June 21, 2018

OSFI proposed the draft version of the 2019 Minimum Capital Test (MCT) guideline for property and casualty (P&C) insurers in Canada. The potential amendments to the guideline are to be implemented over two years. Comments must be received by August 16, 2018. A summary of industry comments received, along with the OSFI responses, will be posted on the OSFI website, when the final guideline is released.

The guideline covers all federally regulated P&C insurance companies. OSFI proposes to increase the margin required for reinsurance ceded to unregistered reinsurers from 15% to 20%, with effect from January 01, 2020. Other key proposed changes that will be effective from January 01, 2019 are as follows:

  • Introduce credit risk capital charges to right-of-use assets resulting from the implementation of IFRS 16
  • Adjust net assets available for Canadian branches to admit the right-of-use asset for owner-occupied property leases resulting from the implementation of IFRS 16
  • Introduce counterparty credit risk capital charges on amounts receivable and recoverable from registered associated reinsurers
  • Recognize accounts payable created under a funds held reinsurance arrangement between Canadian insurance companies and unregistered associated insurers as acceptable collateral to reduce the margin required for cessions to unregistered reinsurers, subject to a condition
  • Update the credit risk factors for securitized assets and transfer the updated risk factors from Guideline B-5 – Asset Securitizationto the MCT guideline
  • Implement other minor edits or clarifications; for example: clarify the capital treatment of funds' withheld reinsurance assets for calculating the credit risk charge and clarify the definition of interest-rate-sensitive assets and liabilities to measure the interest rate risk margin for funds' withheld arrangements

OSFI conducts periodic reviews of the MCT guideline to monitor for, and respond to, emerging trends and issues raised by stakeholders so that the MCT remains effective and reflective of the property and casualty insurance industry developments. OSFI is also undertaking a broad review of the reinsurance framework applicable to federally regulated insurers. To this effect, OSFI has released a draft version of the 2019 MCT guideline for consultation. 

 

Related Links

Comment Due Date: August 16, 2018

Effective Date: January 01, 2019  and January 01, 2020 (reinsurance margin increase)

Keywords: Americas, Canada, Insurance, MCT Guideline, Property and Casualty Insurers, Capital Requirements, OSFI

Related Articles
News

US Agencies Adopt Rule to Exclude Community Banks from Volcker Rule

US Agencies (CFTC, FDIC, FED, OCC, and SEC) adopted a final rule to exclude community banks from the Volcker Rule, in line with amendments to certain sections of the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act.

July 22, 2019 WebPage Regulatory News
News

US Agencies Adopt Amendments to Simplify Regulatory Capital Rules

US Agencies (FDIC, FED, and OCC) adopted a final rule that reduces regulatory burden by simplifying several requirements in the regulatory capital rules for banks.

July 22, 2019 WebPage Regulatory News
News

IA of Hong Kong Delegates Inspection and Investigation Powers to HKMA

HKMA and IA of Hong Kong jointly issued a statement announcing the delegation of the inspection and investigation powers of IA to HKMA, pursuant to the statutory regulatory regime for insurance intermediaries under the Insurance Ordinance.

July 19, 2019 WebPage Regulatory News
News

FSB Extends Implementation Timeline for Policy Recommendations on SFTs

FSB announced adjustments to the implementation timelines for its recommendations on securities financing transactions (SFTs), specifically those related to the minimum haircut standards for non-centrally cleared SFTs.

July 19, 2019 WebPage Regulatory News
News

EBA Single Rulebook Q&A: Third Update for July 2019

EBA published answers to six questions under the Single Rulebook question and answer (Q&A) tool this week.

July 19, 2019 WebPage Regulatory News
News

EBA Report Assesses Regulatory Framework for Fintech Activities

EBA published the findings of its analysis on the regulatory framework applicable to fintech firms when accessing the market.

July 18, 2019 WebPage Regulatory News
News

OSFI Revises Capital Requirements for Operational Risk for Banks

OSFI is revising its capital requirements for operational risk, in line with the final Basel III revisions published by BCBS in December 2017.

July 18, 2019 WebPage Regulatory News
News

OSFI Consults on Revised Principles for Management of Liquidity Risk

OSFI proposed revisions to Guideline B-6 on the principles for the management of liquidity risk.

July 18, 2019 WebPage Regulatory News
News

ESMA Guidance on Disclosures for Credit Rating Sustainability Issues

ESMA published the technical advice on sustainability considerations in the credit rating market, along with the final guidelines on disclosure requirements applicable to credit ratings.

July 18, 2019 WebPage Regulatory News
News

FASB Issues Q&A on Estimation of Expected Credit Losses by Firms

FASB issued a second question-and-answer (Q&A) document that addresses more than a dozen frequently asked questions related to the Accounting Standards Update No. 2016-13 titled “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”

July 17, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3482