Guideline formalized interim expectations previously outlined in the IFRS 17 Advisory, letters to insurers, and regulatory return instructions; made no substantive changes.
Clarified financial guarantees, intra-group pooling, and captive fronting arrangements.
Consolidated accounting expectations for certain insurance products and transactions.
Addressed comparability concerns highlighted by stakeholders and supported consistent application of existing regulatory return instructions across the industry.
Rescinded IFRS 17 Advisory issues to support transition to new accounting standard.
Insurance Contract Guideline
Applies to federally regulated insurers (FRIs) using IFRS 17 insurance contracts.
Set expectations on intra-group pooling insurance risk shared agreements, accounting for financial guarantee contracts for mortgage insurers, captive fronting arrangements.
Financial Guarantee Contracts
IFRS 17 guideline provided mortgage insurers the option to classify financial guarantee contracts as either IFRS 17 Insurance Contracts or IFRS 9 Financial Instruments.
For consistency and comparability across the industry, mortgage insurers should classify and account for these contracts as insurance contracts and apply IFRS 17.
Intra-Group Pooling
Guidelines specified that intra-group pooling arrangements are insurance risk sharing arrangements that redistribute risks between affiliates within a group of companies.
Benefit of IFRS 17 is the disaggregation of transactions and transparency of reporting.
Accounting for intra-group arrangements should not be conducted on a net basis.
Where intra-group pooling arrangement constitutes a reinsurance arrangement then IFRS 17 reinsurance contract accounting should be applied as a direct ins contract.
Direct ins contract for assuming party, reinsurance contract held for the ceding party.
This permits C-OSFI to assess risks and capital at each individual entity level.
Provides more clarity and certainty over priority of claims in the event of insolvency.
Also provides for comparable reporting of reinsurance contracts across institutions.
Fronting Captive Arrangements
These arrangements are insurance contracts entered into with a policyholder and subsequently reinsured to an entity within the same group as the policyholder.
FRIs expected to act as principal in its activities with the policyholder and adhere to OSFI guidance found in Sound Reinsurance Practices and Procedures (Guideline B-3),
If IFRS 17 is applicable, institution must fully account for these contracts as insurance contracts and disclose all reinsurance contracts held with unregistered reinsurers.
Insurer must notify lead supervisor if treatment other than IFRS 17 is appropriate.
Effectiveness
Final IFRS 17 Guideline is effective immediately, Nov. 21, 2024.
