previous two and a half years rather effectively, and P/C insurers have endured in this unique climate."

According to the research, 97% of the AM Best-rated companies in Canada received either a Superior (A++ or A+) or an Excellent (A or A-) financial strength rating (FSR), which the rating agency found was consistent with trends in recent years. This was mentioned in the report. In addition, the majority of the rating actions that the agency took in 2021 were affirmations of high FSRs, which reflects the robustness of the industry.

From the previous year's end to the current one, the overall net income for the PC industry in Canada increased by 76%, or $3.5 billion, to $8.3 billion. Positive underwriting performance was the primary contributor to net earnings, according to AM Best, which noted that a fall in investment income only partially offset the impact of the trend.

In the meantime, the life and annuity (LA) insurance industry in Canada managed to remain stable in 2021 despite the hurdles posed by regulatory authorities and the economic unpredictability. AM Best describes the outlook for the industry as "stable," and they base this on the segment's consistently strong regulatory capital levels; favorable earnings and underwriting in spite of COVID-19's impact on mortality and global economic instability; refined business profiles as a result of acquisitions, divestitures of legacy and capital-intensive businesses; and greater clarity among all stakeholders regarding the impacts of IFRS 17.

According to AM Best, "Canada's L/A insurers have been resilient over the past year, bolstered by strong equity market returns, only a modest rise in COVID-related mortality, and a renewed awareness of life insurance by the general population because of the pandemic, which resulted in record life insurance sales." These factors all contributed to record life insurance sales.

AM Best made the observation that, for the year 2021, all of Canada's life insurance firms had financial strength ratings (FSRs) of A- (Excellent) or above, with only one having a pessimistic outlook on their operations.