Peter Routledge, superintendent of financial institutions with the Office of the Superintendent of Financial Institutions (OSFI), in early September participated in a moderated discussion at the Scotiabank Financials Summit. September 5, OSFI published an edited transcript of the discussion, focused on OSFI’s top priorities in the next three to five years.
Regulator’s priorities
“Over the next three to five years, OSFI’s focus is on continuous improvements to our supervisory approach, leveraging data and technology (and) streamlining the accountability of boards and senior management of financial institutions,” the superintendent stated.
Shortly after, he called the regulator’s practice of continuously refining regulator guidelines and advisories a discipline that will remain ongoing. Money laundering, fraud, cyber attacks and increasing reliance on third-party service providers were all also noted as regulatory priorities.
On tariffs
Regarding tariff risks, Routledge points out that Canada’s banks and life insurance companies are entering this period with strong capital and liquidity buffers, along with risk governance which has been built up since the global financial crisis and later, during the COVID-19 pandemic. “A strong, stable financial system is a cornerstone of Canada’s economic strength,” he said.
Later in the month, this time at the National Insurance Conference of Canada, Routledge expanded on the notion of regulatory efficiency, saying OSFI will be pursuing efficiency by simplifying guidance, eliminating low value asks and creating predictable schedules.
Guideline B-15
The conversation, published by OSFI on September 18, then delved into climate risk guidelines – Guideline B-15 and the Standardized Climate Scenario Exercise.
More on Guideline B-15 can be found in the related article, Climate risk places new, wide-ranging obligations on insurers. The Standardized Climate Scenario Exercise meanwhile, finalized in September 2024, measures the potential exposure of financial institutions to climate risk. It was noted that the measures require significant time, resources and effort on the part of insurers.
“Climate-related risks are financial risks that require greater measurement precision so that boards and senior management can reflect these risks in institutions’ business strategies and risk management frameworks. Guideline B-15, the Standardized Climate Scenario Exercise and the Climate Risk Returns all lay the groundwork for insurers to build their risk quantification capabilities,” the superintendent told the moderator.
He adds that less than half of the property and casualty (P&C) insurers reported having experience with physical climate scenario analysis prior to the climate scenario exercise being introduced. “This number is even lower for deposit-taking institutions and life insurers,” he says.
That few financial institutions outside of the P&C industry geocode their exposures, he says is a significant gap given increasingly frequent and severe climate-related physical risks. The financial institutions the superintendent was referring to, includes life insurers.
“Geospatial analysis is foundational for assessing the exposure and vulnerability of assets and is essential to ensuring that these risks are accurately measured and appropriately priced,” he said.
