The Office of the Superintendent of Financial Institutions is proposing changes to the capital requirements for life insurance firms.

OSFI published for comment proposed changes to the Minimum Continuing Capital and Surplus Requirements guideline, which will take effect for the year beginning January 1, 2011. The guideline describes the capital required, using a risk-based formula, and defines the capital that is available to meet the minimum standard.

A life insurer’s minimum capital requirement is determined as the sum of the capital requirements for each of five risk components: asset default risk, interest rate risk, mortality/morbidity lapse risks, segregated fund risks, and foreign exchange risk. The capital requirement is determined on a consolidated basis, including all subsidiaries (entities, whether held directly or indirectly, that are controlled) that carry on a business that a company could carry on directly.

The comment period ends April 7.

IE