Backgrounder: Final Mortgage Insurer Capital Adequacy Test (MICAT) 2027

Overview

The Office of the Superintendent of Financial Institutions (OSFI) is updating the Mortgage Insurer Capital Adequacy Test (MICAT). This is the framework that sets out minimum capital requirements for mortgage insurers to hold to remain financially resilient. OSFI expects mortgage insurers to maintain capital above this baseline to help absorb unexpected losses and economic stress.

As part of this update, OSFI is introducing a new low-rise multi-unit residential construction category within the insurance risk section of MICAT. A low-rise project comprises fewer than 7 stories and 200 units. This definition is intended to prevent large-scale residential construction projects from receiving preferential capital treatment that is not commensurate with their risk profile.

To reflect the lower risk profile of these exposures, OSFI is reducing the base risk weight for low‑rise residential construction exposures from 150% to 130%. This change reflects a lower risk profile and introduces greater risk-sensitivity. High‑rise residential exposures remain at 150%. The change increases the risk sensitivity of the framework by better aligning capital requirements with the underlying risk of the exposure.

Why it’s important

OSFI's capital requirements should reflect the risks institutions and insurers face. This update recognizes the lower risk profile of certain low-rise multi-unit residential construction projects and improves the risk sensitivity of the MICAT framework.

The change aligns MICAT with related 2027 capital framework updates and supports consistent treatment of residential construction exposures across OSFI's regulatory requirements.

By calibrating capital requirements more closely to risk, OSFI continues to support a resilient financial system while maintaining prudent standards for mortgage insurers.

Next steps

MICAT 2027 is effective on January 1, 2027.