OSFI posts Q&As on legal agreements and other aspects of Reinsurance Security Agreements

Legal opinions related to Reinsurance Security Agreements (RSAs) may be obtained from inside or outside counsel of a reinsurer or another third party, as opposed to a ceding company’s counsel, according to the Office of the Superintendent of Financial Institutions (OSFI).
But in these instances, ceding companies should satisfy themselves by consulting their own counsel that the opinion is something upon which the ceding company and the regulator are “entitled to rely.”
The legal opinions should not be filed with OSFI, and a copy of all legal documents and/or reinsurance agreements to which the opinion applies must be included as an attachment to the opinion.
OSFI provided these and other answers to common questions associated with the Jan. 1, 2012 implementation of RSAs. The Q&As are posted on OSFI’s Web site at:
http://www.osfi-bsif.gc.ca/app/DocRepository/1/eng/practices/supervisory/RSAQA_e.pdf
OSFI is terminating its standard form Reinsurance Trust Agreements that federally regulated ceding companies were required to use to be eligible for a capital/asset credit associated with unregistered reinsurance.
In its place, OSFI is requiring ceding companies to enter into suitable RSA arrangements in which the ceding company has a valid, first-ranking security interest in assets of an unregistered reinsurer that are held in Canada.
Ceding companies are now required to obtain a legal opinion asserting that such an interest has been created in their favour.