Office of the Superintendent of Financial Institutions
In November 2019, following a review of the responsibilities and general operating activities of the Securities Administration and Approvals Reporting Unit (SAAR),
OSFI announced the first in a series of steps to modernize and improve its Securities Administration regime and processes. This letter introduces proposed procedural updates to branch requirements intended to reduce administrative requirements on a risk-adjusted basis and ensure OSFI is efficiently collecting the information it needs.
Insurance Companies Act requires foreign companies to maintain in Canada an adequate margin of assets in respect of its insurance business in Canada. These assets must be vested in trust in a Canadian financial institution. The vested assets provide assurance that the foreign company is able to meet its obligations to Canadian policyholders. The
Standard Trust Agreement (STA) is the agreement that establishes the account to hold such assets, and the contractual means for OSFI to obtain information from the Canadian trustee in respect of such assets. The STA consists of two forms:
Form 542 includes three Schedules:
OSFI proposes to revise Schedule A to better reflect its risk tolerance for certain asset classes. The proposed list will include investment grade debt and securities from the United States. OSFI expects insurance branches will only request to vest assets outside of this list in exceptional circumstances.
In addition to any requirements or restrictions included in Part XIII of the
Insurance Companies Act, the assets vested in trust must be included in the List of Permitted Assets and meet all of the following criteria:
To be considered an investment grade issue, the debt must be rated at 'BBB' or higher by Standard and Poor's or ‘Baa3’ or higher by Moody's
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Requests to vest non-preapproved assets to, or release assets from, trust accounts must be accompanied by OSFI
Form 298. In conjunction with the revision of the Schedule A list of assets, OSFI is proposing to revise Form 298 to better capture information Supervisors require. A draft of the revised Form
Trustees that hold assets in trust for foreign insurance branches are required to, on or before the fifteenth of each month, file with the Superintendent a statement of assets held along with their respective market values. OSFI intends to standardize this process by requiring all filings be submitted via OSFI’s Regulatory Reporting System (RRS). A sample of this format
is attached. Roll out of this feature is still under development and will not commence until later this year.
Stakeholders are invited to provide comments on the above proposals by email at
SAAR@OSFI-BSIF.gc.ca by April 23, 2021. OSFI expects to publish its final amendments and implementation schedule in spring 2021.