Draft Key Metrics Report – P&C 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 Instructions
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 MCT (BAAT).
Regulatory Capital (Margin) under the MCT (BAAT) is calculated at the Supervisory Target level and should be reported in this way on column 03, lines 01 through 04 and line 19. The Regulatory Capital (Margin) at Target level is adjusted to the MCT (BAAT) Minimum capital (margin) required on line 05 by an embedded formula.

Line 05 :
MCT (BAAT) Minimum capital (margin) required  (A)

This line is calculated by an embedded formula. It represents the insurer’s regulatory MCT (BAAT) “Minimum capital (margin) required”. Refer to the MCT (BAAT) guideline for the detailed calculation approach.
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 05 (A).
Column 05 Instructions
General

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

An insurer’s allocation of the various components calculations of its Own Capital (Margin) Needs should be consistent with the components of MCT (BAAT) “Minimum capital (margin) required” with explanations and details provided.

Lines 06 – 17: 
Other ORSA Risks
(write in)

Describe and include amounts for other risks not explicitly specified in the MCT (BAAT) 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 18:
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 19: 
Adjustments – Aggregation / Diversification

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.

Line 20:
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 21:
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 22:
ORSA Adjustments – Other
Once an insurer has determined "Own Capital (Margin) Needs" (i.e.: line 20 above), other adjustments may be required to account for external or third party margin expectations, notably OSFI expectations including that the "Internal Target" (line 24) should not be less than the MCT (BAAT) Supervisory “Target capital (margin) required”.

Line 23: 
ORSA Adjustments – Varying Nature & Severity Scenarios

In addition to the “Adjustments – Other” (i.e. line 22 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 24:
Internal Target

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.
Column 07 and Reconciliation of Capital (Margin) Available 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 risk or element was quantified.
Reconciliation of Capital (Margin) Available If regulatory “Total capital available (Net assets available)” differs from that used for ORSA purposes (e.g. foreign branch’s non-vested assets), insurers should provide details on any “ORSA Total capital available (Net Assets Available)” reconciling items.
The following should be documented and included within the ORSA report or supporting materials:

A summary calculation and explanation of the between-risks aggregation /diversification adjustment methodology and results (line 19) should be documented and included within the ORSA report or supporting materials.

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

  • “Internal Target” (column 05 line 24) to
  • “Target capital (margin) required (column 03 line 21).