Office of the Superintendent of Financial Institutions
In August 2013, OSFI published the Draft Earthquake Exposure Data Form for public consultation and received seven submissions from industry associations and companies. OSFI reviewed the submissions and amended the Draft form where appropriate. Appendix A to this letter provides a summary of public comments received and an explanation of how they were addressed.
Today, OSFI is publishing a new version of the Earthquake Exposure Data Form (effective date January 2015). This form is constructed to be consistent with the expectations and terminologies from Guideline B-9. The sample of the form is posted here to help you understand the data points that will be required in the future electronic filing. The format and/or structure of the form may change to accommodate system implementation requirements but this should not affect the data points requested. Technical specifications for this form together with electronic filing instructions will be posted in the summer of 2014.
Please note this form is published today to give companies sufficient time to prepare for the transition, and should not be used for the April 15, 2014 filing. The Earthquake Exposure Data Form (effective date January 2014) should be used for the 2014 filing.
Questions concerning the Earthquake Exposure Data Form should be addressed to your OSFI Relationship Manager or to Gladys Wong, Actuarial Division, by email at Gladys.Wong@osfi-bsif.gc.ca.
1. It was noted that the new earthquake filing form is onerous, requesting information that was not previously reported and whose purpose is not always clear.
Data quality and the associated documentation are the most controllable aspects of sound earthquake risk management. As such, Guideline B-9 sets high expectations in these areas. OSFI has revisited the cost effectiveness of the data points requested and amended the form where appropriate.
Some other modifications were made to improve clarity and consistency.
It should be made clear if the question on materiality is only relevant to companies that have a non-material exposure.
Terminologies used in section 2 should be defined and the logical flow of the information requested should be clarified.
Calculation instructions were included in the tables or footnotes for those items not defined in the MCT Guideline.
Some commentators requested an explanation of the rationale and purpose of reporting on worldwide (Canada wide) PML as the revised methodology does not take into account worldwide exposure.
Guideline B-9 requires that “Earthquake PMLs should be estimated and reported to senior management and the Board based on Canada wide exposure for foreign insurers or worldwide exposure for Canadian insurers, as well as any regulatory capital requirements.”
The table requested in the form is also a data resource for OSFI to monitor changes to the model output for comparison with the regulatory formula.
Average Annual Loss (AAL) is pure premium quantified by aggregate exceedance probability curve. Aggregate exceedance probability curve is a cumulative distribution showing the probability that aggregate losses in a year will exceed a certain amount.
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Cat XOL: catastrophe-excess of loss coverage
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