May, 2010 – The past two years have been a tumultuous time for financial services. It is fair to say, however, that the insurance industry – and particularly the Property and Casualty (P&C) sector – has to date fared better on a relative basis. Is that relative success due to business and regulators getting the balance right? Were we just lucky? Or have times already changed and we need to change with them?
To make a case in point I will discuss the question of finding the right balance between change and stability as we discuss OSFI’s reinsurance regime.
Reinsurance has evolved extensively in the past 20 years. Insurance and reinsurance companies have engineered highly sophisticated risk management strategies and programs which are increasingly segmented and globally-diversified.
In early 2008, OSFI commenced a thorough policy review of its reinsurance regulatory and supervisory framework.
OSFI had not made substantive amendments to its reinsurance regime since the early 1980’s, in response to a series of failures of small P&C companies. At the time, OSFI implemented certain rules and limits that specifically targeted reinsurance. Part of the reason for the 2008 policy review was to see if the 1980’s rules and limits were still applicable.
OSFI is reviewing many elements of many aspects, including:
- Repealing the Cession Limits
- Mutual Recognition vs. Collateral
- Collateral Requirements
- Security Agreements
Regulators are more aware of the increasingly complex nature of P&C insurance activities and risks. You have convinced us that the Canadian P&C industry has the level of sophistication and strong risk management necessary to support the evolution of our regulatory regime from a rules-based regime to a more principles-based framework.
To read the remarks, go here.
OSFI is an independent agency of the Government of Canada. It reports to the Minister of Finance. For more information visit www.osfi-bsif.gc.ca.