Mortgage Insurer Capital Adequacy Test - Filing Instructions
Information
Table of contents
Section I - MICAT Introduction
All federally regulated mortgage insurance companies are required to complete a uniform Mortgage Insurer Capital Adequacy Test (MICAT) return each quarter. The MICAT return is designed to enable regulators to monitor the financial condition and operating results of mortgage insurers, as well as certain compliance requirements.
Accounting Principles – Quarterly Returns
The Canadian Accounting Standards Board (AcSB) has adopted International Financial Reporting Standards (IFRS) as Canadian Generally Accepted Accounting Principles (CGAAP) for publicly accountable enterprises (PAEs). As federally regulated mortgage insurers have fiduciary responsibilities, they are considered to meet the definition of a PAE and are required to report using IFRS for fiscal years beginning on or after January 1, 2011.
For the purposes of the regulatory return instructions, the term "IFRS" will refer to requirements under "Part I - International Financial Reporting Standards" of the CPA Canada Handbook.
The expectations of the mortgage insurer with respect to the credit scores used in the MICAT calculations are the ones received from a reputable credit bureau at the inception of the loan and used according to guidance in section 3.1.1.4., or elsewhere, in the MICAT.
Consolidated Financial Statements
All regulatory return core financial statements, notes, supporting schedules and exhibits are to be completed on a consolidated basis in accordance with IFRS.
Language Preference
The MICAT return and related instructions are available in both official languages.
General
OSFI is interested in your comments on any aspect of the MICAT return and/or instructions. Please direct your comments to the:
Office of the Superintendent of Financial Institutions
Risk and Data Analytics
255 Albert Street, 12th floor
Ottawa, ON K1A 0H2
Email: RRSsupport-SDRsoutien@osfi-bsif.gc.ca
Section II – MICAT Filing Instructions
General
The MICAT return is designed to be self-explanatory, and accordingly, the text on each page of the return is part of the instructions. Below are additional points to assist in the preparation of the MICAT return.
- The filing deadlines are the dates by which the regulators must receive the quarterly return. A February 28 deadline refers to the last day of February. The specific filing deadlines are on OSFI’s website: Reporting Requirements for Federally Regulated Mortgage Insurers.
- The full name of the insurer, the reporting date, and other requested information must be shown on the cover page. The insurer is required to be identified on every page; an abbreviated form of the name is acceptable on the inside pages.
- Pages containing no data are to be included with the filed MICAT return.
- All monetary amounts reported in the MICAT return are to be reported in Canadian dollars. Insurers are to follow the requirements of the applicable accounting standards regarding foreign currency conversion.
- Monetary amounts must be rounded to the nearest thousand dollars. Individual items must be adjusted so that the total is not affected by rounding to the nearest thousand dollars.
- The column and row labels should not be changed, except for blank lines where a specification is explicitly noted. Any permitted write-in information must be self-explanatory.
- All subtotals and totals must be entered manually in the MICAT return, since regulators use these amounts as reference points. Where supplementary listings are filed (e.g., investments), the totals must be carried forward to the actual exhibits in the MICAT return.
- To indicate a negative number, insurers must use brackets rather than a minus sign, for example "(649)" rather than "-649."
- Only MICAT returns that are complete and accurate will be considered filed.
- Dates are to be reported using the convention YYYY/MM/DD.
- For a list of all current validation rules, please refer to OSFI's website.
Mailing Address
Risk and Data Analytics
Office of the Superintendent of Financial
Institutions Canada
255 Albert Street, 12th Floor
Ottawa, ON K1A 0H2
Email: RRSsupport-SDRsoutien@osfi-bsif.gc.ca
Web address: www.osfi-bsif.gc.ca
Penalties for Late Filing
The MICAT return must be received at the regulator's office on the applicable due date. There are penalties for late filing, and depending on the circumstances, late filing is an offence that may result in prosecution and fines.
Electronic Filing
For electronic filing instructions, please refer to the Regulatory Reporting System (RRS) – Manage Financial Returns User Guide (PDF, 2.4 MB) located on the OSFI website.
