Canada’s insurers are approaching a turning point in their response to climate risk regulation. The Office of the Superintendent of Financial Institutions’ (OSFI) Guideline B-15, which introduces mandatory climate-related disclosures and governance requirements, has been described by some as burdensome – but others see it as the catalyst the industry needed to modernize.
According to Jullie Hands (pictured), partner, business consulting, insurance transformation at EY, the new framework represents both a challenge and an opportunity. Meeting OSFI’s requirements will demand significant investment in data, analytics, and reporting infrastructure, she said, but those same systems could ultimately strengthen competitiveness and resilience.
“Insurers that proactively embed climate risk into their underwriting practices and product development processes are well positioned to stand out in the marketplace,” Hands noted. “It’s not just a compliance exercise – it’s a chance to rethink how insurers measure, manage, and communicate risk.”
Under Guideline B-15, federally regulated insurers are expected to disclose their exposure to climate risks and outline how those risks are integrated into decision-making. The task is far from trivial. Many carriers will need to overhaul data pipelines, refine catastrophe models, and enhance internal governance to meet the reporting standard.
Hands said that while some view these demands as administrative hurdles, the long-term payoff could be significant. By building systems capable of assessing climate exposure at a granular level, insurers will be able to price risk more accurately, identify new coverage opportunities, and guide clients toward resilience.
Rather than focusing narrowly on compliance, she argued, insurers should approach the new regime as a framework for innovation. “Forward-looking insurers can leverage these regulations to deepen engagement with clients on sustainability initiatives,” she said. “It’s an opportunity to lead rather than react.”
Perhaps the most complex piece of the new reporting framework is Scope 3 emissions – the indirect carbon footprint associated with insurers’ investments, supply chains, and even the emissions tied to the activities they insure. For many carriers, this represents uncharted territory.
Hands called the 2025 disclosure goal “ambitious,” noting that true Scope 3 requirements do not formally take effect until 2028 under OSFI’s timeline. However, insurers will begin filing climate risk returns long before that, which will require at least partial reporting and forward planning.
“Scope 3 encompasses a wide range of indirect impacts,” she explained. “The biggest challenge for insurers lies in data reliability – especially when it comes to insurance-associated emissions. Standards are still developing, and market data isn’t consistent.”
As a result, many Canadian insurers are currently relying on proxy methods to estimate Scope 3 figures, combining external benchmarks with portfolio-level assumptions. While imperfect, this approach allows companies to demonstrate progress and intent while the broader data ecosystem matures.
Hands said transparency will be crucial: publishing clear methodologies, even if incomplete, can help build trust with regulators and investors. “The firms that are open about their process and incremental progress will be seen as credible,” she added. “Perfection isn’t expected, but commitment is.”
The implications of OSFI’s framework go beyond data collection. Climate disclosure is pushing insurers to reassess their entire operating model – from underwriting and investment strategy to product innovation and client communication.
Hands noted that companies integrating climate risk early will likely gain a first-mover advantage as demand grows for green insurance solutions and climate-resilient financial products. These may include incentives for risk mitigation, sustainability-linked coverage options, or specialized protection for renewable energy and infrastructure projects.
The transformation, however, comes at a time when the industry is already under pressure from rising catastrophe losses and tightening capital conditions. “It’s a test of operational resilience,” she said. “Insurers that balance compliance with strategic investment will come out stronger.”
OSFI’s leadership has acknowledged both the scale and the pace of the task ahead. Speaking at the National Insurance Conference of Canada late last year, Superintendent Peter Routledge said the industry still has time to act – but not much.
“There should be a lot of urgency around the climate issue… but within this sector, we have time,” Routledge said. “Not a lot of time, but we have time to get the measurement right so that we make good decisions down the line.”
That process of “getting the measurement right” is central to OSFI’s vision. Guideline B-15 is designed not only to promote transparency but also to embed climate risk discipline into financial decision-making – ensuring that boards and executives allocate capital based on credible, scenario-tested data.
