July 11, 2022 — CANADA’s federal regulator is creating a new division that will focus on digital endeavours including open insurance, open data and crypto currencies.
Superintendent Peter Routledge made the announcement during a June risk management seminar that was held virtually for both the p&c and life insurance sectors.
The term ‘open insurance’ generally refers to the providing of services and data to partners — usually via application programming interfaces — to create new offerings, applications and innovative business models.
Mr. Routledge said the increased use of both third-party suppliers and the chances of a significant cyber attack along with digital innovations are transforming the nature of financial services.
He said the Office of the Superintendent of Financial Institutions is conducting internal modernization and external consultations to respond to the need for transformation and risks coming from outside of traditional financial services sector boundaries.
“There is little doubt when looking to the future that it holds more digital disruption rather than less,” Mr. Routledge said.
“It is simple to confront this future with resistance, but that is likely to result in being left behind rather than becoming more resilient.”
He said the changes with digital disruption pose increased operational, compliance, reputational and financial risks.
Meanwhile, he said OSFI has successfully adapted its capital tests, other guidelines and regulatory returns to adjust to the new IFRS-17 international accounting standard that will come into effect Jan. 1.
Mr. Routledge said using the new standard will impact insurance companies by fundamentally changing their accounting, actuarial and reporting practices. He noted it will also significantly affect their support systems and practices in general.
“Canada’s insurance industry is well-capitalized today under current accounting rules and the implementation of IFRS-17 will not change that,” Mr. Routledge said.
“As IFRS-17 is a new standard — and we continue to operate through an extended period of economic uncertainty — we expect insurers to act conservatively when making decisions that would result in changes to their levels of capital.”
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