January 6, 2011 by Canadian Underwriter
The Office of the Superintendent of Financial Institutions (OSFI) has posted the final version of its Guidance for Reinsurance Security Agreements.
OSFI expects all new agreements to comply with the guidance, beginning July 1, 2011.
The guidance spells out criteria to be followed in order for federally regulated insurance companies to receive credit from OSFI for using unregistered reinsurance.
Ceding companies will have to obtain a legal opinion asserting that a security interest has been or will be created in their favour. Further, ceding companies are expected to approve assets offered as pledge or withdrawn.
The guidance requires a legal opinion to be addressed to the ceding company, confirming that a valid and enforceable security interest has been created. That opinion will be registered with OSFI.
“Where the foreign company’s chief agent is the legal counsel of the company, the foreign company should seek a legal opinion from outside legal counsel,” the guidance states. “Where a ceding company’s legal opinion is provided by in-house counsel, OSFI expects that the opinion will state that it is provided by counsel in his or her professional capacity as a lawyer and not in any other capacity.”
According to OSFI’s guidance, the legal opinion must include:
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