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Type of Publication: Letter
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Date: July 21, 2022
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To: Federally Regulated Insurers and stakeholders.
Today, OSFI is releasing the final insurance capital guidelines that reflect the transition to International Financial Reporting Standard 17 –
Insurance Contracts (IFRS 17) for fiscal years beginning on or after January 1, 2023. This marks the final milestone announced in the September 30, 2020,
Letter to Federally Regulated Insurers.
The accounting transition to IFRS 17 represents the most significant change to insurance accounting requirements in over 20 years. Implementation will impact insurance companies by fundamentally changing accounting, actuarial, and reporting practices, and by significantly impacting supporting systems and practices. Canada’s insurance industry is well-capitalized today under current accounting rules and will remain well-capitalized after insurers implement IFRS 17. While a great deal of effort has gone towards a robust implementation, IFRS 17 is a new standard, and we expect insurers to act conservatively when making decisions that would result in changes to their levels of capital.
Shortly after the standard was first published in June 2017, OSFI embarked on a multi-year exercise to update its capital tests, guidance, reporting requirements and supervisory expectations to support a robust implementation by insurers of IFRS 17.
The input from the insurance industry and stakeholders have helped us come to conclusions that make sense for the Canadian industry. OSFI conducted extensive consultations with insurers, as well as other stakeholders and provincial regulators. To update our capital tests, our outreach included three quantitative impact studies, along with multiple data calls, written updates, and discussions with insurers. All feedback received was considered and helped to inform the final capital guidelines, which are balanced and appropriate.
As a result of this long term and iterative consultation, we have adapted our capital guidelines and accompanying forms for IFRS 17. We have also made consequential changes to update references and streamline guidelines and confirm expectations across all other relevant guidelines to address for the new accounting rules.
Through all this work, OSFI continues to fulfill its commitment to protect the rights and interests of Canadian policyholders and creditors and contribute to public confidence in the Canadian financial system.
Consistent with our previous practice, post-IFRS 17 implementation, OSFI will continue to monitor the effectiveness of our guidelines to ensure they remain fit-for-purpose and appropriate in light of industry and economic developments. Any changes will be introduced in transparent manner and in consultation with external stakeholders.
On July 25, OSFI will be hosting a briefing session for all sectors to share information and to answer any questions.
Please register for the all-sector briefing taking place on July 25. Registration closes at 8:00 AM (ET) on Monday, July 25. Capacity for this call is limited.
Explanation of specific changes can be found in individual cover letters for each guideline.
Sincerely,
Amar Munipalle
Executive Director, Risk Advisory Hub