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Claim and Claim Adjustment Expense Reserves | 9 Months Ended
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Sep. 30, 2025
Insurance [Abstract] |
Claim and Claim Adjustment Expense Reserves | Claim and Claim Adjustment Expense Reserves Claim and claim adjustment expense reserves represent the estimated amounts necessary to resolve all outstanding claims, including incurred but not reported (“IBNR”) claims as of the reporting date. Reserve projections are based primarily on detailed analysis of the facts in each case, experience with similar cases and various historical development patterns. Consideration is given to historical patterns such as claim reserving trends and settlement practices, loss payments, pending levels of unpaid claims and product mix, economic, medical and social inflation, and public attitudes. All of these factors can affect the estimation of claim and claim adjustment expense reserves. Establishing claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves for catastrophic events that have occurred, is an estimation process. Many factors can ultimately affect the final settlement of a claim and, therefore, the necessary reserve. Changes in the law, results of litigation, medical costs, the cost of repair materials and labor rates can affect ultimate claim costs. In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of the claim, the more variable the ultimate settlement amount can be. Accordingly, short-tail claims, such as property damage claims, tend to be more reasonably estimable than long-tail claims, such as workers’ compensation, general liability and professional liability claims. Claim and claim adjustment expense reserves are also maintained for structured settlement obligations. In developing the claim and claim adjustment expense reserve estimates for structured settlement obligations, actuaries review mortality experience on an annual basis. Adjustments to prior year reserve estimates, if necessary, are reflected in the results of operations in the period that the need for such adjustments is determined. There can be no assurance that the ultimate cost for insurance losses will not exceed current estimates. Catastrophes are an inherent risk of the property and casualty insurance business and have contributed to material period-to-period fluctuations in the Company’s results of operations and/or equity. Catastrophe losses, net of reinsurance, of $41 million and $143 million were recorded for the three months ended September 30, 2025 and 2024 and $200 million and $313 million were recorded for the nine months ended September 30, 2025 and 2024. Catastrophe losses for the three and nine months ended September 30, 2025 were driven by severe weather related events. Catastrophe losses for the three and nine months ended September 30, 2024 were driven by severe weather related events, including $55 million for Hurricane Helene. Liability for Unpaid Claim and Claim Adjustment Expenses The following table presents a reconciliation between beginning and ending claim and claim adjustment expense reserves.
Nine Months Ended September 30 | 2025 |  | 2024 |  |
(In millions) |  |  |  |  |
Reserves, beginning of year: |  |  |  |  |
Gross | $ | 24,976 |  |  | $ | 23,304 |  |  |
Ceded | 5,713 |  |  | 5,141 |  |  |
Net reserves, beginning of year | 19,263 |  |  | 18,163 |  |  |
Net incurred claim and claim adjustment expenses: |  |  |  |  |
Provision for insured events of current year | 5,011 |  |  | 4,706 |  |  |
Increase (decrease) in provision for insured events of prior years | 191 |  |  | 26 |  |  |
Amortization of discount | 29 |  |  | 30 |  |  |
Total net incurred (a) | 5,231 |  |  | 4,762 |  |  |
Net payments attributable to: |  |  |  |  |
Current year events | (659) |  |  | (655) |  |  |
Prior year events | (3,463) |  |  | (3,189) |  |  |
Total net payments | (4,122) |  |  | (3,844) |  |  |
Foreign currency translation adjustment and other | 165 |  |  | 35 |  |  |
Net reserves, end of period | 20,537 |  |  | 19,116 |  |  |
Ceded reserves, end of period | 5,988 |  |  | 5,442 |  |  |
Gross reserves, end of period | $ | 26,525 |  |  | $ | 24,558 |  |  |
(a) | Total net incurred does not agree to Insurance claims and policyholders’ benefits as reflected on the Consolidated Condensed Statements of Operations due to amounts related to retroactive reinsurance deferred gain accounting, uncollectible reinsurance and benefit expenses related to future policy benefits and policyholders’ dividends, which are not reflected in the table above.
