Office of the Superintendent of Financial Institutions
This Guideline applies to all federally regulated property and casualty insurers (P&C FRIs). It applies to insurance companies on an individual and consolidated basisFootnote 1 and to individual foreign branches.Footnote 2
The Guideline sets out OSFI’s expectations related to large insurance exposures; that is, losses a P&C FRI could suffer from a single large insurance exposure and the sudden failure of an individual unregistered insurance counterparty. It also sets out OSFI’s expectations related to investment concentration.
This Guideline complements OSFI’s
Supervisory Framework and
Assessment Criteria. Excluding hyperlinks, terms that are capitalized and underlined in this Guideline are defined in
Please refer to OSFI’s
Corporate Governance Guideline for OSFI’s expectations of institution Boards of Directors in regards to operational, business, risk and crisis management policies.
P&C FRIs should have a comprehensive Gross Underwriting Limit Policy (GUWP)Footnote 3 that is consistent with the P&C FRI’s Risk Appetite Framework.Footnote 4
The aggregated insurance exposures on in-force policies at a single location, including any exposures subject to the location.
This should be, at a minimum, the sum of the location building insurance exposure, location contents insurance exposure, and business interruption insurance exposure. It should also include automobile parking lot risks.
The exposure should be determined from the standpoint of the predominant peril(s).
OSFI expects FRIs to develop and establish their own criteria and approach for determining and measuring the maximum loss on a Single Insurance Exposure.
25 per cent of
Total Capital Available
100 per cent of
Net Assets Available of the foreign branch provided that the criteria in
Annex 2 are met.
Where these criteria are not met, the limit is 25 per cent of Net Assets Available of the foreign branch.
100 per cent of Total Capital Available of the subsidiary provided that the criteria in
Annex 2 are met.
Where these criteria are not met, the limit is 25 percent of Total Capital Available of the subsidiary.
P&C FRIs should have policies with respect to the management of investment concentration, which include internal limits. The policies should be consistent with the P&C FRIs’ Risk Appetite Framework.
Where a federally regulated P&C insurance company is a subsidiary of another federally regulated P&C insurance company, this Guideline applies to both companies individually and on a consolidated basis.
Return to footnote 1
A foreign branch is a foreign property and casualty company as defined in the
Insurance Companies Act.
Return to footnote 2
The GUWP can be one consolidated document or a set of policy documents.
Return to footnote 3
The requirements for the Risk Appetite Framework are outlined in OSFI’s
Corporate Governance Guideline.
Return to footnote 4
A P&C FRI may reduce its required Net Counterparty Unregistered Reinsurance Exposure if the CRM techniques meet the requirements of Guideline A “Minimum Capital Test for Federally Registered Property and Casualty Insurance Companies” and Guideline B-3 “Sound Reinsurance Practices and Procedures”.
Return to footnote 5
A P&C FRI may reduce its required capital (or “assets” in the case of foreign branches) for ceded reinsurance if it meets the requirements of Guideline B-3 “Sound Reinsurance Practices and Procedures”.
Return to footnote 6