Section III - MICAT Detailed Instructions
Throughout this document, "page" refers to a page of the MICAT return and "section" refers to a part of these instructions.
The MICAT return must be completed in compliance with the MICAT Guideline. This document is available on OSFI's website.
Refer to the MICAT guideline for definitions of terms included in the MICAT return.
Capital requirements apply on a consolidated basis. Refer to the MICAT Guideline, chapter 1, subsection 1.1.3. for further details.
All dollar amounts are to be reported in thousands.
If any non-zero values are filled in for lines that are labeled "other (specify)," then the mortgage insurer should send an explanation to OSFI of what these values represent in a separate document.
The Regulatory Reporting System (RRS) performs a number of plausibility checks to ensure there are no obvious inconsistencies (e.g. total capital available on page 10.10 matches total capital available on page 10.20). The companies should perform their own checks before submitting the MICAT return to preclude the possibility of the return being rejected. The corresponding figures must agree exactly, resolving any rounding differences. The cross-checks performed by the RRS may be found (described as "validation rules") on OSFI's website.
Cover
Mortgage Insurer Capital Adequacy Test: Quarterly Return
Insurer's Name, Code, Date of Return and Contact Person
The insurer should use its official name and OSFI identification code and indicate the period ending date of the return. If regulatory staff has questions about the return or its content, they will generally contact the person indicated on the cover page.
Original Signatures
The Attestation of authorized official on the cover page of the MICAT Return should bear the original signature of the authorized official, as designated by the insurer, to indicate verification of the return information and attest to its accuracy.
The original signature page must be retained on file for regulatory review upon request.
Page 10.10
Capital Requirements for Federally Regulated Mortgage Insurers
Line 202 - Base total requirements for liabilities for remaining coverage
Report the base total requirements for all in-force insured residential mortgages as of the reporting date. Refer to the MICAT Guideline, chapter 3, subsection 3.1.1.2 for further details.
Line 203 – Plus: supplementary capital requirements
Report any supplementary capital requirements for in-force insured residential mortgages as of the reporting date. Refer to the MICAT Guideline, chapter 3, subsection 3.1.1.3. for further details.
Line 208 - Minus: liabilities for remaining coverage
Report the liabilities for remaining coverage for residential mortgages, including any amounts for incurred but not reported claims.
Line 212 – Capital floor
Report the capital floor for liabilities for remaining coverage.
Line 214 – Capital for liabilities for remaining coverage before adjustments
Report the greater of the amounts on line 209 and line 211.
Line 215 - Minus: additional policy provisions for residential mortgages
Report the amount for the additional policy provision for residential mortgages. Refer to the MICAT Guideline, chapter 3, subsection 3.3 for further details.
Line 240 - Capital for liabilities for remaining coverage on commercial exposures
Report the capital required for liabilities for remaining coverage associated with commercial exposures. Refer to the MICAT Guideline, chapter 3, subsection 3.2.1. for further details.
Line 269 - Additional Policy Provisions
Report the capital requirements for additional policy provisions for both residential and commercial mortgages.
Page 10.20
Capital Available
For further details on available capital, refer to the MICAT Guideline, chapter 2.
Line 109 - Qualifying category A common shares
Report the total amount of common shares issued and paid that meet the qualifying criteria for inclusion of capital instruments in category A for regulatory capital purposes. Refer to the MICAT Guideline, chapter 2 for further details.
Line 119 - Contributed surplus
The total amount reported in this line should include contributed surplus resulting from the issuance of category A common shares.
Line 123 - Minus: unrealized net after-tax fair value gains (losses) on company owned and occupied properties at conversion to IFRS - cost model
At the point of conversion to IFRS, insurers may have elected to use the fair value option for their own-use properties in the initial IFRS balance sheet valuation. In this case, unrealized fair value gains at conversion are reflected in equity. These unrealized gains must be deducted from capital available on an after-tax basis. The amount entered in this line at conversion is an on-going deduction to capital available and can only be changed as a result of a sale of own-use properties (owned at the time of IFRS conversion) and the resulting recognition of actual gains (losses).
