Canada’s federal solvency regulator has released its final capital guidelines for the P&C insurance sector, and one new wrinkle includes a fresh approach to handle the provincial risk-sharing pools administered by Facility Association — a new 2.5% capital charge.
The Office of the Superintendent of Financial Institutions (OSFI) published its new capital guidelines as part of the industry’s transition to the new International Financial Reporting Standard 17 scheduled for Jan. 1, 2023.
Under OSFI’s finalized capital guidelines, “the Provincial Risk Sharing Pools (RSP) administered by the Facility Association (FA), as well as the Groupement des assureurs automobiles (GAA), are now subject to credit risk charges,” OSFI explains in an introductory MCT letter to P&C companies.
“The 2.5% risk charge is used to capture the credit risk for third party reinsurance. The…