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Type of Publication: Industry Letter
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Date: September 30, 2020
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To: Federally Regulated Insurers
International Financial Reporting Standard (IFRS) 17 Insurance Contracts, published by the International Accounting Standards Board in May 2017, has been deferred; it will now become effective for annual reporting periods beginning on or after January 1, 2023. This letter updates the Office of the Superintendent of Financial Institutions (OSFI)
previously communicated timelines to revise its existing capital guidance for insurers, namely Guidelines A:
Life Insurance Capital Adequacy Test (LICAT),
Minimum Capital Test (MCT) and
Mortgage Insurer Capital Adequacy Test (MICAT).
OSFI has made significant progress towards adapting its capital guidelines for insurers:
- In 2018, OSFI distributed a preliminary draft LICAT, MCT and MICAT guidelines, updated for IFRS 17, and conducted a questionnaire/data collection exercise.
- In 2019, OSFI launched a consultation on the updated draft LICAT, MCT and MICAT guidelines, accompanied by a Quantitative Impact Study (QIS), as well as draft forms and instructions.
For life insurers with segregated fund guarantee (SFG) business, development work on the new standard approach for determining associated capital requirements has been following a separate project plan. Additional details related to the plan will be communicated later this year.
OSFI will continue its capital policy development process, including quantitative assessments, to implement IFRS 17 in a robust and timely way in its insurance capital guidelines. The remaining key milestones include:
Sep / Oct 2020 | June 2021 | Nov 2021 – Mar 2022 | Aug 2022 |
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Distribute directly to insurers and select stakeholders for comment:
- Revised draft LICAT / MCT / MICAT 2023 guidelines;
- QIS #2 for LICAT and MCT, focused on select capital impact drivers;
- LICAT sensitivity test
| Publish on OSFI’s website:
- Revised draft LICAT / MCT / MICAT 2023 guidelines;
- Draft regulatory capital forms;
- QIS #3 and sensitivity tests
| Potential directed consultations and data calls for calibration and transition purposes | Publish on OSFI’s website:
- Final LICAT / MCT / MICAT 2023 guidelines;
- Final regulatory capital forms
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Consistent with past communications with respect to LICAT and MCT and to the extent possible, OSFI intends on maintaining capital frameworks consistent with current capital policies and minimizing potential industry-wide capital impacts.
Questions regarding this letter should be directed to Lisa Peterson, Managing Director, Life Insurance Capital
(lisa.peterson@osfi-bsif.gc.ca), or Henri Boudreau, Managing Director, Property, Casualty and Mortgage Insurance Capital
(henri.boudreau@osfi-bsif.gc.ca).
Sincerely,
Bernard Dupont
Senior Director
Capital Division