The Office of the Superintendent of Financial Institutions (OSFI) has proposed a set of changes to the capital rules for property and casualty (P&C) insurers.
OSFI issued a draft of proposed revisions to the Minimum Capital Test (MCT) guideline on Wednesday, which includes proposed amendments to the regulatory capital requirements for P&C insurers for 2016.
The most significant change being proposed to the guideline, according to a letter from Mark Zelmer, deputy superintendent, is the addition of provisions for equity risk exposures, including capital requirements for equity derivatives (such as equity total return swaps, futures and forwards) and equity instruments held short, and the recognition of equity hedging strategies employed by P&C insurers.
Apart from these new provisions, most of the other amendments aim to clarify the guideline based on inquiries received during the year, to revise accounting terminology used in the guideline for consistency with the international accounting standards, and to improve consistency with the rest of the financial services sector.
OSFI is seeking comments on the proposed changes by Sept. 4. The federal financial regulator is aiming to finalize the guideline in the fall, with the new rules taking effect on Jan. 1, 2016.