Draft Key Metrics Report - Life insurers

Instructions

All federally regulated insurance companies (insurer) are required to complete a Key Metrics Report (KMR). The KMR form is to be submitted to OSFI at least annually and within 30 days of the Own Risk and Solvency Assessment (ORSA) report being reviewed by the insurer’s Board of Directors or signed off by its Chief Agent. The following instructions are provided to assist in completing the KMR:

 General Instruction
KMR Template

The template should not be modified by the insurer. Insurer input should be made only to the white cells in the template. Shaded cells are not applicable or contain embedded formulas that should not be adjusted.

Insurers who wish to include an alternative presentation should do so within their ORSA report or submit an additional schedule to their OSFI Lead Supervisor in addition to the standard KMR.

Name of insurer and date of ORSA report reviewed by the insurer’s Board of Directors or signed off by its Chief Agent should be entered in the respective yellow boxes at the top of the KMR.  

Column 03 Instructions
General The amounts reported as Regulatory Capital (Margin) should be those calculated per the LICAT guideline.

Line 04 :
LICAT (LIMAT) Capital (Margin) Requirements: Before Credits and Non-Diversified Risk (A)

This line is calculated by an embedded formula once data is entered in lines 01 – 03. It should be equal to the amount of an insurer’s regulatory LICAT (LIMAT) capital (margin) requirements needed to support specific risks, as outlined in the LICAT guideline.

Line 07 :
LICAT (LIMAT) Credits (B)

This line is calculated by an embedded formula once data is entered in lines 05 – 06. It should be equal to the amount of an insurer’s credits as outlined in the LICAT guideline.

Line 10 :
LICAT (LIMAT) Capital (Margin) Requirements:
Non-Diversified Risks (C)

This line is calculated by an embedded formula once data is entered in lines 08 – 09. It should be equal to the amount of an insurer’s regulatory LICAT (LIMAT) capital (margin) requirements needed to support non-diversified risks as outlined in the LICAT guideline.

Line 19 :
LICAT (LIMAT) Base Solvency Buffer (Required Margin) at Supervisory Target Level (D)

This line is calculated by an embedded formula. It represents the insurer’s regulatory LICAT (LIMAT) Base Solvency Buffer (Required Margin), calculated at the Supervisory Target level. Refer to the LICAT guideline for the detailed calculation approach.

Line 26 :
LICAT (LIMAT) Capital (Margin) Available (I)

This line is calculated by an embedded formula once data is entered in lines 23 – 25. It is the sum of the insurer’s Available Capital (Margin), Surplus Allowance and Eligible Deposits (which are all defined in the LICAT guideline).

Line 28 :
LICAT (LIMAT) Core Supervisory Target (K)

This line is calculated by an embedded formula. It represents a ratio of 70% of the Base Solvency Buffer (Required Margin) and is the regulatory Core Supervisory Target as outlined in the LICAT guideline.  

Line 29 :
LICAT (LIMAT) Tier 1 Capital (Available Margin - Other Admitted Assets) (L)

This line represents the regulatory amount of Tier 1 Capital (Available Margin - Other Admitted Assets) as outlined in the LICAT guideline.

Line 30 :
LICAT (LIMAT) Core Capital (Margin) Available (M)

This line is calculated by an embedded formula. It is the sum of the insurer’s Tier 1 Capital (Available Margin – Other Admitted Assets), 70% of Surplus Allowance and 70% of Eligible Deposits, as outlined in the LICAT guideline.  
Columns 04 & 06 Instructions
For all applicable Lines These lines are calculated by an embedded formula, where applicable. These two columns represent the percentages of the amount of each applicable line in relation to the amount reported as regulatory capital (margin) on line 19 (D).
Column 05 Instructions
General

The risk categories (e.g. Credit, Market, Insurance, Segregated Fund Guarantee, Operational, Other) and amounts reported as an insurer’s ORSA Capital should reflect those determined as part of the insurer’s ORSA process.

An insurer’s allocation of the various component calculations of its Own Capital (Margin) Needs should be consistent with the components of LICAT (LIMAT) Base Solvency Buffer (Required Margin) with explanations and details provided.

Lines 01 – 03:
Specific Risks - Credit, Market and Insurance risks

Include these risks assessed as part of the ORSA process.

Lines 05 – 06 :
Credits

This line should be equal to the amount of an insurer’s credits assessed as part of the ORSA process. Include amounts for between-risk diversification benefits (i.e. within-risk diversification should be reflected on that individual risk line), net of any dependencies creating, in aggregate, capital (margin) needs that are greater than the sum of the individual risk assessments.

Lines 08  – 09 :
Non-Diversified Risks - Seg Fund Guarantee and Operational risks

Include non-diversified risks assessed as part of the ORSA process.

Lines 11 – 16 :
Other Risks
(write in)

Describe and include amounts for other risks not explicitly specified in the LICAT (LIMAT) guideline (e.g. concentration risk) but assessed as part of the ORSA. (These should therefore not be included in any lines under Column 03 vis-à-vis Regulatory Capital (Margin)).

Line 17 :
ORSA Adjustments – Other

Include amounts for elements that relate to an adjustment to a number of own risks or to a specific own risk not identified /included on a particular line (e.g. model risk, data quality/quantity or for management tolerances, if not quantified elsewhere).

Line 18 :
ORSA Adjustments - Extremely Severe Scenarios

May be necessary when sophisticated scenario testing tools uncover dependencies between risks that had not been measured by individual risk assessment, or when it is determined that some plausible but extremely severe scenarios, in aggregate, amount to capital (margin) needs greater than the sum of the individual risk assessments.

Line 19 :
ORSA Own Capital (Margin) Needs

This line is calculated by an embedded formula and reflects the insurer’s assessment of Own Capital (Margin) Needs for all risks.