Net Prior Year Development Changes in estimates of claim and claim adjustment expense reserves, net of reinsurance, for prior years are defined as net prior year loss reserve development. These changes can be favorable or unfavorable. Favorable net prior year loss reserve development of $1 million and $5 million for the three months ended September 30, 2025 and 2024 and unfavorable net prior year loss reserve development of $56 million and favorable net prior year loss reserve development of $24 million for the nine months ended September 30, 2025 and 2024 was recorded for CNA’s commercial property and casualty operations (“Property & Casualty Operations”). No net prior year loss reserve development and unfavorable net prior year loss reserve development of $22 million for the three months ended September 30, 2025 and 2024 and unfavorable net prior year loss reserve development of $134 million and $57 million for the nine months ended September 30, 2025 and 2024 was recorded for CNA’s operations outside of Property & Casualty Operations (“Other Insurance Operations”). The following table and discussion present details of the net prior year loss reserve development in Property & Casualty Operations and Other Insurance Operations:
| Three Months Ended | Nine Months Ended |  |
| September 30, | September 30, |  |
| 2025 |  | 2024 | 2025 |  | 2024 |  |
(In millions) |  |  |  |  |  |  |  |
Medical professional liability |  |  |  |  |  | $ | (2) |  |  |
Other professional liability and management liability | $ | 25 |  |  | $ | 11 |  | $ | 43 |  |  | 28 |  |  |
Surety | (25) |  |  | (20) |  | (47) |  |  | (46) |  |  |
Warranty |  |  | 7 |  | 10 |  |  | 20 |  |  |
Commercial auto |  |  | 25 |  | 50 |  |  | 46 |  |  |
General liability |  |  | 28 |  | 62 |  |  | 47 |  |  |
Workers’ compensation | (1) |  |  | (57) |  | (66) |  |  | (106) |  |  |
Other property and casualty operations |  |  | 1 |  | 4 |  |  | (11) |  |  |
Total property & casualty operations | (1) |  |  | (5) |  | 56 |  |  | (24) |  |  |
Other insurance operations |  |  |  | 22 |  | 134 |  |  | 57 |  |  |
Total pretax (favorable) unfavorable development | $ | (1) |  |  | $ | 17 |  | $ | 190 |  |  | $ | 33 |  |  |
Three Months 2025 Unfavorable development in other professional liability and management liability was primarily due to higher than expected claim severity and frequency in CNA’s professional errors and omissions (“E&O”) business. Favorable development in surety was primarily due to lower than expected frequency and lack of systemic activity in multiple accident years. 2024 Unfavorable development in other professional liability and management liability was primarily due to higher than expected large claim severity in CNA’s directors and officers (“D&O”) business in accident year 2019. Favorable development in surety was primarily due to lower than expected frequency and lack of systemic activity in multiple accident years. Unfavorable development in commercial auto was due to higher than expected claim severity in recent accident years. Unfavorable development in general liability was due to higher than expected large claim severity in multiple accident years going back to 2015. Favorable development in workers’ compensation was due to favorable medical trends driving lower than expected severity primarily in accident years 2018 and prior. Unfavorable development in other insurance operations was largely associated with legacy mass tort abuse reserves. Nine Months 2025 Unfavorable development in other professional liability and management liability was primarily due to higher than expected claim severity and frequency in CNA’s professional E&O business. Favorable development in surety was primarily due to lower than expected frequency and lack of systemic activity in multiple accident years. Unfavorable development in warranty was primarily due to higher than expected frequency and severity in the most recent accident year for auto warranty. Unfavorable development in commercial auto was due to higher than expected claim severity, largely in CNA’s construction business in the most recent accident year. Unfavorable development in general liability was due to higher than expected claim severity in multiple accident years going back to 2016. Favorable development in workers’ compensation was due to favorable medical trends driving lower than expected severity in multiple accident years. Unfavorable development in other insurance operations was largely associated with legacy mass tort abuse claim activity, the ongoing effects of social inflation and the agreement in principle with regards to the Diocese of Rochester. 