The Office of the Superintendent of Financial Institutions has announced its planned approach to overhauling regulation of the reinsurance industry.

OSFI released a discussion paper on the issue in December 2008, and has now finalized its policy approach to reinsurance regulation and supervision. A paper released by the regulator on Wednesday outlines its policy decisions, and the impending reforms to its reinsurance regulatory and supervisory framework.

It says that the policy decisions and reforms it plans to implement “represent a regulatory shift from strict reliance on prudential limits to guidance on sound reinsurance practices and procedures, enhanced and more equitable capital requirements for federally-regulated ceding companies, greater disclosure requirements, and increased supervisory and actuarial scrutiny of reinsurance arrangements/contracts.”

“Along with this regulatory and supervisory shift, OSFI will undertake developmental policy work to assess the issues associated with establishing a more sophisticated risk-based system for unregistered reinsurers and corresponding risk-based capital requirements for ceding companies,” it says.

OSFI hopes to implement the main changes to the reinsurance regulatory framework by the end of 2010.

IE