Broad policy exclusions with respect to a host of data-related losses are now commonplace in commercial general liability policies. However, privacy breaches or data loss incidents are now said to be a matter of when and not if. As a result, if an organisation wishes to obtain comprehensive insurance coverage for cyber-related risks, the insurance – to the extent available – must be thoughtfully and deliberately purchased.
Insurers and other insurance professionals have traditionally been well positioned to drive improvements in risk management processes. Cyber-security risk is a modern phenomenon which has arisen in the electronic information and internet age, and the insurance industry is demonstrating that it can play a key role both in educating and equipping organisations to manage this emerging risk, and in providing insurance protection.
Insurers in Canada are required to implement a system of enterprise-wide risk management that identifies the inherent risks in their activities and manages those risks to appropriately defined levels. Recent regulatory initiatives include revised guidelines on corporate governance and regulatory compliance management and a new guideline on own risk and solvency assessment.
The Office of the Superintendent of Financial Institutions (OSFI) has released draft Guideline E-21 – Operational Risk Management for federally regulated financial institutions (FRFIs), including insurance companies. The guideline identifies the appropriate framework and processes that OSFI expects FRFIs to maintain in order to mitigate operational risk.
The Office of the Superintendent of Financial Institutions Canada has recently proposed several revisions to the Minimum Capital Test Guideline that will take effect in 2016, the objective of which is to improve regulatory risk-based capital guidance. The revisions add further provisions for equity risk exposures and amend the wording of the guideline to incorporate clarifications and enhance consistency.
The final Mutual Property and Casualty Insurance Company with Non-mutual Policyholders Conversion Regulations and Mutual Property and Casualty Insurance Company Having Only Mutual Policyholders Conversion Regulations were recently published. They reflect Parliament's twin objectives of ensuring the equitable treatment of mutual and non-mutual policyholders and establishing a transparent, orderly demutualisation process.
The Department of Finance has published two draft regulations under the Insurance Companies Act which, if implemented, would allow the demutualisation of federally regulated mutual property and casualty insurance companies ('P&C mutuals'). This would allow P&C mutuals to convert from policyholder-based ownership to share-based ownership and subsequently to issue shares on public markets.
The Saskatchewan minister of justice and attorney general has introduced Bill 177, which will implement the new Insurance Act and repeal the Saskatchewan Insurance Act. The proposed act includes significant changes to address market conduct and unfair practices, and will introduce insurance compliance self-evaluative audits.
The Office of the Superintendent of Financial Institutions is seeking to produce a revised capital guideline for life insurers that takes into account developments in the areas of financial reporting, actuarial methodology, economic capital and financial theory and thereby better assesses their solvency risk. Industry stakeholders are invited to continue to provide input in order to assist with the framework's development.
We know the law, but how well do we know our regulators? In an era where regulation is surpassing law on the radars of most in-house counsel and other risk managers, this question has never been more pressing. How do we best navigate regulators in order not only to get the best results, but also to preserve and continue good relations?
The Office of the Superintendent of Financial Institutions Canada has announced revisions to the Minimum Capital Test Guideline that will come into effect on January 1 2015. The revisions are designed to create a more vigorous risk-oriented test that aligns capital requirements to the level of risk encountered by the property and casualty insurance industry.
The Office of the Superintendent of Financial Institutions Canada (OSFI) has published a draft revised Guideline E-13 entitled "Regulatory Compliance Management". The purpose of the update is to align OSFI's guidance on regulatory compliance management better with the revised corporate governance guideline, as well as with OSFI's supervisory framework and assessment criteria.
The Office of the Superintendent of Financial Institutions Canada (OSFI) has released for consultation Draft Guideline B-21 Residential Mortgage Insurance Underwriting Practices and Procedures. The draft guideline sets out OSFI's prudential expectations for residential mortgage insurance underwriting and related activities in the form of six fundamental principles.
The International Monetary Fund (IMF) has released its Financial System Stability Assessment in accordance with the IMF's Financial Sector Assessment Programme. The assessment noted that the insurance sector performed well in stress tests undertaken by the IMF, but also offered suggestions to safeguard further the stability of the insurance sector.
The Office of the Superintendent of Financial Institutions Canada (OSFI) has issued a draft advisory on board and senior management changes which applies to all federally regulated financial institutions (FRFIs), including insurers. The draft advisory is based on the principle that FRFIs should notify OSFI whenever such changes are contemplated.
The two main vehicles for establishing an insurance business in Canada federally are incorporation of a Canadian insurance company and qualification of a Canadian branch of a foreign insurance company. The information requirements and timing for both are very similar, and both involve an extensive approval application to the Office of the Superintendent of Financial Institutions Canada.
