LICAT – Life Insurance Capital Adequacy Test 2018 (DRAFT)

OSFI is issuing for public consultation the draft guideline: Life Insurance Capital Adequacy Test (LICAT), along with the guideline’s draft reporting forms.

The Life Insurance Capital Adequacy Test (LICAT) guideline will replace the current life insurance capital test, the Minimum Continuing Capital and Surplus Requirements (MCCSR) guideline, in place since 1992. OSFI developed the LICAT to better align capital and risk measures with the economic realities of the life insurance business. The LICAT guideline takes into account lessons learned from the financial crisis, recent developments in financial reporting standards, actuarial standards, economic and financial practice, and international trends in solvency frameworks.

Comments on the draft guideline should be provided on or before May 9, 2016. The feedback received from this public consultation process, further discussions with our partners, as well as results from some test runs will help OSFI calibrate the final approach and ensure there are no anomalous effects to introducing the LICAT guideline in 2018.