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OSFI releases revised Minimum Capital Test Guideline effective January


September 26, 2014   by Canadian Underwriter


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The Office of the Superintendent of Financial Institutions (OSFI) has released a revised Minimum Capital Test Guideline for property and casualty insurers, which comes into force Jan. 1, 2015.

“This new version of the guideline represents a more robust risk-based test that more accurately aligns capital requirements to the risks faced by the property and casualty insurance industry,” Deputy Superintendent Mark Zelmer said in a statement on the new guideline, issued Sept. 24.

“This guideline would not have been possible without the industry’s significant cooperation over the past few years,” he noted.

The updated guideline, which has a three-year phase-in period, includes new and updated risk factors and margins, and a new revised definition of available capital. Those revisions were made through public consultations, industry input, testing and analysis, according to OSFI.

“The new risk-based capital framework results in a slight 2.8 percentage point decline in the capital ratio (MCT/BAAT combined ratio) on average across the entire industry,” OSFI also noted.

“Although the decline in the overall capital ratio is not material, the impact may vary by individual company as the new framework better aligns each insurer’s capital requirements with its risk profile.”



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