Insurance

On September 30th, Jeremy Rudin, the newly appointed Superintendent of Financial Institutions gave his first public address at a meeting of the Economic Club of Canada in Toronto.  The speech presented the first opportunity to learn more about Rudin and the direction that he may take OSFI.  His speech certainly left us with some food for thought.

Since the financial crisis of 2008, the Office of the Superintendent of Financial Institutions has put significant effort into updating its expectations for strong corporate governance, including forming a special division to deal with corporate governance issues, updating its Corporate Governance Guideline and, last May, publishing an Advisory on Changes to the Board or Senior …

Yesterday, I posted some information about some voluntary commitments that the banks had made relating to residential mortgages, powers of attorney and joint accounts.  Clearly, the commitments were meant to address two hot topics in the industry, the continuing escalation of house prices, with the resulting high levels of consumer debt, and the aging population.  While it is difficult to find fault with any of the commitments that the banks made, or with the Government’s interest in these areas, they mark the third occasion this year where the Minister of Finance used the tool of a voluntary commitment to essentially introduce new regulation.

On January 1, 2014, Office of the Superintendent of Financial Institutions (“OSFI”) implemented Guideline E-19: Own Risk and Solvency Assessment (ORSA) and companion Guideline A-4: Internal Target Capital Ratio for Insurance Companies.  In this case, implementation meant that insurers were asked to, over a period of time, put in place the processes needed to meet the expectations of the Guidelines.  They had until March 31, 2014, to let their OSFI relationship manager know when in 2014 their ORSA report would be available.  Insurers looking for more insight into OSFI’s expectations may gain some valuable insight from their bank colleagues.

Last April, the Office of the Superintendent of Financial Institutions (OSFI) released for comment an updated version of its guideline on Legislative Compliance Management (to be renamed Regulatory Compliance Management) (RCM Guideline).  The RCM Guideline requires that every bank and insurance company adopt a regulatory compliance management framework and sets out OSFI’s expectations regarding regulatory compliance and the key elements of the framework.  The comment period on the draft expired in June and it is widely expected that the final updated guideline will be released sometime this fall.

OSFI has stated that the purpose for issuing the new RCM Guideline was to better align it with certain other Guidelines that have been recently updated, including their revised Corporate Governance Guideline.  The Corporate Governance Guideline overlaps with the RCM Guideline by setting out certain expectations for “control functions”, including the compliance function.  While OSFI does not consider that the revised RCM Guideline created any new requirements for banks and insurance companies, a careful reading of the draft suggests that, at very least, OSFI felt that there was a need to place greater emphasis on certain of their expectations.