Line 124 - Plus: accumulated net after-tax revaluation losses in excess of gains on company owned and occupied properties - revaluation model
Where an insurer has chosen to use the revaluation model for own-use properties, there is a possibility that unrealized losses in fair value could exceed unrealized gains. If this occurs, the net loss will be added back to capital available to maintain the value of own-use properties at or near the value when using the cost model.
Line 144 - Minus: accumulated net after-tax unrealized gains on own-use properties - revaluation surplus
Net after-tax revaluation gains on own-use properties must be deducted from accumulated other comprehensive income.
Lines 201 to 219 - Qualifying category B and category C instruments
The values reported in these lines must be for instruments meeting category B and/or category C qualifying criteria, not exceeding the applicable limits as per the MICAT Guideline, chapter 2. The values reported in these lines also include share premium amounts resulting from the issuance of instruments meeting category B and/or C criteria.
Page 20.10
Residential Mortgages: Outstanding Balances and Number of Mortgages
The purpose of the tables on page 20.10 is for OSFI to understand how a mortgage insurer's in-force residential mortgages and their associated outstanding balances are distributed by loan-to-value (LTV) and credit score. Commercial mortgages should not be included in these tables. Mortgages for which a claim has been received and a claim reserve established should also not be included.
For the purposes of completing these tables, the credit score and LTV for an individual mortgage are the same as the ones used in the base total requirement calculation. A bulk-insured mortgage is insured as part of a pool or portfolio, and an individually insured mortgage in which the decision whether to insure the mortgage is based on the characteristics of the mortgage itself and not on the characteristics of some broader portfolio of mortgages. Refer to the MICAT Guideline, chapter 3, subsections 3.1.1.4. and 3.1.1.5 respectively for further details.
Lines 110 to 199 - Outstanding balances for individually insured residential mortgages
Lines 110 to 195, Columns 110 to 220: Report the outstanding balances associated with individually insured residential mortgages that are in-force as of the reporting date by credit score and LTV band.
Report subtotals by credit score band in line 199, subtotals by LTV band in column 999, and the grand total in line 199, column 999.
Lines 210 to 299 - Number of individually insured residential mortgages
Lines 210 to 295, Columns 110 to 220: Report the number of individually insured residential mortgages that are in-force as of the reporting date by credit score and LTV band.
Report subtotals by credit score band in line 299, subtotals by LTV band in column 999, and the grand total in line 299, column 999.
Lines 310 to 399 - Outstanding balances for bulk insured residential mortgages
Lines 310 to 395, Columns 110 to 220: Report the outstanding balances associated with bulk insured residential mortgages that are in-force as of the reporting date by credit score and LTV band.
Report subtotals by credit score band in line 399, subtotals by LTV band in column 999, and the grand total in line 399, column 999.
Lines 410 to 499 - Number of bulk insured mortgages
Lines 410 to 495, Columns 110 to 220: Report the number of bulk insured residential mortgages that are in-force as of the reporting date by credit score and LTV band.
Report subtotals by credit score band in line 499, subtotals by LTV band in column 999, and the grand total in line 499, column 999.
Page 20.20
Residential Mortgages: Base Total Requirements and Supplementary Capital Requirements
The purpose of the tables on page 20.20 is for OSFI to understand how a mortgage insurer's base total requirements and supplementary capital requirements associated with residential mortgages are distributed by loan-to-value (LTV) and credit score. Commercial mortgages should not be included in these tables. Mortgages for which a claim has been received and a claim reserve established should also not be included.
For the purposes of completing these tables, the credit score and LTV for an individual mortgage are the same as the ones used in the base total requirement calculation. Refer to the MICAT Guideline, chapter 3, subsections 3.1.1.4. and 3.1.1.5. respectively for further details.
