Canada’s solvency regulator plans to release a “top-of-the-house risk management guideline” in 2025 as part of its policy review initiative for federally regulated financial institutions.
“We are looking at ways to simplify our guidance…so we’re looking at a top-of-the-house risk management guideline targetted for some time next year, which will provide a comprehensive approach to risk management,” said Darrell Leadbetter, senior director of insurance at the Office of the Superintendent of Financial Institutions (OSFI).
“This will eliminate the need for specific management requirements in individual guidelines,” Leadbetter said last week at KPMG’s 2024 Insurance Conference.
The goal is “greater clarity and transparency for insurers and other institutions with a consistent framework for managing risk.”
Leadbetter and other OSFI executives were providing an overview of the regulator’s upcoming initiatives during a plenary session titled Navigating regulatory standards: A fireside chat with OSFI.
The regulator also plans to aggregate and publish information in 2025 based on its ongoing analysis of climate risk, said another executive.
Earlier this year, the International Accounting Standards Board released an exposure draft on climate-related and other uncertainties that may flow into financial statements, said Kenneth Leung, managing director of accounting policy at OSFI.
“And what they did is they focused on the illustrative examples, and they had an example on the banking side, but we didn’t see anything on the insurance side,” Leung said. “So, we’re wondering, how does that flow into insurers?
“Maybe through IFRS 17 or not, and also through fair value measurement of investments. I think that’s very relevant for insurers as well.”
Leung also pointed to OSFI’s B-15 guideline (Climate Risk Management) disclosure requirements, which begin at the end of 2024 for larger insurers. OSFI has already tweaked its climate risk reporting guideline following input from the property and casualty insurance industry. For example, OSFI aligned its definitions of climate change perils to definitions of modelled perils according to the P&C industry’s major Cat model vendors.
OSFI also wants insurers to conduct a climate scenario exercise as part of their stress testing.
“There’s a lot going on there, and so our climate risk division is watching that information very carefully,” Leung said. “They’re going to aggregate all that data that they receive, and they will publish something sometime in 2025 so that the industry can find some use out of that exercise.”
The regulator continues to look at harmonization between insurance entities as it relates to accounting and actuarial standards. When it comes to IFRS 17 in particular, OSFI has rescinded a 2018 advisory and replaced it with a final guideline, released Nov. 21.
“No new expectations, but all we’re doing is taking portions of the advisory, cleaning it up, looking at industry letters that we’ve issued and some of the return instructions that we’ve had, and just bringing it all together,” Leung said.
Feature image by iStock.com/Ralf Geithe
