New minimum guidelines for P&C insurers

The start of the new year also means a new Minimum Capital Test Guidelines for property and casualty insurers.

Risk Management News

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The start of the new  year also means a new Minimum Capital Test Guidelines for property and casualty insurers.

The Office of the Superintendent of Financial Institutions (OSFI) has released a revised Minimum Capital Test Guideline for property and casualty insurers, effective January 1, 2015.

“This new version of the guideline represents a more robust risk-based test that more accurately aligns capital requirements to the risks faced by the property and casualty insurance industry,” says OSFI Deputy Superintendent Mark Zelmer.  “This guideline would not have been possible without the industry’s significant cooperation over the past few years.”

The updated guideline, which has a three-year phase-in period, includes new and updated risk factors and margins, and a new revised definition of available capital. Those revisions were made through public consultations, industry input, testing and analysis, according to OSFI.

According to OSFI, the new risk-based capital framework “results in a slight 2.8 percentage point decline in the capital ratio (MCT/BAAT combined ratio) on average across the entire industry.”

Although the decline in the overall capital ratio is not material, Zelmer says that the impact may vary by individual company “as the new framework better aligns each insurer’s capital requirements with its risk profile.”

The new guidelines are available on the OSFI website, and can be seen by clicking here.

 

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