2024 Unfavorable development in other professional liability and management liability was primarily due to higher than expected claim severity and frequency in CNA’s professional E&O and cyber businesses. Favorable development in surety was primarily due to lower than expected frequency and lack of systemic activity in multiple accident years. Unfavorable development in warranty was primarily due to higher than expected frequency and severity in a recent accident year. Unfavorable development in commercial auto was due to higher than expected claim severity in recent accident years. Unfavorable development in general liability was due to higher than expected large claim severity in multiple accident years going back to 2015. Favorable development in workers’ compensation was due to favorable medical trends driving lower than expected severity primarily in accident years 2018 and prior. Unfavorable development in other insurance operations was largely associated with legacy mass tort abuse reserves. Asbestos & Environmental Pollution (“A&EP”) Reserves In 2010, Continental Casualty Company (“CCC”) together with several insurance subsidiaries completed a transaction with National Indemnity Company (“NICO”), a subsidiary of Berkshire Hathaway Inc., under which substantially all of their legacy A&EP liabilities were ceded to NICO through a loss portfolio transfer (“LPT”). At the effective date of the transaction, approximately $1.6 billion of net A&EP claim and allocated claim adjustment expense reserves were ceded to NICO under a retroactive reinsurance agreement with an aggregate limit of $4.0 billion. The $1.6 billion of claim and allocated claim adjustment expense reserves ceded to NICO was net of $1.2 billion of ceded claim and allocated claim adjustment expense reserves under existing third party reinsurance contracts. The NICO LPT aggregate reinsurance limit also covers credit risk on the existing third party reinsurance related to these liabilities. NICO was paid a reinsurance premium of $2.0 billion and billed third party reinsurance receivables related to A&EP claims with a net book value of $215 million were transferred to NICO, resulting in total consideration of $2.2 billion. In years subsequent to the effective date of the LPT, adverse prior year development on A&EP reserves was recognized resulting in additional amounts ceded under the LPT. As a result, the cumulative amounts ceded under the LPT have exceeded the $2.2 billion consideration paid, resulting in the NICO LPT moving into a gain position, requiring retroactive reinsurance accounting. Under retroactive reinsurance accounting, this gain is deferred and only recognized in earnings in proportion to actual paid recoveries under the LPT. Over the life of the contract, there is no economic impact as long as any additional losses incurred are within the limit of the LPT. In a period in which a change in the estimate of A&EP reserves is recognized that increases or decreases the amounts ceded under the LPT, the proportion of actual paid recoveries to total ceded losses is affected and the change in the deferred gain is recognized in earnings as if the revised estimate of ceded losses was available at the effective date of the LPT. The effect of the deferred retroactive reinsurance benefit is recorded in Insurance claims and policyholders’ benefits on the Consolidated Condensed Statements of Operations. The impact of the LPT on the Consolidated Condensed Statements of Operations was the recognition of a retroactive reinsurance benefit of $14 million and $11 million for the three months ended September 30, 2025 and 2024 and $39 million and $36 million for the nine months ended September 30, 2025 and 2024. As of September 30, 2025 and December 31, 2024, the cumulative amounts ceded under the LPT were $3.7 billion. The unrecognized deferred retroactive reinsurance benefit was $386 million and $425 million as of September 30, 2025 and December 31, 2024 and is included within Other liabilities on the Consolidated Condensed Balance Sheets. NICO established a collateral trust account as security for its obligations under the LPT. The fair value of the collateral trust account was $2.3 billion as of September 30, 2025. In addition, Berkshire Hathaway Inc. guaranteed the payment obligations of NICO up to the aggregate reinsurance limit as well as certain of NICO’s performance obligations under the trust agreement. NICO is responsible for claims handling and billing and collection from third-party reinsurers related to A&EP claims. Credit Risk for Ceded Reserves The majority of CNA’s outstanding voluntary reinsurance receivables are due from reinsurers with financial strength ratings of A- or higher. Receivables due from reinsurers with lower financial strength ratings are primarily due from captive reinsurers and are backed by collateral arrangements.

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