Federal financial regulators have issued a consultation paper on proposed changes to the definition of regulatory capital for property & casualty insurers.
The Office of the Superintendent of Financial Institutions (OSFI) is in the process of revising the capital definition for P&C insurers, as part of an overall review of the standardized minimum capital framework. OSFI says that the purpose of the capital definition review is to ensure that the capital of P&C companies remains high quality, and sufficient to absorb losses in periods of stress.
OSFI notes that the financial crisis showed the importance of adequate, high quality capital in financial firms. The federal regulator says that the proposed changes will provide better guidance to firms on the quantity and quality of capital required, with common equity remaining the primary form of capital.
The paper is being issued to consult with industry stakeholders on the proposed changes, namely the qualifying criteria for capital instruments, capital limits, and regulatory adjustments.
The first set of changes to the framework was introduced earlier this year. The second set, including changes to the definition of regulatory capital, are slated for Jan. 1, 2014.
Comments are due by September 5.