OSFI Releases Final Reinsurance Regulatory Guideline and Guidance on Reinsurance Security Agreements.
Mondaq Business Briefing › Nbr. 2011, January 2011
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Summary
Office of the Superintendent of Financial Institutions
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Extract
OSFI Releases Final Reinsurance Regulatory Guideline and Guidance on Reinsurance Security Agreements.
Introduction
Late last year, the Office of the Superintendent of Financial Institutions (Canada) (OSFI), the Canadian federal prudential insurance regulator, released final versions of administrative guidance which, once implemented in 2011 and 2012, will significantly strengthen the regulation of reinsurance business in Canada. The guidance is comprised of Guideline B-3 Sound Reinsurance Practices and Procedures (the Guideline) and Guidance (the Guidance) on the use of Reinsurance Security Agreements (RSAs). OSFI's issuance of the Guideline followed the release, in August 2010, of a consultation draft (the Draft Guideline), which had in turn reflected a long-awaited paper, released in March 2010, on OSFI's regulatory and supervisory approach to reinsurance. The Guideline applies to all federally-regulated insurers and reinsurers and fraternal benefit societies (each, a FRI) in respect of reinsurance cessions, retrocessions and, where applicable, assumption reinsurance transactions. Once fully implemented, the Guideline will significantly enhance OSFI's oversight of reinsurance arrangements and impose significant new internal requirements on FRIs. Meanwhile, issuance of the Guidance followed the August 2010 release of a consultation draft (the Draft Guidance), which was accompanied by a letter (the Letter) summarizing OSFI's rationale for discontinuing the previously-utilized mechanism of standard form reinsurance trust agreements (RTAs) and outlining OSFI's new approach to RSAs. The Guidance applies to all FRIs in respect of reinsurance cessions (and retrocessions) with reinsurers not licensed in Canada, and also outlines OSFI's expectations of FRIs in connection with the RSA process. Once fully implemented, the Guidance ...See the full content of this document
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