The Office of the Superintendent of Financial Institutions (OSFI) has launched three consultations, including one on changes to the Minimal Capital Test (MCT) Guideline, and has made two updates to the Life Insurance Capital Adequacy Test (LICAT). (The remaining two consultations pertain to deposit-taking companies.)
The MCT guideline consultation is open for 90 days – until August 20, 2025. The LICAT changes are effective immediately.
“OSFI is proposing to simplify the MCT guideline on insurance risk (specifically unexpired coverage). This is to ensure it is understood and interpreted consistently to address risk,” they write. “OSFI also proposes updating regulatory adjustments to net assets available for insurance receivables and updating the capital confirmation requirements for user fees.”
The final MCT Guideline, expected to be published in November 2025, comes into effect on January 1, 2026. The guideline applies to Canadian property and casualty insurance companies and casualty companies operating in Canada on a branch basis.
The LICAT changes, meanwhile, remove the five per cent cap on reduction in Tier 1 capital deductions with respect to stop loss reinsurance. The aggregate reduction amount and the reduction in the amount included in assets required no longer applies, they state.
“The second (change) ensures that the capital treatment for unregistered reinsurance of segregated fund guarantees aligns with other products,” they write. “The adjustments to LICAT take effect immediately and are expected to be incorporated into the next version of the LICAT Guideline.”
