The Office of the Superintendent of Financial Institutions (OSFI) has launched a 10-week consultation, starting April 13, 2021, to get feedback on its assurance expectations for federally regulated insurers and deposit-taking institutions.
The paper, entitled Assurance on Capital, Leverage and Liquidity Returns, includes 17 questions intended to inform OSFI’s future guidance and supervision. OSFI says the effort to enhance and align assurance expectations is needed given the complexity arising from evolving regulatory reporting frameworks, particularly changes resulting from International Financial Reporting Standards 17 (IFRS 17), insurance contracts, and Basel III reforms.
OSFI says it proposes to have assurance expectations apply to the capital returns of all federally regulated life insurers, property and casualty insurers, mortgage insurers and the capital, leverage and liquidity returns of all federally regulated, deposit-taking institutions. Submissions responding to the paper are being requested until June 18, 2021.
“The purpose of this discussion paper is to engage federally-regulated financial institutions and other interested stakeholders in a dialogue with OSFI, to proactively enhance and align assurance expectations,” says the regulator. “Responses to this discussion paper will inform the development of future OSFI guidance with respect to assurance expectations on regulatory returns.” The paper goes on to examine broadened internal and external audit expectations, audit materiality and audit requirements and senior management attestations about liquidity, capital and leverage.
OSFI adds that the regulatory returns and guidelines in scope for insurers include the Life Insurance Adequacy Test (LICAT), the Minimum Capital Test (MCT) and the Mortgage Insurer Capital Adequacy Tests (MICAT), respectively.
“Given the increasing complexity of upcoming changes to regulatory reporting frameworks due to IFRS 17 and Basel III reforms, this initiative aligns with OSFI’s strategic goal 1 of improving a federally-regulated financial institution’s resilience to financial risks,” the discussion paper’s authors add. “This initiative aims to proactively enhance and align OSFI’s assurance expectations over key regulatory returns, including capital returns for insurers and capital, leverage and liquidity returns for deposit-taking institutions. Enhancing and aligning assurance expectations increases OSFI’s confidence in the accuracy and completeness of these returns which are used for effective supervision.”