Canada’s financial institutions sector continues to undergo significant regulatory changes. Financial institutions are expected to adapt to the increasing volume and detail of regulations and regulatory expectations, while being subject to more targeted and demanding supervision by regulators. Regulators continue to emphasize different things to different institutions, and insurers should expect more direct interaction with, and more specifically targeted moral suasion coming from, the regulators. Below are three regulatory trends for 2014.


Dating back to 2008, the Office of the Superintendent of Financial Institutions (OSFI) has recognized that major changes to the minimum continuing capital and surplus requirements for life insurers (MCCSR) are necessitated by international developments in accounting and solvency standards for insurers. Further to its commitment to develop appropriate risk-based capital requirements for life insurers, on November 1, 2013, OSFI requested that life insurers participate in a fifth quantitative impact study (QIS #5). Through these studies, OSFI is collecting information and assessing the possible impact of the major components of a potential revised life insurance regulatory capital framework. In the meantime, OSFI continues to make changes to Guideline A: Minimum Continuing Capital and Surplus Requirements for life insurance companies, the most recent of which will come into effect on January 1, 2014.

Earlier in 2013, OSFI undertook an in-depth review of the regulatory capital framework for federally regulated property and casualty (P&C) insurers. In a discussion paper published in May 2013, OSFI outlined the proposed changes to the Minimum Capital Test (MCT) for Canadian P&C insurers and the Branch Adequacy of Assets Test for branches of foreign P&C insurance companies. The revised MCT Guideline is scheduled to be issued for public consultation in late 2013 and is expected to take effect on January 1, 2015.

Continuing delays relating to finalization of international accounting standards for insurers and uncertainty as to the date of adoption of any final standards by other jurisdictions are impacting OSFI’s progress with respect to solvency standards for insurers, particularly life insurers. Likely the single largest regulatory issue facing the life insurance industry is the need for an appropriate result from the international accounting standards process.

Following consultations with the insurance industry, OSFI published the final versions of Guideline E-19: Own Risk Solvency and Assessment, and Guideline A-4: Regulatory Capital and Internal Capital Targets. Both guidelines have an implementation date of January 1, 2014.


In January 2013, OSFI released a revised version of its Corporate Governance Guideline, which was first issued in 2003. Full implementation of the requirements of this guideline is expected by no later than January 31, 2014. OSFI’s revisions targeted the composition and competencies of the boards as well as risk governance at the board and senior management level, and delineated the roles of the chief risk officer and the audit committee. Looking in to 2014, it is expected that OSFI will closely monitor the implementation of the requirements of this guideline, as well as the new Principles for an Effective Risk Appetite Framework issued by the Financial Stability Board in November 2013, particularly with respect to designing and implementing an effective risk appetite framework appropriate for the institution.


In February 2013, amendments were introduced to the general regulations made under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, Canada's anti-money laundering legislation. The amendments will come into effect in February 2014 and are aimed at improving Canada's compliance with the Financial Action Task Force's Recommendation 10 dealing with customer due diligence. Financial institutions are required to update their anti-money laundering policies and procedures to comply with these new requirements. We are still waiting for any amendments coming out of the federal government’s December 2012 consultation paper.