The Office of the Superintendent of Financial Institutions has issued revised capital guidelines for life insurers.

These latest changes to the Minimum Continuing Capital and Surplus Requirements (MCCSR) for life insurance companies are effective for fiscal year-end 2005. The revisions include substantial changes to the requirements for mortality and segregated fund guarantee risk, and to the treatment of reinsurer deposits and claims fluctuation reserves.

“Because these changes will have a material impact on some insurers, they will be phased in over a period of two or three years,” OSFI notes.

The regulator says that the objective of undertaking major revisions to the guideline this year is to adopt more appropriate approaches in several areas. It aims to: incorporate the new requirements for segregated fund guarantees (released, in draft form, in April) into the guideline; implement a new actuarial methodology regarding mortality risk; and, strengthen the conditions required to receive credit for claims fluctuation reserves created under reinsurance treaties.

OSFI says it provided draft copies of the revised portions of guideline for comment to the Canadian Life and Health Insurance Association in letters sent in July, August and September. “The industry generally supports the changes, but requested slight modifications,” it reports.