Climate-Related Financial Disclosures

 

In alignment with Guideline OSFI B-15 (the “Guideline”), CNA and its affiliates (“CNA”, “we”, “our,” or “us”) is committed to transparent public disclosure regarding climate-related risks and management strategies. Our disclosures address governance, risk management, strategy, and metrics associated with climate-related financial risks. These include information on board and senior management oversight, our approaches to identifying and assessing climate risks, and the integration of climate considerations into business decisions.


At the CNA Canada Branch level (“CNA Canada” or the “Branch”), we regularly review and update our climate risk disclosures to ensure they reflect current practices and regulatory expectations. These disclosures are made available to stakeholders through our annual financial reporting and other public communications, supporting informed decision-making and accountability.


Climate-related risks are overseen at CNA Canada in a manner that is consistent with the expectations set out in the Guideline and aligned with the existing Enterprise Risk Management (ERM) framework.

 

 

Governance


Board and Senior Management Oversight


Climate-related risks are incorporated into enterprise-wide risk oversight and are escalated to senior management and the Board through established reporting channels. The Chief Risk & Reinsurance Officer provides regular reporting on key risk exposures, including climate-related risks where material, to the Audit Committee of the Board.


Senior Management is accountable for ensuring that climate-related risks are appropriately identified, assessed, and managed, including integration into the CNA Canada Branch level (“CNA Canada” or the “Branch”)’s risk management and strategic decision-making processes.

 

Enterprise Risk Committee


The Enterprise Risk Committee (ERC), chaired by the Chief Risk & Reinsurance Officer, performs the following at an enterprise level:

  • Meets quarterly and comprises senior representatives from underwriting, investments, actuarial, claims, and finance
  • Reviews key risk exposures, controls, and risk indicators, including climate-related risks
  • Provides oversight of integration of climate risks into the ERM framework and risk reporting

 

CNA Canada ERM Committee

 

At the Branch level, the ERM Committee supports the governance and oversight of risks, including climate-related risks, within the broader ERM framework. Climate risk is not managed through a standalone committee but is embedded within existing risk governance structures.

 

Canada Climate Risk Working Group


The Canada Climate Risk Working Group supports management in fulfilling the expectations set out in the Guideline and provides subject matter expertise on climate-related risks.


Key responsibilities include:

  • Assessing and monitoring physical and transition risk exposures
  • Supporting development of the climate risk governance framework
  • Evaluating data requirements and regulatory reporting (e.g., climate risk returns, GHG emissions)
  • Supporting development of the Climate Transition Plan

 

Internal Audit


Internal Audit provides independent assurance on the effectiveness of the CNA Canada governance, risk management, and control processes. Subject to its annual audit planning process, Internal Audit is responsible for conducting audits and independently assessing CNA Canada’s climate related risk and associated disclosures.

 


Risk Management


CNA has a formalized risk governance structure that starts with the Board of Directors and cascades to underlying company committees, business units, and ultimately all employees. CNA Canada uses a ‘Three Lines of Defence’ approach for managing and mitigating risks. We seek to promote a strong risk management culture and the belief that effective risk management is the responsibility of all employees

 

Enterprise Risk Management (ERM) Framework

 

Guiding Principles


CNA Canada’s ERM framework is designed to support Senior Management in achieving the Branch’s strategic and financial objectives while maintaining an appropriate risk profile aligned to its risk appetite. It establishes clear risk preferences relative to the Branch’s business strategy and financial resources, providing defined boundaries for risk taking. The framework promotes a strong risk management culture characterized by open and transparent communication and ensures that risk related issues and exposures are effectively monitored, escalated, and addressed through a disciplined feedback loop. The same framework is applied consistently to climate related risks as to all other risks within the organization.

 

Approach


The Branch applies an ERM approach that integrates qualitative and quantitative risk appetite measures, including defined risk tolerances and limits, aligned with its strategic objectives and financial capacity. Risk identification, assessment, and evaluation of both short  and long term risks are embedded across planning and operational processes at all levels, ensuring a coordinated and consistent approach to risk mitigation. The framework supports compliance with applicable legal and regulatory requirements and reflects relevant industry best practices, while ongoing monitoring and periodic assessment of the Branch’s risk profile and ERM effectiveness enable continuous improvement and informed decision making.

 

 

Risk Identification and Prioritization


Risk Identification


Risks are identified by first-line business owners (“Risk Owners”) through periodic and event driven reviews covering underwriting, investment, and operational activities. This includes both physical risks (e.g., catastrophe exposure) and transition risks (e.g., regulatory, market, and technology changes.


Risk Assessment


Risk Owners identify the relative materiality and likelihood of key risks, identify highest priority risks based on each risk’s potential impact, and determine metrics and limits.

 

Control Identification


Risk Owners identify and assess controls for key risks and create an inventory of controls. These controls are aligned to key exposures and are embedded within business activities to support a coordinated and consistent approach to risk mitigation.


