The Office of the Superintendent of Financial Institutions (OSFI) is preparing to adopt a new accounting rule treatment in 2021, which will impact the capital rules for insurance companies.
OSFI announced on Wednesday that it’s working with other Canadian regulators and the insurance industry to revise its existing guidance on the capital rules for both life and property & casualty (P&C) insurers to support the implementation of a new International Financial Reporting Standard, known as IFRS 17, on insurance contracts.
The new treatment, which will take effect starting Jan. 1, 2021, requires several revisions to the insurance capital rules to align with the accounting standard, OSFI says. It aims to have final guidance published by mid-2020.
“In developing revisions for 2021, OSFI intends to maintain capital frameworks consistent with current capital policies and to minimize potential industry-wide capital impacts,” OSFI states.
The regulator also notes that a new standard approach for determining capital requirements for segregated fund guarantee business will be developed, with the implementation of the new approach taking place after 2021. In the meantime, the existing methodology will be maintained.