In certain respects, a 2009 Office of the Superintendent of Financial Institutions advisory opened the door to foreign insurers which do not already have licensed Canadian branches to consider entering into insurance contracts that cover Canadian risks. However, before doing so, unlicensed foreign insurers should ensure that provincial legislation is consulted and that the applicable unlicensed insurance regime is followed.
Effective January 1 2013, administrative monetary penalties were introduced to Ontario's insurance industry as a result of legislative changes. The penalties were implemented in order to help the Financial Services Commission of Ontario address contraventions of the law more efficiently and promote compliance.
The Canadian Council of Insurance Regulators (CCIR) has issued a paper entitled "Position Paper: Electronic Commerce in Insurance Products". The real driver for this exercise is the significant rise in internet use by insurance providers. According to the position paper, the CCIR's concern is that customers should be afforded access to necessary information and protection, even when purchasing insurance online.
Canadian insurers have a busy year ahead if they are to meet new regulatory initiatives from the Office of the Superintendent of Financial Institutions. They will not only have to prepare regulatory solvency assessments, but also prepare to meet the requirements of the revised Corporate Governance guideline, while at the same time addressing new requirements for processes to verify earthquake data and utilise sound earthquake models.
In late January the Office of the Superintendent of Financial Institutions released its final version of the revised Corporate Governance Guideline, which reflects its response to commentary received on the first version published in August 2012. Among other things, the revised guideline confirms that insurers and other regulated institutions may implement its requirements in a manner that is best suited to the organisation.
The Office of the Superintendent of Financial Institutions has issued a new draft guideline on corporate governance. The most obvious change introduced by the new guideline, and one of particular relevance to the insurance industry, is the increased focus on risk. Risk management is now a mere subset of risk governance, which entails a more systematic, defined and holistic approach to dealing with risk.
The Financial Services Commission of Ontario recently released a consultation paper outlining four proposals to reform Ontario's insurance regime. Among other things, insurers (with the exception of farm mutuals) licensed in Ontario must comply with the International Association of Insurance Supervisors' stringent solvency standards, which were established in response to the recent global financial turmoil.
The Office of the Superintendent of Financial Institutions issued new guidance for reinsurance security agreements in 2010 requiring Canadian insurance companies that reinsure with reinsurers not registered in Canada to convert their existing security arrangements governed by reinsurance trust agreements into reinsurance security agreements in order to continue to receive capital or asset credit. January 1 2012 was targeted as the deadline.
The Office of the Superintendent of Financial Institutions has issued the final version of its new guidance on reinsurance security agreements. Commencing July 1 2011, all new collateral arrangements involving unlicensed reinsurance should be in the form of a reinsurance security agreement. The implementation target date of January 1 2012 remains for all existing ongoing reinsurance arrangements.
After reviewing submissions in response to its December 2008 discussion paper, the Office of the Superintendent of Financial Institutions (OSFI) has published its response paper: "Reforming OSFI's Regulatory and Supervisory Regime for Reinsurance". The response paper sets out OSFI's conclusions and decisions as to which of the proposed changes will be implemented.
The Office of the Superintendent of Financial Institutions (OSFI) recently issued documentation relating to the amendments to Part XIII of the Insurance Companies Act respecting foreign companies. The amendments make it clear that OSFI’s jurisdiction over the activities of foreign insurers primarily will be determined based on the location of the insuring activities.
Canada's federal insurance regulator, the Office of the Superintendent of Financial Institutions (OSFI), recently released a consultation paper relating to its "Regulatory and Supervisory Approach to Reinsurance". The paper describes OSFI's overall philosophy with respect to reinsurance and outlines certain initiatives that are being considered.
The Office of the Superintendent of Financial Institutions has issued an advisory clarifying the circumstances in which foreign insurers will be required to be registered in Canada and, if registered, the extent to which their businesses will be subject to the reporting, vesting of assets and other requirements of the Insurance Companies Act.
On April 20 2007 Bill C-37, An Act to Amend the Law Governing Financial Institutions and to Provide for Related and Consequential Matters, came into force. Certain changes, effective from Januray 1 2009, will clarify the provisions of the Insurance Companies Act that require foreign insurers to be registered in Canada.
Although Bill C-37 came into force on April 20 2007, the parts of the bill amending the Insurance Companies Act in relation to foreign insurers are not due to come into force until 2008. These changes will clarify the provisions of the act that require foreign insurers to be registered in Canada.