In a letter to the Senate Banking Committee, Superintendent Nick Le Pan says that the federal financial regulator does not believe that finite reinsurance is a problem in Canada.

Le Pan’s letter indicates that problems can arise when reinsurance is used without proper risk transfer and inappropriate accounting and disclosure. However, it notes that OSFI doesn’t believe this is a “system-wide concern in the Canadian marketplace”.

The letter also notes that its latest memorandum to insurance companies indicates that they must disclose any finite reinsurance agreements. It notes that it has been gathering information on this area for some time, and has been stressing the importance of oversight in such areas to senior management and directors.

OSFI also notes that earlier this year it asked insurers about the governance and oversight mechanisms they have established for these sorts of products. It is currently reviewing the data it received.