Office of the Superintendent of Financial Institutions
This guideline addresses the issue of investments in an entity or group of
related entities by property and casualty (P&C) insurance companies
and sets out the Office's policy with respect to limits on these
investments. This guideline applies to all federally regulated P&C
The Office is concerned about the concentration of investments in an
entity or a group of related entities in considering the diversification
needs of a prudent portfolio policy.
The Office believes that large exposures need to be subject to limits,
notwithstanding the quality of individual investments.
All property and casualty insurance companies must set out in writing, as
part of their overall prudent portfolio investment policy, internal
policies on investment concentration. P&C insurance companies must
also have in place management information and control systems necessary to
give effect to their written policies.
Notwithstanding the limit addressed in this guideline, it is expected that
companies will establish lower limits and their investments will approach
the guideline limit on an exceptional basis.
The aggregate book value of investments by a Canadian P&C insurance
company in any entity or group of related entities shall
not exceed 5 per cent of the company's assets.
include investments made by all subsidiary companies (see example in
The aggregate book value of investments of a foreign company in any entity
or group of related entities vested in trust shall not
exceed 5 per cent of the company's assets in Canada.
A company with excess investments in an entity or in a group of related
entities must reduce its exposure below the 5 per cent limit. Meanwhile,
the amount of investments in excess of the 5 per cent limit will be
deducted from the total assets in calculating the company's Assets
For a Canadian company, the total book value of assets reported on the
balance sheet of the regulatory return (P&C-1).
For a foreign company, the total book value of assets under the control of
the Minister (vested in trust in Canada) as reported on the balance sheet
of the regulatory return (P&C-2).
An investment within the normal meaning of the term as used by P&C
insurance companies. P&C companies should also take into consideration other forms of
exposure to an entity or group of related entities even in cases where an
investment or commitment is not shown on the balance sheet; for example,
options, futures, forward contracts and unfunded portions of committed
An investment excludes loans to, and loans guaranteed or securities issued
or guaranteed by the Government of Canada, a Canadian province or an OECD
As defined in the Insurance Companies Act, a natural person, a
body corporate, trust, partnership, fund, unincorporated association or
organization, an agency of the Crown in right of Canada or of a province,
and any agency of a foreign government.
An entity is related to another entity in those circumstances in which a
person would be related to a company pursuant to subsection 518(1) of the
Investment Concentration Limit