On Feb. 11, C-OSFI issued final B-2 and B-3 practices, procedures.
C-OSFI issued revised reinsurance guidelines following review for effect Jan. 1, 2025.
For federally regulated insurers (FRI) re sound reinsurance practices and procedures.
Also, property and casualty large insurance exposures and investment concentration.
Guideline B-2
Entitled Property and casualty large insurance exposures and investment concentration
Requires property and casualty FRIs cover max losses re single insurance exposure.
To account for largest unregistered reinsurer with applicability to FRI-issued policies.
Establish gross underwriting limit policy (GUWP) to define single insurance exposure.
Gross insurance risk limits and senior management oversight for policy annual review.
Consideration criteria of single insurance exposure: property, credit, surety, and title.
Addresses exposure limits from affiliated firms that are direct writers of business and caps the total capital available and caps 100% net assets available of foreign branches.
Sets investment concentration: 5% firm's assets; 5% of foreign branch assets in CAN.
Guideline B-3
Authority guidance B-3 is entitled, Sound reinsurance practices and procedures.
Sets expectations for FRIs to best identify, manage reinsurance and counterparty risk.
Establishes elements for reinsurance risk management policy (RRMP) to manage risk.
Goal for firms meet capital criteria under Life insurance capital adequacy test (LICAT).
In addition, Minimum capital test (MCT), by sound reinsurance risk management.
Notes RRMP should set ceding limits for book of business, line of business if needed.
Advises counterparty concentration limits re individual or group of affiliated entities.
Onus rests with senior management to ensure RRMP compliance and monitoring.
Guide includes FRI responsibility to stress test on reinsurance program performance.
Cites complement guidance re reinsurance security, outsourcing, LICAT, governance.
Effectiveness
FRIs to remain compliant with current regulations and transition prior to Jan. 1, 2025.
Dec. 2024 C-OSFI Title Implementation Delay
On Dec. 11, 2024, C-OSFI published letter on decision to defer application of Section II of Guideline B-2 for the title insurance writers to Jan. 1, 2027 to allow additional time.
Time to further examine approach applied to large exposures in other jurisdictions.
Also, to engage in additional consultation with industry on implementation approach.
Accordingly, small modification to S. 2 Large Insurance Exposures portion for clarity.
