August 09, 2018

OSFI issued the final Mortgage Insurer Capital Adequacy Test (MICAT) guideline, along with the guideline impact analysis statement. The guideline sets out the regulatory framework within which OSFI assesses whether a mortgage insurance company maintains adequate capital. The guideline comes into effect on January 01, 2019.

The MICAT guideline consolidates the capital requirements of OSFI for mortgage insurers into a single document, incorporating elements from advisory on capital requirements for federally regulated mortgage insurers (advisory) and relevant chapters of the 2018 Minimum Capital Test (MCT) guideline for federally regulated property and casualty insurance companies. In addition, the guideline introduces credit risk capital charges resulting from the implementation of IFRS 16 on leases in 2019 and includes updated credit risk factors for securitized assets that were earlier a part of "Guideline B-5 – Asset Securitization." IFRS 16 comes into effect on January 01, 2019.

OSFI issued MICAT in the final form as the guideline mainly consolidates existing guidance and is not expected to have a material impact on the regulatory capital for mortgage insurers. When it comes into effect, the MICAT will replace the advisory and the MCT guideline as the framework for assessing the capital adequacy of mortgage insurance companies. Property and casualty insurance companies that are not mortgage insurers will continue to determine their regulatory capital requirements using the MCT guideline. OSFI will monitor the effectiveness of the new MICAT guideline and make any necessary modifications when the guideline is next updated in 2021.

 

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Effective Date: January 01, 2019

Keywords: Americas, Canada, Insurance, Mortgage Insurers, MICAT Guideline, Capital Requirements, MCT Guideline, OSFI

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