OSFI issues final version of LICAT guidelineBy The IJ Staff | November 24 2017 01:30PM
The Office of the Superintendent of Financial Institutions (OSFI) released the final version of its 2018 Life Insurance Adequacy Test Guideline Capital (LICAT) for federally regulated life insurers on Nov.24.
OSFI calls the LICAT “an important evolution in OSFI’s regulatory capital expectations. It represents a more advanced and risk-sensitive approach to capital that reflects lessons learned from the financial crisis, significant changes in the nature and management of risk within the life insurance industry, and international advancements in solvency frameworks.”
The LICAT replaces the current life insurance capital test, the Minimum Continuing Capital and Surplus Requirements Guideline (MCCSR), in place since 1992. The LICAT implementation date is January 1, 2018.
"Capital requirements not only protect policyholders and creditors, they promote confidence in the financial condition of life insurers,” said Assistant Superintendent Carolyn Rogers. “The LICAT strikes the appropriate balance between protecting policyholders, while still allowing insurance companies to take risks and compete effectively."
OSFI says the LICAT is not expected to significantly change the overall amount of capital required to be held by the industry when compared to the current MCCSR. To learn more, consult the LICAT guideline on OSFI’s site.