Stacked white books on rules and regulations

Federal financial regulators are refining Canada’s capital regime for financial services institutions with the introduction of new requirements specifically for mortgage insurers.

The Office of the Superintendent of Financial Institutions (OSFI) published new capital rules for mortgage insurers on Thursday that will take effect Jan. 1, 2019. The new capital guideline, known as the Mortgage Insurer Capital Adequacy Test (MICAT), establishes specific requirements for these companies, which are technically considered property and casualty (P&C) insurers, even though their businesses are quite different from traditional P&C companies.

“Having a separate guideline for mortgage insurers allows OSFI to better tailor its capital framework to the mortgage insurance industry,” said Carolyn Rogers, OSFI’s assistant superintendent, in a statement.

The new rules consolidate the existing capital treatments for mortgage insurance, introduce new credit risk capital charges and include updated credit risk factors for securitized assets. OSFI states in a news release that it does not expect the new guideline to have a material impact on the regulatory capital holdings of mortgage insurers.

“Given the fundamental differences in the business model and capital requirements of mortgage insurance companies as compared to other property and casualty insurance companies, OSFI believes it appropriate to create a single document that incorporates all elements of the regulatory capital framework for mortgage insurers,” an OFSI news release states. “Having a separate guideline will also allow OSFI to tailor the capital guideline to the mortgage insurers.”