OSFI looking more closely at A&S line

Property and casualty insurers should be prepared to disclose additional data on the accident and sickness segment of their business as the Office of the Superintendent of Financial Institutions continues its review of that line of business. Speaking at the recent Canadian Insurance Financial Forum in Toronto, Jeff Muller, insurance modelling specialist at OSFI, said the regulator is looking at the accident and sickness segments to “dive deeper” in preparation for new minimum capital test requirements next year. “OSFI undertook this review . . . to just insure that capital requirements continue to accurately reflect the risks based in this line of business by p&c insurers as well as to give consideration to the requirements under the new life insurance capital guidelines,” he said. Earlier this year OSFI emailed instructions and templates to 39 p&c insurers that were in this line of business in 2015. “We appreciate the time taken and we received submissions from 20 p&c insurers,” Mr. Muller said. “That largely covers the entire industry in terms of net premiums written so it was good data in terms of conducting our analysis. We gained better insight into the types of products that were being provided and who was offering what.” But OSFI needs more data. “We are relocating accident and sickness into a separate exhibit in the p&c return to collect that data going forward,” Mr. Muller said. “We will continue to look at that business and determine if any changes are necessary in the future, keeping in mind that it is an area with some overlap between p&c insurance and life insurance.” Each year OSFI considers changes to the minimum capital test requirements as part of its efforts to enhance regulatory guidance. That draft will soon be published and will include amendments and clarification based on feedback from insurers. Meanwhile, the new international reporting standard IFRS 17, a chore for insurers, is also high on the agenda for the regulator. “We have started putting in place that project framework,” Christopher Townsend, senior director at OSFI’s actuarial division, said at the CIFF. He said OSFI is looking to maintain the Canadian Generally Accepted Accounting Principles for statutory reporting. “We are not in favour of splitting that out. But that requires a level of consistency and comparability and a few other criteria that we are hoping will be there to support that.” He said OSFI would also be looking to clarify whether or not IFRS 17 reporting changes affect insurers’ capital. “Obviously, given that we are using (IFRS 17) for regulatory reporting and therefore the capital in the minimum capital test, we have to understand the changes and how they are going to impact capital and make appropriate changes to the minimum capital test and all regulatory returns as well,” Mr. Townsend said. OSFI also wants to better understand the impacts on net income. “We have to learn to understand and talk to companies about how their income is and what the income shows.”