Mortgage Insurance Return – Section III – Definitions

Type of document
Insurance companies
Mortgage Insurance Return and Instructions
Last updated
October 2022


Definitions have been included in these instructions to assist insurers with the preparation of their filings.

This section is not a complete set of insurance and insurance accounting definitions or interpretations. It is related specifically to the preparation of the MI Core Financial Statement Return, the Supervisory Quarterly and Supervisory Annual Returns and the Provincial Return.

Other definitions are contained in the federal Insurance Companies Act and the various provincial and territorial insurance acts.

Additional sources of definitions include:

However, definitions contained in this section take precedence, for the completion of the MI financial returns, over any definition of the same terms contained in non-legislative sources.

There may be jurisdictional differences in the interpretations of certain terms; please consult your primary regulator for technical interpretations.

Classes of Insurance Definitions

The class of insurance is defined below for ease of reference; however, please refer to your primary regulator's legislation or regulations.

Mortgage means insurance against loss caused by default on the part of a borrower under a loan secured by a mortgage or charge on, or other security interest in, real property.

Other Definitions


Appointed Actuary's Report


Insurance Companies Act (ICA - Federal), Insurers Act, CQLR, c. A-32.1 or An Act Respecting Insurance or similar legislation in other provincial or territorial jurisdictions.


A person or entity directly or indirectly controlling, being controlled by, or under common control with another person or entity.

Ancillary Operations

Any function that provides support or service to the insurance or investment operations can be considered an ancillary operation.


An associate is an entity, including an unincorporated entity such as a partnership, over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture. "Significant influence" is defined in accordance with IFRS. For further detail on the definition of the term "associated", please refer to OSFI's MICAT Guideline.


To accept risk from a ceding company.


Transfer of risk to assuming reinsurers / insurers.

Contingent Commission

Any commission not exclusively attributable to premium volume is a contingent commission and would be considered non-deferrable.


Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities, in accordance with the meaning of the term under IFRS.

Deposits of Reinsurers

Deposits provided by unregistered reinsurers may also be used to reduce the capital/margin otherwise required for unregistered reinsurance, provided that such deposits materially reduce the risk associated with the reinsurer's credit quality.

Experience Rating Refunds

A refund to the insured that is based on a clause or agreement in an insurance contract that allows the insured to share in the favourable underwriting results of the contract. Also known as a "retrospective rating refund."

Financing Reinsurance

Where an agreement that is called a reinsurance agreement does not have as its primary purpose the transfer of insurance risk, such an agreement will be regarded as a financing or funding agreement rather than a reinsurance agreement and must be reported accordingly.

Government Grade

Refer to the Mortgage Insurer Capital Test (MICAT) Guideline for guidance on government grade obligations.

Incurred But Not Reported (IBNR)

The additional claim reserves established to cover claims, including related adjustment expenses, which have occurred but which have not been reported to the insurer before the date of valuation, and for additional reserves set up to allow for an anticipated development in case reserves.

Internal Target Capital Ratio

The level of capital, based on the company's own risk and capital adequacy assessment process, necessary to cover the risks specified in the capital tests as well as all other risks of the insurer. Refer to OSFI's Guideline A-4 for further details.

Joint Venture

A contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control.

Notional Principal Amount

The notional principal amount is:

  1. the stated notional amount, except where the stated notional amount is leveraged or enhanced by the structure of the transaction. In these cases, insurers must use the actual or effective notional amount when determining potential future exposure;

  2. nil, where the credit exposure on single currency floating/floating interest rate swaps would be evaluated solely on the basis of their marked-to-market value; or

  3. for contracts with multiple exchanges of principal, the sum of the remaining payments.

  • Direct Written
    Pertaining to policies issued by insurers.

  • Gross
    Direct Written + Assumed business.

  • Net
    Direct Written + Assumed – Ceded business.

Rating Refunds

Refer to the definition of Experience Rating Refunds.

Reciprocal Insurance Exchanges

A group of subscribers exchanging reciprocal contracts of indemnity of inter-insurance with each other through a principal attorney as defined in some provincial jurisdictions.


The federal, provincial or territorial government agency responsible for the control and regulation of the insurance industry under its jurisdiction. The primary regulator is the regulator in the jurisdiction under which the insurer (a) obtained its order to carry on business; or (b) was incorporated.


The transfer of some or all of an insurance risk to another insurer. The company transferring the risk is called the "ceding company"; the company receiving the risk is called the "assuming company" or "reinsurer."


To transfer significant insurance risk from one insurer to another insurer.

Retrospective Rating Credits

Refer to the definition of Experience Rating Refunds.

Salvage and Subrogation Recoverable

Salvage is the residual value that belongs to the insurer as a result of paying an insured's claim for the property covered by a policy issued by the insurer.

Subrogation is the assumption by an insurer of an insured's legal right to collect damages.

Significant Dependencies

Examples include 10% or more of total premiums from one source; fundamental operations or systems provided by others (claims, information technology, policy issuance, etc.).

Stop Loss

Cedant is reimbursed costs in excess of a specified amount (attachment point) up to a defined maximum.

Subordinated Indebtedness

Includes all indebtedness of the insurer that, in the event of the insolvency or winding-up of the insurer, are subordinate to all policy liabilities of the insurer and all other liabilities except those that rank equally with, or are subordinate to, such indebtedness.

Refer to the MICAT Guideline for further information.


In accordance with IFRS, a subsidiary is an entity, including an unincorporated entity such as a partnership, that is controlled by another entity (known as the parent).

Substantial Investment

For federally registered insurers, section 10 of the Insurance Companies Act (ICA) defines a substantial investment as follows:

  • "the voting rights attached to the aggregate of any voting shares [owned] exceed 10 per cent of the voting rights attached to all of the outstanding voting shares;"


  • "the aggregate of any shares" which are owned "represents ownership of greater than 25 per cent of the shareholders' equity."

Subsection 495(4) of the ICA provides that a property and casualty insurance company wanting to acquire or increase a substantial investment in a financial institution must control the financial institution (that is, must have more than 50% of the votes to elect directors), except as permitted under subsection 495(5).

For provincially incorporated insurers, please consult with your primary regulator for any jurisdictional differences.

Unregistered Insurer (Company)

Refer to the definition under Registered and Unregistered Insurers.