March 25, 2010 by Romana King
Fresh off of an international podium – where the focus was on the Canadian financial market and its regulator’s performance during the sub-prime credit crisis of 2008/2009 – Canada’s top financial supervisor opened the 3rd Annual National Insurance Conference of Canada with a bit of reflection.
“When I spoke to you a year ago, the global financial sector was in a precarious state,” Dickson, head of the Office of the Superintendent of Financial Institutions Canada (OSFI), told a packed room of insurer, reinsurer and broker C-suite decision-makers in Ottawa. The three-day conference began September 30.
This recent, volatile history validated two of Dickson’s long-held beliefs:
However, Dickson was quick to point out six areas that the Canadian P&C sector will need to focus on in upcoming months. These include:
Dickson emphasized that the last 18 months really did show that “healthy capital levels are the last defense against rampant losses and rapid deterioration.”
Despite the constraints of OSFI’s current Minimum Capital Testing (MCT) requirement, Dickson believes that the importance of adequate capital and an observance of operating losses will come to light as companies continue to stress test.
“The inescapable lesson of the financial crisis,” was that insolvencies do happen, said Dickson. “That’s why we embarked on Part XIII of the Insurance Companies Act.
“[We learned from the] global financial turmoil that it is important to know, in advance, and with as much certainty [as possible] what obligations a P&C company has.”
While Dickson, and her office, are not adverse to potential new products or strategies for transferring risk, she did warn the delegates in attendance that urgent or rushed reaction to the global financial crisis can have unintended consequences.
“Low interest rates, mortgage practices, less regulation—all had consequences” in the years leading up to and during the credit-crunch, said Dickson. “Many of these consequences were unintended. That means regulators and the industry needs to think; we cannot become complacent.”
This story was originally published by Canadian Insurance Top Broker.