The Office of the Superintendent of Financial Institutions (OSFI) is consulting on changes to capital rules for the insurance industry ahead of new accounting standards.
OSFI’s proposed changes to the Life Insurance Capital Adequacy Test (LICAT), the Minimum Capital Test and the Mortgage Insurer Capital Adequacy Test reflect new international financial reporting standards for insurance contracts that will come into effect on January 1, 2023.
The regulator said the proposed change to LICAT “reflects input and dialogue with industry participants and other stakeholders gathered over the last three years.”
OSFI stressed that it seeks to minimize the burden of implementing the revised capital rules.
“OSFI intends to maintain its capital framework consistent with current capital policy and minimize the potential impact on capital across the industry,” it said.
To this end, the regulator is also launching a quantitative impact study to help determine whether gradual or transitional adjustments are required.
Taking into account the proposed changes to LICAT, the regulator also announced that it is postponing by two years to January 1, 2025, the implementation of the new standard approach to calculating capital requirements for life insurers operating a ring-fenced funds guarantee business.
“This delays the consultation originally scheduled for September 2021 so that insurers can devote more time and resources to robust implementation (of the new accounting standard),” it said.
Feedback on the proposals is due by September 30. The revised regulations are expected to be finalized by August 2022.
