FSCO passes guidelines on insurer investments

Following the release of a consultation paper last fall, the Financial Services Commission of Ontario has passed, as part of a budget bill, changes to the restrictions on insurer investment portfolios. The changes are to make the province’s regulations more in line with other provincial as well as federal guidelines.
Among the provisions is one that allows insurers to invest in mutual and pooled funds. Also, income-related restrictions were lifted on common and preferred shares. Now, insurer can invest up to 25% of their assets in common shares.
The new guidelines are binding, although they are an interim measure in anticipation of a more widespread overhaul of the regulations known as the “prudent portfolio”. The aim is to promote disclosure of insurer investment portfolio risks as a means of ensuring solvency. The expected changes will also see new corporate governance and related party rules more in keeping with the federal system.
“This approach would be consistent with that of other Canadian financial services regulators and is widely accepted and followed throughout the financial services sector,” states a FSCO bulletin on the changes. “In Ontario, the aim is to harmonize, to the greatest extent possible, with the federal insurance legislation.”