Line 20:
ORSA Adjustments – Other

Once an insurer has determined "ORSA Own Capital (Margin) Needs" (i.e. line 19 above), other adjustments may be required to account for external or third party margin expectations, notably OSFI expectations including that the "Internal Target" (line 22) should not be less than the LICAT (LIMAT) Base Solvency Buffer (Required Margin) at the Supervisory Target Level.

Line 21:
ORSA Adjustments – Varying Nature & Severity Scenarios

In addition to the “Adjustments – Other” (i.e. line 20 above), an insurer may include additional adjustments based on scenarios of varying nature and severity to assess the adequacy of the margin between the amount of its “Own Capital (Margin) Needs” and external expectations (e.g. OSFI’s Supervisory Target).

Line 22:
Internal Target (E)

This line is calculated by an embedded formula. This should be the same as the Internal Target identified in the insurer’s Capital Management Policy and disclosed to OSFI. This amount should not be less than OSFI’s Supervisory Target. As outlined in Guideline A-4: Regulatory Capital and Internal Targets, the Internal Target should be determined through the ORSA process.

Line 26 :
ORSA Total capital (margin) available (I)

This line represents the amount of an insurer’s total capital (margin) available, assessed as part of the ORSA process.

Line 28:
ORSA Core Internal Target (K)

 
This amount represents the insurer’s ORSA Core Internal Target. (The ORSA Core Internal Target ratio calculated on this line in Column 06 should be determined as part of the insurer’s ORSA and should be the same as the Core Internal Target identified in the insurer’s Capital Management Policy and disclosed to OSFI. The ratio should not be less than OSFI’s Supervisory Target Core Ratio.

Line 29 :
ORSA Tier 1 (Available Margin - Other Admitted Assets) equivalents (L)

This line represents an amount equivalent to regulatory Tier 1 capital (Available Margin - Other Admitted Assets), assessed as part of the ORSA process.

Line 30 :
ORSA Core capital (margin) available (M)

This line represents the sum of the amount entered on line 29 above, and all other core capital elements other than Tier 1 (Available Margin - Other Admitted Assets) equivalents, assessed as part of the ORSA process.
Column 07 Instructions

Column 07 -
Methodology and
References

Should identify the methods used in the ORSA process and include references to the sections of the ORSA report that provide a description of how the risks or elements were quantified.
Reconciliation of Capital (Margin) Available
Reconciliation of  Capital (Margin) Available

If regulatory “Capital (Margin) Available” differs from ORSA amounts (e.g. foreign branch’s non-vested assets), insurers should provide details on any “ORSA capital (margin) available” reconciling items.

  1.  Reconciling regulatory Tier 1 Capital (Available Margin – Other Admitted Assets) with ORSA T1 (Available Margin – Other Admitted Assets) Equivalents (line 29):
    1. Begin with Line 32 Column 05 which is equal to Line 29 Column 05, ORSA T1 (Available Margin – Other Admitted Assets) Equivalents.
    2. Use Line 33 Column 05 to Line 36 Column 05 to add or subtract ORSA T1 (Available Margin – Other Admitted Assets) Equivalents amounts that are included in Line 29 Column 05 but not included in Line 29 Column 03, regulatory Tier 1 Capital (Available Margin – Other Admitted Assets).
    3. Then, Line 37 Column 03 is the sum of Line 32 Column 05 to Line 36 Column 05 and must equal Line 29 Column 03.
  2. Reconciling regulatory Capital (Margin) Available and ORSA Total capital (margin) available:
    1. Start with Line 38 Column 05 which is equal to Line 26 Column 05 less Line 29 Column 05, the ORSA Non-T1 (Available Margin – Other Admitted Assets) equivalents.
    2. Use Line 39 Column 05 to Line 42 Column 05 to add or subtract ORSA Non-T1 (Available Margin – Other Admitted Assets) equivalent amounts that are included in Line 38 Column 05 but not included in Line 23 Column 03 less Line 29 Column 03, which equates to LICAT (LIMAT) Tier 2 Capital (Non-Core Margin).
    3. Then, Line 43 Column 03 is the sum of Line 38 Column 05 to Line 42 Column 05 and must equal Line 23 Column 03 less Line 29 Column 03, LICAT (LIMAT) Tier 2 Capital (Non-Core Margin).
    4. Line 46 Column 03 is then the sum of Line 37 Column 03 + Line 43 Column 03 + Line 44 Column 03 + Line 45 Column 03 and must equal Line 26 Column 03, LICAT (LIMAT) Capital (Margin) Available.

In conducting their ORSA, insurers may include components of capital (margin) that differ from regulatory T1 (Available Margin – Other Admitted Assets) and Tier 2 (Available Margin – Other Admitted Assets) capital included in the LICAT (LIMAT). These different components should be written-in on lines 33 – 36 for reconciling Tier 1 equivalents, and on lines 39 – 42 for reconciling all other capital elements other than Tier 1 equivalents.

The following should be documented and included within the ORSA report or supporting materials:

To determine if the Internal Target is above OSFI’s Total Supervisory Target, compare the dollar ($) amount of the:

  • “Internal Target” (column 05 line 22 [E]) to
  • “LICAT (LIMAT) Base Solvency Buffer (Required Margin)” (column 03 line 19 [D]).

A summary calculation with rationale of the determination of the ORSA Core Internal Target (line 28 [K]) should also be included.

To determine if the ORSA Core Internal Target is above OSFI’s Core Supervisory Target, compare the dollar ($) amount (line 28 [K]) of the:      

  • “ORSA Core Internal Target ” to
  • “LICAT (LIMAT) Core Supervisory Target”.