Continuous Improvement


CNA Canada supports continuous improvement in its climate risk management practices through active engagement with business units and integration into broader ERM processes.


Risk Reporting


Climate related risks and control effectiveness are reported through established ERM governance structures, including escalation of material exposures, monitoring of key risk indicators, and tracking of mitigation actions.

 

 

Strategy


In the context of climate risk management, physical risk refers to the financial risks arising from the increasing severity and frequency of climate-related events (acute risks such as floods, wildfires, and storms) and longer-term climate shifts (chronic risks such as sea level rise and temperature changes), including indirect impacts.


Transition risk refers to the financial risks associated with the adjustment to a low greenhouse gas economy, including impacts from changes in policy, regulation, technology, and market or customer behavior. The risk to the investment portfolio is the potential decline in asset valuations due to exposure to sectors sensitive to transition risks, driven by climate related shifts in supply and demand.


Physical and transition risks relevant to our business are outlined below, including their expected time horizons and the strategies in place to manage them.

 

 

Time Horizons

 

The time horizons are defined as follows:

 

Short-term:

  • 0-1 years
  • Risks that arise within the horizon of the reporting timeframe

Medium-term:

  • 2-5 years
  • Risks that arise with the operational and strategic planning horizon

Long-term:

  • Over 5 years

  • Risks that arise beyond the medium-term strategic planning horizon

     

 

Physical Risks


Natural Catastrophe Exposure


Short to Long-Term


Frequency and severity of weather-related claims risk refer to the potential increase in the number and magnitude of insured losses arising from climate-driven weather events across short, medium, and long-term time horizons. Recent trends indicate increasing volatility and a higher incidence of severe weather events, contributing to elevated loss activity. CNA Canada mitigates this risk through risk-based underwriting, exposure management, reinsurance strategies, and ongoing monitoring of portfolio concentrations and loss trends.

 

How we manage physical risks


CNA Canada manages climate related physical risk primarily through underwriting, pricing, and portfolio risk controls that reflect exposure to severe weather and catastrophe events. Changing climate conditions are expected to increase the frequency and severity of natural catastrophes and longer-term environmental shifts, which may impact our operations through damage to our premises and contribute to higher losses and disruption for our policyholders.

 

Product and Pricing


Risk stemming from natural catastrophe is assessed using a combination of catastrophe risk models and internal exposure analytics, informed by the geophysical characteristics of insured locations, and reviewed in the context of risk appetite and portfolio concentrations. The results of these assessments are incorporated into pricing and risk selection decisions in a manner proportionate to the nature and materiality of the exposure, alongside reinsurance and other risk mitigation strategies. Our measurement approaches continue to evolve as data quality, methodologies, and regulatory guidance develop. We monitor emerging practices to continuously enhance our underwriting risk assessment capabilities.

 

Reinsurance and Risk Transfer


Reinsurance is a key tool used to manage climate related physical risk by limiting exposure to large and catastrophic losses and reducing unexpected volatility and tail risk in the portfolio. Our reinsurance arrangements are designed to keep net risk retention aligned with our underwriting guidelines and overall risk appetite, and to help ensure the portfolio remains within internal catastrophe risk tolerances, including Probable Maximum Loss (PML) objectives.


Financial


Catastrophe losses are budgeted for in the financial plan through planning assumptions and are updated based on actual catastrophe experience and modelled losses over a relevant time period.

 

 

Transition Risks

 

Impact of Climate Factors on Investment Income


Short to Long-term


Risk to investment income arising from climate-related factors reflect the potential for adverse impacts on returns and increased volatility within the Branch investment portfolio, driven by both physical and transition risks across all time horizons, including through asset repricing, credit deterioration, and broader market shifts. Emerging trends indicate heightened sensitivity to climate-related risk drivers, particularly within vulnerable sectors and geographies. CNA Canada manages this risk through diversified asset allocation, investment limits, and ongoing monitoring.


Legal and Regulatory Risk


Short to Long-Term


Legal and regulatory risk from climate factors reflects the potential for increased exposure to regulatory change, litigation, and compliance requirements arising from physical and transition risks across all time horizons, driven by evolving laws, supervisory expectations, and stakeholder actions. Recent trends indicate heightened regulatory scrutiny and litigation activity related to climate disclosures and risk management practices. The Branch mitigates this risk through ongoing monitoring of regulatory developments, alignment with CNA Group policies, and integration of climate considerations into governance, compliance, and disclosure processes.

 

How We Manage Transition Risk


CNA Canada manages climate related transition risk through an integrated risk management framework and adapted to the Canadian operating environment. Oversight is exercised by Branch Management, consistent with OSFI expectations for foreign entities operating on a branch basis.


