Backgrounder: Final Minimum Capital Test (MCT) Guideline (2026)

Overview

The Office of the Superintendent of Financial Institutions (OSFI) has published the final Minimum Capital Test (MCT) Guideline (2026). The changes continue to support the financial resilience and stability of federally regulated property and casualty (P&C) insurers, including foreign P&C insurers operating in Canada as a branch. The final Guideline also reduces compliance burden by simplifying and clarifying requirements.

The MCT Guideline sets out minimum and supervisory target capital standards that insurers must meet to ensure they have adequate capital under the Insurance Companies Act to meet their obligations and cover potential losses. It clarifies how insurers should apply the capital guideline and helps to ensure financial stability in the P&C insurance industry. The MCT helps maintain trust in the insurance sector, which is essential for consumer protection and market integrity.

The final MCT Guideline incorporates comments from a 90-day public consultation that ended in August 2025.

The final MCT Guideline (2026):

• simplifies the unexpired coverage formula for insurance risk to ensure a consistent interpretation of the capital requirements.
• clarifies a rule about how insurers hold capital for their foreign branches, so it only applies to a certain type of reinsurance arrangement called “funds withheld” and removes the requirement for OSFI’s prior review.
• updates capital confirmation requirements for user fees to clarify the timing of the fees and how they apply so they are transparent, modern, and aligned with the actual service cost.
• makes minor adjustments and clarifications to apply the capital framework accurately.

OSFI also updated the MCT regulatory reporting form PC4 and instructions.

Why it’s important

The final MCT Guideline (2026) includes updates that improve and modernize the capital framework for P&C insurers. These changes clarify the guidance so it can be applied efficiently and consistently.

The final MCT Guideline helps make capital requirements for insurers clearer, more consistent, and easier to apply. Simplifying formulas and clarifying rules, especially around foreign branches and reinsurance, reduces confusion and regulatory burden. These updates also improve transparency around user fees and ensure the capital framework reflects current practices, helping insurers stay strong while focusing on serving policyholders.

Implementation

The final MCT Guideline (2026) was published on November 20, 2025, and comes into effect on January 1, 2026.