OSFI Chief to Tackle AI Risks as Insurance Industry Embraces Disruption

TORONTO, ON – November 20, 2025 – Peter Routledge, Superintendent of Financial Institutions, will address the evolving landscape of risk in the insurance sector tomorrow, as he participates in a fireside chat at ‘The Future of Insurance’ conference. The discussion, titled ‘Regulating Risk in an Age of Disruption,’ comes at a pivotal moment as Canadian insurers increasingly adopt artificial intelligence and advanced data analytics – a trend that presents both immense opportunity and potential systemic risk.

Balancing Innovation and Stability

OSFI’s focus on non-financial risks, particularly those stemming from technological advancements, is no longer a future concern but a present reality. The rapid integration of AI into underwriting, claims processing, and customer service is transforming the industry, but also creating new vulnerabilities. “The pace of innovation is unprecedented,” notes one industry insider. “Regulators are playing catch-up, trying to understand the implications of these technologies before they create significant problems.” OSFI has been proactively developing a framework to manage these risks, recently publishing Guideline E-23 on Model Risk Management, which explicitly incorporates AI and machine learning models.

This isn’t about stifling innovation, according to sources within the regulator. It’s about ensuring that financial institutions have robust risk management frameworks in place to prevent unintended consequences, such as biased algorithms, data breaches, or systemic failures. The regulator aims to adopt a technology-neutral, principles-based approach, allowing for flexibility while maintaining a focus on critical risks. “The goal is to create a level playing field where innovation can thrive within a safe and sound regulatory environment,” explains a source close to OSFI. “The challenge is finding the right balance between fostering competition and protecting consumers and the financial system.”

The Consumer Impact of AI-Powered Insurance

Beyond systemic stability, OSFI is also keenly aware of the impact of AI on individual insurance consumers. While AI promises benefits such as personalized policies, faster claims processing, and more accurate risk assessment, it also raises concerns about fairness, transparency, and privacy. Algorithmic bias, in particular, is a significant worry. “If the data used to train these models reflects existing societal biases, the algorithms will perpetuate those biases, potentially leading to unfair or discriminatory outcomes,” says an advocate for consumer protection. “This could manifest in higher premiums for certain demographics or denial of coverage based on factors that are not legitimately related to risk.”

Transparency is another key concern. Many AI algorithms are “black boxes,” making it difficult to understand how decisions are made. This lack of explainability can erode trust among policyholders and make it challenging to identify and correct errors or biases. OSFI’s approach emphasizes the importance of data governance, ensuring that data is collected, used, and stored responsibly, and that consumers have control over their personal information. “The regulator is pushing for greater transparency and explainability in AI algorithms,” explains a source. “They want insurers to be able to explain how their models work and demonstrate that they are fair and unbiased.”

Preparing for the Future of Risk

The challenges facing OSFI extend beyond AI and data analytics. The insurance sector is also grappling with increasing threats from climate change, cyberattacks, and geopolitical instability. These interconnected risks require a holistic and forward-looking approach to risk management. OSFI is actively working to enhance its capabilities in these areas, collaborating with other regulators and industry stakeholders to share information and best practices. “The risk landscape is constantly evolving,” notes one industry expert. “Regulators need to be agile and adaptable to stay ahead of the curve.”

Several major Canadian insurance companies, including Manulife, Intact, and Great-West Lifeco, have already begun to embrace AI and advanced data analytics, investing heavily in data science and machine learning capabilities. These companies are working to integrate AI into all aspects of their operations, from underwriting and claims processing to customer service and fraud detection. However, they are also acutely aware of the risks and challenges associated with these technologies. “We recognize that AI is a powerful tool, but it’s not a silver bullet,” says a senior executive at one of these companies. “We need to ensure that we’re using it responsibly and ethically, and that we have robust risk management frameworks in place to mitigate potential downsides.”

Tomorrow’s fireside chat and subsequent media scrum will provide valuable insights into OSFI’s perspective on these critical issues. Industry observers expect Routledge to reiterate the regulator’s commitment to fostering innovation while safeguarding the stability of the financial system and protecting the interests of consumers. The discussion will undoubtedly shape the future of insurance regulation in Canada, as the industry navigates the challenges and opportunities presented by the age of disruption.