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    OSFI Consults on the 2019 LICAT Guideline for Insurers

    June 01, 2018

    OSFI is consulting on the 2019 Life Insurance Capital Adequacy Test (LICAT) guideline for federally regulated life insurance companies and fraternal benefit societies. Comments are requested by July 03, 2018 and the guideline will be effective from January 01, 2019.

    LICAT guideline replaced Guideline A on the Minimum Continuing Capital and Surplus Requirements (MCCSR), with effect from January 01, 2018. As was the practice with the MCCSR guideline, OSFI will conduct periodic reviews of the LICAT guideline to monitor for, and respond to, emerging trends and issues raised by stakeholders and to ensure LICAT remains effective and reflective of life insurance industry developments. The proposed changes to the guideline include the following:

    • Implementing changes resulting from the implementation of IFRS 16 on Leases, with effect from January 01, 2019
    • Adding conditions for the recognition of funds' withheld reinsurance, as part of the OSFI initiative related to reinsurance review
    • Specifying that mortality risk components apply to any group life insurance products
    • Harmonizing the treatment between bonds and preferred shares and specifying the treatment for bonds and preferred shares that are both callable and puttable
    • Clarifying the intended meaning of the expression "guarantee coverage period"
    • Clarifying that for calculating the incidence rate shocks, termination rates should not change and are applied to the total termination rate, including terminations due to recovery and death combined
    • Clarifying the definition of unregistered reinsurance

     

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    Comment Due Date: July 03, 2018

    Effective Date: January 01, 2019

    Keywords: Americas, Canada, Insurance, Reinsurance, LICAT, MCCSR, IFRS 16, Capital Adequacy, OSFI

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