OSFI Guidelines Adopted by BCFSA for the Insurance and Trust Sectors

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This table is for B.C. regulated entities in the insurance and trust sectors. BCFSA expects extraprovincial entities to follow the guidance of their primary jurisdiction.

Title	Effective Date	Insurance: Life	Insurance: P&C	Trust
Capital Adequacy Requirements
Life Insurance Capital Adequacy Test (LICAT)	2023-Jan	X
Minimum Capital Test (MCT)	2023-Jan		X
A-4 Regulatory Capital and Internal Capital Targets	2023-Jan	X	X
Mortgage Insurer Capital Adequacy Test (MICAT)	2023-Jan		X
Prudential Limits and Restrictions
B-1 Prudent Person Approach¹	1993-Jan	X	X	X
B-2 Large Exposure Limits	2003-Aug	X
B-2 Investment Concentration Limit²	1994-Mar		X
B-4 Securities Lending (P&C)	1996-Sep		X
B-4 Securities Lending (Life)	1997-Feb	X
B-5 Asset Securitization	2019-Jan	X	X
B-9 Earthquake Exposure Sound Practices Memorandum	2013-Feb		X
B-11 Pledging	2003-May	X	X
E-2 Commercial Lending Criteria	1992-Jun	X		X
E-6 Materiality Criteria for Related Party Transactions (P&C)	1993-Dec		X
E-6 Materiality Criteria for Related Party Transactions (Life)	1993-Jan	X
Accounting and Disclosure
Life Insurance Capital Adequacy Test (LICAT) Public Disclosure Requirements	2018-Dec	X
IFRS 9 Financial Instruments and Disclosures	2023-Jan	X	X	X
C-1 Impairment — Sound Credit Risk Assessment and Valuation of Financial Instruments at Amortized Cost	2010-Jul	X	X
D-1A Annual Disclosures (Life)	2010-Jul	X
D-1B Annual Disclosures (P&C)	2010-Jul		X
D-5 Accounting for Structured Settlements	2023-Jan		X
D-6 Derivatives Disclosure	2010-Jul	X	X	X
D-9 Source of Earnings Disclosure (Life)	2010-Jul	X
D-10 Accounting for Financial Instruments Designated as Fair Value Option	2010-Jul	X	X	X
Advisory – IFRS 17 Transition and Progress Report Requirements for Federally Regulated Insurers	2020-Sep	X	X
Advisory – External Audit Quality Initiatives (DTI)	2014-May			X
Sound Business and Financial Practices
Corporate Governance	2018-Sep	X	X	X
B-3 Sound Reinsurance Practices and Procedures³	2010-Dec	X	X
B-7 Derivatives Sound Practices	2014-Nov	X	X	X
B-20 Residential Mortgage Underwriting Practices and Procedures	2017-Oct	X	X	X
E-5 Retention/Destruction of Records	1993-May	X
E-10 Use of Depositories by Insurance Companies⁴	1996-Dec	X	X
E-12 Inter-Segment Notes for Life Insurance Companies⁵	2010-Jul	X
E-13 Regulatory Compliance Management (RCM)	2014-Nov	X	X	X
E-15 Appointed Actuary: Legal Requirements, Qualifications and Peer Review⁶	2012-Sep	X	X
E-18 Stress Testing⁷	2009-Dec	X	X	X
E-19 Own Risk and Solvency Assessment (ORSA)	2018-Jan	X	X
E-21 Operational Risk Management	2016-Jun	X	X	X
E-22 Margin Requirements for Non-Centrally Cleared Derivatives	2020-Apr	X	X
Life Memorandum to the Appointed Actuary	2023-Jan	X
Property and Casualty Memorandum to the Appointed Actuary	2023-Jan		X

1. Insurance: Where the primary regulator of a non-federal extraprovincial insurer has already adopted a prudent person approach to investment and lending, BCFSA will rely on that approach to the extent that it remains aligned with OSFI’s framework as set out in the Guideline.
Trust: Section 6.1 of the Investment and Lending Regulation to the FIA exempts trust companies from the requirements of a written investment and lending policy. However, BCFSA believes it is a good practice, under OSFI’s Corporate Governance Guideline, for the Board to have an investment policy to set out its risk appetite and oversight of investment activities. Trust companies should take guidance from the procedures section of this Guideline.
2. Investment concentration limits should be set by the Board in accordance with the risk appetite of the insurer. Note that the five per cent concentration limit excludes loans and securities issued or guaranteed by the Government of Canada, a Canadian province, or an OECD central government. For term deposits, guaranteed investment certificates (“GICs”), and other assets that fall under a deposit guarantee scheme, BCFSA will consider them excluded from the five per cent concentration limit up to the amount guaranteed by the relevant government.
3. While not specifically part of this Guideline, BCFSA also expects that any reinsurance placed with unregistered reinsurers be collateralized with an acceptable form of security. BC insurers are expected to give preference to the use of Reinsurance Security Agreements (“RSAs”) to collateralize unregistered reinsurance. Additionally, although OSFI has removed its limits on reinsurance coverage in this Guideline, the reinsurance limits specified in the Insurance Company Reinsurance Limitation regulation (“the regulation”) to the Financial Institutions Act (“FIA”) still apply to BC insurers. Per Section 5 of the regulation, the limits can be varied with the approval of the Superintendent of Financial Institutions. Note that exceeding regulatory limits without approval may result in administrative penalties.
4. Financial institutions should observe the safekeeping requirements outlined in Sections 6, 7, and 8 of this Guideline. Specific references to OSFI legislation or regulations are not applicable to provincially regulated financial institutions.
5. Any provisions contained in the Guideline related to OSFI Guideline E-6 Materiality Criteria for Related Party Transactions are not applicable at this time.
6. BC financial institutions are not required to conduct a limited annual review in situations where there have been no material changes in the previous year affecting the valuation of policy liabilities and ceded reinsurance assets. A limited annual review will still be expected where material changes have occurred, in addition to the regular three-year review cycle.
7. Unlike federally regulated insurers, there is no annual Financial Condition Testing (“FCT”) requirement for provincially regulated insurers. BCFSA expects that the frequency of preparation be determined by a provincial insurer’s Board of Directors in close consultation with its senior management and appointed actuary. The frequency should be no more than two-year intervals (i.e., annually, bi-annually, or tri-annually) and should take into account the insurer’s overall risk profile.