OSFI issues revisions to the 2018 Life Insurance Capital Adequacy Test (LICAT) guideline for comment

News Release

For Immediate Release

OTTAWA ─ June 23, 2017 ─ Office of the Superintendent of Financial Institutions

Today, the Office of the Superintendent of Financial Institutions Canada (OSFI) released for comment revisions to its 2018 Life Insurance Capital Adequacy Test (LICAT) guideline for federally regulated life insurers.

Since the release of the LICAT guideline on September 12, 2016, significant work has been done by OSFI and the industry to prepare for the transition to the new capital adequacy test, effective January 1, 2018.

Earlier this year, all federally regulated life insurers completed an implementation preparation exercise comprised of three parts:

  • LICAT test run: Through which insurers determined their LICAT capital ratios using year-end 2015 data. The results of this test run were used by OSFI to assess whether further calibration of the LICAT and/or transition measures were necessary.
  • Sensitivity testing: To better understand potential movements of the LICAT capital ratios in relation to changes in market interest rates.
  • Implementation plan development: Insurers reported planned milestones and timelines, potential risks and mitigation strategies, along with estimates of resources needed for a successful implementation of the LICAT by its effective date.

Based on the results of this exercise, as well as feedback received from various participants, OSFI made further refinements to the September 2016 version of the LICAT guideline. The guideline cover letter contains a list of key changes as well as instructions on how to provide comments. Also, for ease of reference, all amendments to the guideline are tracked against the September 2016 version.

Quick Facts

  • The LICAT will come into effect on January 1, 2018, and will replace Guideline A: Minimum Continuing Capital and Surplus Requirements (MCCSR).
  • The deadline for submitting comments on the revisions to the LICAT guideline is July 28, 2017.
  • A final version of the LICAT guideline will be published on OSFI’s website this fall.

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About OSFI

The Office of the Superintendent of Financial Institutions (OSFI) is an independent agency of the Government of Canada, established in 1987, to protect depositors, policyholders, financial institution creditors and pension plan members, while allowing financial institutions to compete and take reasonable risks.

Media Contact:

Annik Faucher
OSFI – Public Affairs