We expect the transition to a lower carbon economy to drive changes in regulation, technology, and market dynamics, which may impact our operations and customers through shifting demand, evolving underwriting exposures, and changes in the cost and availability of insurance coverage.


Our investment policy statement provides guidance for our investment decisions. The portfolio is primarily allocated to high credit quality fixed income which is managed to duration, credit quality, and diversification targets, supporting stability of investment income.


CNA regularly assesses risks, both to its investment portfolio and individual holdings, considering emerging trends and their potential impact on specific sectors, including transition risk, which includes periodic research on certain transition risk-related topics to better inform our investment strategy. We aim to be disciplined in our evaluation of each investment’s risk return profile and the risks related to our entire investment portfolio.

 

 

Climate Scenario Analysis


The Branch conducts forward looking climate scenario analysis to assess the potential impacts of physical and transition risks on its financial resilience and capital position. Scenario analysis outcomes are integrated into the Branch’s risk management, capital planning, and strategic decision making processes.


Physical Risk Scenario


The Branch evaluated a severe but plausible physical risk scenario reflecting increased catastrophe activity, assuming a doubling of event frequency with unchanged severity relative to historical multiple event scenarios. This scenario captures the potential impact of climate driven changes in weather patterns on underwriting results and capital adequacy.


The Branch mitigates physical risk-related impacts through its reinsurance program and expects to remain above internal and regulatory capital thresholds under stressed conditions.


Results are used to assess reinsurance adequacy, inform risk appetite, and support underwriting and capital management decisions under adverse climate conditions.

 

Transition Risk Scenario


CNA Canada assessed a transition risk scenario reflecting the impact of decarbonization policies and market shifts toward a low carbon economy, including reduced demand for fossil fuels and declining asset values in carbon intensive sectors. The primary transmission channel for the Branch is through its investment portfolio. As at year end 2024, exposure to transition risk from high carbon intensive industries was assessed as immaterial. Accordingly, no material financial impact was identified under the scenario; however, the Branch continues to monitor exposures and potential concentration risks as part of its ongoing investment risk management processes.
 

Application and Ongoing Development


Scenario analysis results are used to:

  • Assess the resilience of capital under severe but plausible climate conditions;
  • Inform reinsurance, underwriting, and investment strategies; and
  • Enhance understanding of climate risk drivers and transmission channels.
     

The Branch will continue to refine scenario design, assumptions, and methodologies as data availability and industry practices evolve.

 

 

Metrics


We use a range of quantitative metrics to assess and monitor the impact of climate-related risks and overall risk profile. Metrics are reviewed periodically and will be refined as data quality, methodologies, and regulatory expectations evolve.


Climate-Related Metrics

 

Scope 1 Emissions:

Scope: Branch-level

Definition: Direct emissions from owned/controlled emissions

2025: 0

 

Scope 2 Emissions:

Scope: Branch-level

Definition: Indirect emissions from purchased energy

2025: 25.6344 tCO2e

 

*Scope 3 disclosures will be enhanced over time in line with regulatory timelines and data availability.

 

Physical Risk Exposure Metrics

 

Catastrophe Losses:

Scope: Branch-level

Definition: Losses paid by wildfire, hurricane, severe convective storm, and flood

2025: $1.02M

 

Net Probable Maximum Loss (PML) – 1-in-100:

Scope: Branch-level

Definition: Modelled portfolio-level loss at a 1-in-100 return period across all material weather-related catastrophe perils, after reinsurance

2025: $62.97M

 

Transition Risk Metrics

 

Exposure to carbon-intensive sectors

Scope: Branch-level

Definition: % of portfolio exposed to high-emission, transition risk–sensitive sectors.

2025: 30%

 

Investments in Electricity Support and Distribution

Scope: Branch-level

Definition: % of portfolio in electricity transmission, distribution, and supporting grid infrastructure services.

2025: 13%

 

Methodologies and Assumptions

 

  • Scope 3 greenhouse gas (GHG) emissions, including those associated with underwriting and investment activities, are subject to a phased implementation timeline and are not currently included in the Branch’s disclosed emissions metrics. Consistent with regulatory expectations, Scope 3 disclosures are expected to be incorporated beginning in the 2028 reporting cycle.
  • Scope 2 emissions are calculated in accordance with the GHG Protocol Corporate Accounting and Reporting Standard using a location-based approach, reflecting electricity consumption. Direct measurements from suppliers are prioritized followed by historical averages and estimations. Envizi is used to calculate emissions and is built on the GHG Protocol, incorporating a variety of emissions factors from authoritative sources such as the US EPA, eGRID, DEFRA, IEA, IPCC.
  • Physical risk metrics are derived from catastrophe models and internal exposure analytics.
  • Investment-related emissions and sector exposures are based on available issuer-level and portfolio data.
  • Methodologies and assumptions are subject to ongoing refinement as data availability and regulatory guidance evolve.