Office of the Superintendent of Financial Institutions
OSFI is issuing the final IFRS 17 Regulatory Forms and Instructions ("the Returns") for FRIs. The final Returns represent a major deliverable under OSFI's IFRS 17 Project.
Insurance Companies Act (ICA) stipulates in the case of FRIs that "financial statements shall, except as otherwise specified by the Superintendent, be prepared in accordance with generally accepted accounting principles (GAAP), the primary source of which is the Handbook of the Chartered Professional Accountants of Canada."Footnote 2 The changes made to the OSFI Returns will ensure FRIs will continue to report their financial statements in accordance with GAAP. GAAP for FRIs is effectively International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
OSFI would like to thank all respondents who provided feedback on the Returns during the public consultation. OSFI received over 700 comments from various stakeholders. All comments received including those arising from the IFRS 17 Amendments were taken into consideration in finalizing the Returns. The Annex provides a summary of the material comments received and OSFI's response.
Please address any questions regarding this letter by email to David Correia, Director, Accounting Policy Division at
email@example.com and Carole Gagnon, Business Analyst, Risk & Data Analytics at
Ben Gully Assistant Superintendent, Regulation Sector
Some respondents were concerned that the information requested by line of business (classes of insurance) was too granular and would be difficult and costly to implement.
In addition, some respondents pointed out that reporting by some classes of insurance (such as automobile) is not in line with IFRS 17 level of aggregation.
OSFI requires the detailed information in order to supervise the financial institutions' compliance with the ICA which defines classes of insurance and it determines how insurers are licensed. The provision of sufficiently detailed information by line of business (class of insurance) to stakeholders is necessary to facilitate OSFI's supervision of an insurer's business, governance, risk measurement and risk management.
OSFI also promotes transparency around financial reporting. Therefore, no changes were made to the line of business (class of insurance) pages in the Returns.
Some respondents were concerned that the treatment of business transferred to Risk Sharing Pool (RSP) – Facility Association is treated as negative direct for P&C regulatory reporting purposes instead of a reinsurance arrangement, which is the IFRS 17 accounting treatment for recognition, measurement, presentation and disclosure.
In addition, some respondents urged OSFI to update the definitions section of the Return Reporting Instructions relating to RSP to align with IFRS 17 accounting terminology.
OSFI expects FRIs to comply with IFRS 17 when accounting for RSP whenever it is applicable.
Facility Association has provided instructions for P&C reporting purposes to address the issue on premium tax calculation. These have been included in the OSFI Regulatory Return instructions.
The definitions section of the Manual of Reporting Forms and Instructions have been updated to reflect IFRS 17 compliance for the RSP accounting.
Some respondents requested that OSFI disclose time bands of less than 1 year, 1 to 5 years and greater than 5 years without further breakdown.
In addition, some respondents proposed that OSFI combine the Proportionate and Non-Proportionate Reinsurance Contracts Held line items into a single line.
OSFI reviewed the issue in detail and concluded that the data gathered with respect to the profit attribution from the CSM amortization was necessary to assess the volatility of earnings from the underlying book of business from the FRI. Even though the first 5 years' CSM amortizations are key, the amortization data after the 5th year are also important and sizeable. OSFI has decided to maintain the originally proposed time-band disclosure requirement.
With respect to the Industry proposal on proportionate and non-proportionate reinsurance contracts held. OSFI has combined the proportionate and non-proportionate reinsurance contracts held into a single line on the CSM Amortization schedule.
Some respondents from the life industry suggested either removing the discount rates pages from the Returns or changing the pages to be free format. They stated that the discount rate disclosures would vary significantly between FRIs.
Some respondents wanted clarification as to why OSFI was collecting discount rate data by class of business and splitting between insurance contracts vs. reinsurance contracts held.
The discount rate assumption is a key component of the IFRS 17 fulfillment cash flows for each reporting period. It is important for OSFI to collect structured data in order to compare this component across industry and conduct supervisory monitoring in a timely manner. As a consequence no requirement changes were made to the OSFI Regulatory Returns, more specifically:
OSFI understands that the discount rates would be determined based on each entity's accounting policy and each entity could have multiple discount rates. As a result, OSFI's Life Returns will collect the discount rate curve with the highest liquidity premium by line of business. The annual Appointed Actuary Report with unstructured data will provide additional details, so OSFI can conduct a fulsome assessment.
P&C The discount rate pages are required for OSFI's supervision monitoring purposes. Collection of data by class of business and split between insurance contracts and reinsurance contracts held is consistent with the other supervisory pages in the Returns.
IFRS 17 provides an accounting policy choice as to changing the treatment of accounting estimates made in previous interim financial statements when applying IFRS 17 in subsequent interim financial statements or in the annual reporting period.
Some respondents noted that there might be differences between FRIs that select the accounting policy of changing subsequent interim financial statements and those making the change in the annual reporting leading to comparability and consistency concerns.
IFRS 17 provides presentation options for Mutual entities as having either Residual Interest liabilities or Residual Interest equity in the financial statements.
Some respondents noted that they would continue to have policyholders' equity under IFRS 17 similar to the treatment under IFRS 4 as such would not report any Residual Interest liability.
Some respondents noted that at the December 2019 meeting, the IASB agreed to expand the scope for the proposed amendment for reinsurance contracts held – recovery of losses from reinsurance contracts providing proportionate coverage to all reinsurance contracts.
Therefore, the Reinsurance Contracts Held disclosures needed to be updated to reflect the above amendment.
Federally Regulated Insurers include Canadian branches of foreign life and property and casualty companies, fraternal benefit societies, regulated insurance holding companies and non-operating insurance companies.
Return to footnote 1
Subsections 331(4) and 887(4) of the Insurance Companies Act (ICA).
Return to footnote 2