(September 18 – 14:45 ET) – The Office of the Superintendent of Financial Institutions has released information concerning capital requirements for guarantees under segregated funds sold by life and health insurance companies.
In a letter issued to the industry today, OSFI indicated it was adopting the factor approach put forward by a task force of the Canadian Institute of Actuaries in their report of August 1, 2000, for calculating the capital requirement for segregated fund guarantees. The factors to be employed will be at a more conservative level than that contained in the task force report. To allow for phase in, one half of the capital requirement will be included in the 2000 Minimum Continuing Capital and Surplus Requirement (MCCSR) and the full requirement will be included in 2001.
OSFI says it consulted extensively with the Canadian Institute of Actuaries and the Canadian Life and Health Insurance Association prior to finalizing the segregated fund guarantee capital requirements. Further discussions concerning potential refinements to the factors will take place with the industry over the coming weeks. The final requirement will be contained in the MCCSR Guideline issued later this fall.
Introduced in 1992, the Minimum Continuing Capital and Surplus Requirement is a measure of capital adequacy for life insurance companies. It is a risk-based minimum requirement, determined by applying factors for a number of risk components to specific on- and off-balance sheet assets or liabilities. Previously, the MCCSR did not apply to segregated fund guarantees.
-IE Staff