Featured Product

    OSFI on Approach to Determine Capital for SFG Risk to Reflect IFRS 17

    November 27, 2020

    OSFI is developing a new approach to determine capital requirements for Segregated Fund Guarantee (SFG) risk, which will reflect the IFRS 17 standard on insurance contracts. OSFI has issued a letter to life insurers to provide additional details on the development of the approach. The new approach will become effective on January 01, 2023 and will replace the current Chapter 7 of the Life Insurance Capital Adequacy Test (LICAT) guideline. OSFI also released an advisory to the LICAT guideline to formally include in the framework a smoothing technique for determining interest rate risk requirements for participating business and to clarify expectations regarding negative Dividend Stabilization Reserves or other similar experience leveling mechanisms. The advisory has an effective date of January 01, 2021.

    The development of the new approach is being undertaken separately from updates to other elements of the LICAT for IFRS 17—the timelines for this work were communicated in an OSFI letter dated September 30, 2020. One objective of the new standard approach is to improve the risk-sensitivity of SFG capital requirements. Accordingly, unlike updates being made to other areas of the LICAT framework for IFRS 17, for SFG risk, the new approach will include changes in the capital policies of OSFI. Consideration will be given at a later date to what, if any, specific transition or other measures will be introduced concurrent with the implementation of the new approach. Under the new approach, capital requirements will be calculated by applying shocks to SFG liabilities. Internal models that were previously approved for use by OSFI to calculate SFG capital requirements will no longer be permitted for this purpose, once the new approach is implemented.

    OSFI has begun work on the development of the new approach. The remaining key steps in the development process are:

    • In December 2020, distribute draft approach and quantitative impact study and sensitivity tests, with accompanying instructions directly to insurers with SFG business for comment
    • In September 2021, publish, for public consultation, draft approach (that is revised Chapter 7 of the LICAT Guideline), draft LICAT forms related to SFG, and quantitative impact study and sensitivity tests, with the accompanying instructions
    • From November 2021 to March 2022, issue potential directed consultations and data calls for calibration and transition purposes
    • In August 2022, publish the final 2023 LICAT guideline, including the revised Chapter 7 with the final approach, along with the final regulatory capital forms, including forms related to SFG


    Related Links

    Effective Date: January 01, 2023/January 01, 2021

    Keywords: Americas, Canada, Insurance, IFRS 17, Insurance Contracts, SFG Risk, LICAT, Segregated Fund Guarantee, Life Insurers, OSFI

    Featured Experts
    Related Articles

    US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint

    The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.

    January 13, 2022 WebPage Regulatory News

    EBA Issues Guide on Bank Resolvability, Consults on Transferability

    The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).

    January 13, 2022 WebPage Regulatory News

    HKMA Extends Repayment for Trade Facilities, Consults on Crypto-Assets

    The Hong Kong Monetary Authority (HKMA) published a circular, along with the reporting form and instructions, for self-assessment, by authorized institutions, of compliance with the Code of Banking Practice 2021.

    January 12, 2022 WebPage Regulatory News

    FCA Registers Securitization Repositories; PRA Issues 2022 Priorities

    The Financial Conduct Authority (FCA) decided to register European DataWarehouse Ltd and SecRep Limited as securitization repositories under the UK Securitization Regulation, with effect from January 17, 2022.

    January 12, 2022 WebPage Regulatory News

    EC Regulation Sets Out Methods for Measuring K-Factors Under IFR

    The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.

    January 11, 2022 WebPage Regulatory News

    BIS Studies How Platform Models Impact Financial Stability & Inclusion

    The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.

    January 10, 2022 WebPage Regulatory News

    ESAs Publish List of Financial Conglomerates for 2021

    The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.

    January 07, 2022 WebPage Regulatory News

    APRA Licenses Two More Banks, Reduces Committed Liquidity Facility

    The Australian Prudential Regulation Authority (APRA) updated the list of authorized deposit-taking institutions, granting license to Barclays Bank PLC and Crédit Agricole Corporate and Investment Bank to operate as foreign authorized deposit-taking institutions under the Banking Act 1959.

    January 07, 2022 WebPage Regulatory News

    EU Issues SII Corrigendum; EIOPA Assesses SII Reporting Exemptions

    EU published, in the Official Journal of the European Union, a corrigendum to the Delegated Regulation 2015/35, which supplements Solvency II Directive (2009/138/EC).

    January 06, 2022 WebPage Regulatory News

    EBA Opines on Impact of De-Risking and Associated AML/CFT Challenges

    The European Banking Authority (EBA) published an Opinion on the scale and impact of de-risking in European Union and the steps that competent authorities should take to tackle unwarranted de-risking.

    January 05, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7860