Office of the Superintendent of Financial Institutions
Pursuant to sections 523 and 597 of the Insurance Companies Act (ICA), the prior approval of the Superintendent is required where a federally regulated insurer (FRI) intends to cause itself to be reinsured by a related party that is not also an FRI (Related Reinsurer). Currently, such approvals under the ICA are granted in respect of each reinsurance arrangement and the information requirements in respect of a request for this approval are set out in Transaction Instruction DA No. 21.
After January 1, 2014, approvals will generally be granted in respect of each Related Reinsurer as opposed to each reinsurance arrangement with a Related Reinsurer. That is, the approval of the Superintendent will relate to the applicant’s intention to cause itself to be reinsured – through one or more reinsurance arrangements on an ongoing basis – by a specific Related Reinsurer rather than in respect of each particular reinsurance arrangement. This revised approach is expected to better align with reinsurance industry practices, which frequently see FRIs entering into multiple reinsurance arrangements with the same Related Reinsurer, often on very short notice. In addition to allowing FRIs more flexibility in managing their reinsurance programs, we believe that the revised approach will provide OSFI with additional insight into FRIs’ risk exposure to Related Reinsurers.
A revised Transaction Instruction will be published on OSFI’s website prior to December 31, 2013. The revised Transaction Instruction will set out the general information requirements in support of an FRI’s application for the Superintendent’s approval in respect of an FRI’s intention to cause itself to be reinsured with a Related Reinsurer. Under this revised approach, approvals will typically be granted for an indefinite term, however, approvals will be conditional on the FRI annually providing certain information to OSFI. The information that will generally be required on an annual basis will be set out in the revised Transaction Instruction. In addition, where such an approval is granted, the specific information that the FRI will be required to provide to OSFI on an annual basis, as a condition of that approval, will be set out in the Notice of Approval letter sent to the FRI.
The Appendix to this memorandum provides transitional guidance in relation to different situations. In summary,
Please direct any questions related to the above to Patrick Clermont, Director, Insurance Approvals at Patrick.Clermont@osfi-bsif.gc.ca or (613) 949-8698.
The renewal of an existing reinsurance arrangement (i.e., the execution of a new agreement with no material changes from the preceding agreement) does not constitute a new reinsurance arrangement or a material change to an existing arrangement.
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Please see footnote 1 above.
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Note that approvals of these reinsurance arrangements will expire June 30, 2015, and FRIs are expected to apply for approval under the revised Transaction Instruction (i.e., approval of the Related Reinsurer) by January 1, 2015.
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