Lines 110 to 199 - Base total requirements for individually insured residential mortgages
Lines 110 to 195, Columns 110 to 220: Report the base total requirements associated with individually insured residential mortgages that are in-force as of the reporting date by credit score and LTV band.
Report subtotals by credit score in line 199, subtotals by LTV in column 999, and the grand total in line 199, column 999.
Lines 210 to 299 - Supplementary capital requirements for individually insured residential mortgages
Lines 210 to 295, Columns 110 to 220: Report the supplementary capital requirements associated with individually insured residential mortgages that are in-force as of the reporting date by credit score and LTV band.
Report subtotals by credit score in line 299, subtotals by LTV in column 999, and the grand total in line 299, column 999.
Lines 310 to 399 - Base total requirements for bulk insured residential mortgages
Lines 310 to 395, Columns 110 to 220: Report the base total requirements associated with bulk insured residential mortgages that are in-force as of the reporting date by credit score and LTV band.
Report subtotals by credit score in line 399, subtotals by LTV in column 999, and the grand total in line 399, column 999.
Lines 410 to 499 - Supplementary capital requirements for bulk insured residential mortgages
Lines 410 to 495, Columns 110 to 220: Report the supplementary capital requirements associated with bulk insured residential mortgages that are in-force as of the reporting date by credit score and LTV band.
Report subtotals by credit score in line 499, subtotals by LTV in column 999, and the grand total in line 499, column 999.
Page 20.30
Breakdown by Year of Mortgage Origination
The purpose of the tables on page 20.30 is for OSFI to understand how a mortgage insurer's outstanding balances, base total requirements and supplementary capital requirements associated with their in-force residential mortgages are distributed by year of mortgage origination. For supplementary capital requirements, this table also shows the distribution by census metropolitan area (CMA). Commercial mortgages should not be included in these tables. Mortgages for which a claim has been received and a claim reserve established should also not be included.
For the purposes of completing these tables, a mortgage's year of origination is the reporting year in which the mortgage is first recognized on the insurer's financial statements and included in the calculation of the capital requirement for liabilities for remaining coverage.
Column 101 - Current reporting year
The values reported in the column "current reporting year" are for residential mortgages that were originated since the company's most recent year-end. For example, for Q1 reporting there will be three months of residential mortgage originations in this column, for Q2 reporting there will be six months of mortgage originations in this column, and so on.
Columns 110 to 220 - Current reporting year - n
The values reported in these columns are for residential mortgages that were originated in the reporting year that is n years prior to the current reporting year. For example, if the current reporting year is 2018, all values reported in column 120 (Current reporting year – 2) should represent residential mortgage originations from 2016. Each of these columns will include a full year of residential mortgage originations.
Line 101 - Originated balances for individually insured residential mortgages
Report the balances as of mortgage origination associated with individually insured residential mortgages that are still in-force as of the reporting date.
Line 111 - Outstanding balances for individually insured residential mortgages
Report the outstanding balances associated with individually insured residential mortgages that are in-force as of the reporting date.
Line 121 – Base total requirements for individually insured residential mortgages
Report the base total requirements associated with individually insured residential mortgages that are in-force as of the reporting date.
Lines 130 to 190 - Supplementary capital requirements for individually insured residential mortgages
Report the supplementary capital requirements associated with individually insured residential mortgages that are in-force as of the reporting date according to CMA.
Line 201 - Originated balances for bulk insured residential mortgages
Report the balances as of mortgage origination associated with bulk insured residential mortgages that are still in-force as of the reporting date.
Line 211 - Outstanding balances for bulk insured residential mortgages
Report the outstanding balances associated with bulk insured residential mortgages that are in-force as of the reporting date.
Line 221 – Base total requirements for bulk insured residential mortgages
Report the base total requirements associated with bulk insured residential mortgages that are in-force as of the reporting date.
Lines 230 to 290 - Supplementary capital requirements for bulk insured residential mortgages
Report the supplementary capital requirements associated with bulk insured residential mortgages that are in-force as of the reporting date according to CMA.