The Office of the Superintendent of Financial Institutions (OSFI) is consulting on revisions to the capital rules for the insurance sector 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 take effect on Jan. 1, 2023.
The regulator said the proposed change to the LICAT “reflects input from and dialogue with industry participants and other stakeholders collected over the past three years.”
OSFI stressed that it’s seeking to minimize the burden of implementing revised capital rules.
“OSFI intends to maintain capital frameworks consistent with current capital policies and minimizing potential industry-wide capital impacts,” it said in a release.
To that end, the regulator is also launching a quantitative impact study to help determine whether phase-in or transitional adjustments are required.
Given the proposed changes to the LICAT, the regulator also announced that it’s pushing back the implementation of a new standard approach to calculating capital requirements for life insurers with a segregated fund guarantee business by two years to Jan. 1, 2025.
“This postpones the originally planned September 2021 consultation to allow insurers to devote more time and resources for a robust implementation of [the new accounting standard],” it said.
Feedback on the proposals are due by September 30. The revised rules are expected to be finalized by August 2022.