March 30, 2005 by Canadian Underwriter
The Office of the Superintendent of Financial Institutions (OSFI) has outlined its “Plan and Priorities for 2005-2008” this week. Within the report, OSFI notes the improved performance of the primary p&c and reinsurance sectors, but adds “the p&c sector is inherently volatile, and the length of the current recovery is uncertain”. The industry’s profitability has attracted new capital which will spur competition, and the regulator comments, “the desire to retain capital then lead to the writing of unprofitable business”. Specifically OSFI is concerned with the possible attendant loosening of terms and conditions that competition will bring. “Pricing behavior over the next year will be crucial to determining whether the industry retains underwriting profitability,” OSFI concludes.
New York Insurance Superintendent Howard Mills says his department will require insurance company CEOs to attest under oath that “all reinsurance contracts they enter into contain documentation as to the transaction’s economic intent”, as well as providing a risk transfer analysis and a statement affirming no written or oral agreements are in place which might alter a reinsurance contract’s terms. The move is a response to current investigations into finite reinsurance, which Mills says can be a legitimate financing arrangement if they are completely transparent.
The Insurance Bureau of Canada (IBC) has scheduled its Regulatory Affairs Symposium for October 25, 2005. IBC assistant general counsel Steven Lingard says the government’s anticipated white paper on financial institutions is likely to be a hot topic at the event.