Implementation Of Reinsurance Security Agreements: An Update And New Guidance From OSFI

As described in a previous article, the Office of the Superintendent of Financial Institutions ("OSFI"), Canada's federal regulator of banks, insurers, loan and trust companies and similar institutions, issued new Guidance in December 2010 (the "RSA Guidance") which requires Canadian insurance companies that reinsure with reinsurers not registered in Canada ("unregistered reinsurers") to convert their existing security arrangements governed by reinsurance trust agreements ("RTAs") into reinsurance security agreements ("RSAs") in order to continue to receive capital/asset credit in respect of the unregistered reinsurance.

converting to RSAs: issues and challenges

The RSA Guidance targeted January 1, 2012 as the deadline for completing RTA conversions for all insurers in Canada. We understand that although many RTA conversions have been started, relatively few have been finalized to date. One reason for the slow progress is that various practical issues that were not