The deal announced Tuesday will establish Definity as the fourth-largest property and casualty insurer in Canada and helped shares hit a record high on Wednesday.

“In Canada, you need size and scale to keep investing in technology and AI and data and be relevant to your brokers and customers,” CEO Rowan Saunders said in an interview.

Read more: Definity Financial to Buy Travelers Cos.’ Canadian Operations for $2.4 Billion

Saunders said the P&C insurance industry in Canada is a lot more fragmented and competitive than the banking industry, which is dominated by six big banks.

Several foreign players operate in Canada, offering competitive products as insurance becomes a necessity in wildfire-prone regions in the western part of the country and floods become more regular occurrences due to climate change.

“This might be a tipping point where a number of these international players will be paying attention to this deal and saying: ‘If Travelers, at C$1.6 billion (in annual premiums), didn’t think they had enough scale … how would these companies that are much smaller than that do the same?’”

“I think that could be a decision or a question that’s asked around boardrooms, which might be a catalyst for ongoing consolidation in our industry.”

Scaling up will help insurers invest in technology systems, artificial intelligence, data and build efficient supply chain systems to deal with increasing claims from rising catastrophic events or personal claims.

Saunders said deal talks began in New York last May where he discussed with Travelers’ CEO Alan Schnitzer the importance of scale in Canada.

Definity’s purchase of Travelers’ Canadian personal insurance and the majority of its commercial insurance business will add roughly C$1 billion in annual premiums to its personal lines business and C$600 million in annual premiums to its commercial unit.

Definity’s shares were up 13% on Wednesday at C$78.62.

(Reporting by Nivedita Balu in Toronto; editing by Mark Potter)