Budget creates $50-billion earthquake insurance backstop

The federal budget creates the Canadian Earthquake Insurance Facility, a government-backed backstop of up to $50 billion for property and casualty insurers after an extreme earthquake, and searches for Canada’s earthquake preparedness spiked on Google Trends on Wednesday.

The measure closes a gap that the Insurance Bureau of Canada (IBC) has pressed Ottawa to address since at least 2016, according to Insurance Business. The budget, tabled under Prime Minister Mark Carney, commits to introducing legislation to set up the facility. Last year’s budget had committed only to consultations.

The IBC and the Insurance Brokers Association of Canada are to take part in discussions on how the facility is designed and put in place, Insurance Business reported. The budget refers to nominal levies on insurers, and Canadian Underwriter has reported that how the backstop will be funded remains an open question. The budget does not say when legislation will pass.

The industry says the risk is large. The IBC estimates a severe earthquake could produce insured losses of about $52.6 billion, Insurance Business reported. The group has said a single catastrophic event of about $35 billion could overwhelm the property and casualty market. The industry holds about $50 billion in capital to cover every kind of claim, including auto, home and business, so a major quake could exhaust it.

The IBC has said Canada was the only G7 country with significant earthquake exposure and no government-backed mechanism. Its proposal, submitted to Finance Canada in April, was modelled on a U.S. law that sets a pre-agreed cost-sharing formula for extreme losses.

For homeowners, the budget measure does not change what a policy covers today. Earthquake insurance in Canada is optional, usually added to a home policy as an endorsement, and take-up varies widely. Insurance Business reported that roughly 50 to 65 per cent of British Columbia homeowners carry it, compared with four to seven per cent in Quebec. Coverage questions go to your own insurer or broker.

The risk is concentrated on the Pacific coast. Federal scientists typically put the chance of a magnitude 8 or greater Cascadia earthquake in the next 50 years at about 30 per cent, according to the same report. The National Observer and The Weather Network have also covered the facility this week.

The budget also contains the wider spending and tax measures we explained earlier in Budget 2026 explained: what it means for your wallet.

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