OSFI Releases Guideline On Risk Oversight Frameworks For P&C Insurers' Internal Models Of Minimum Capital Requirements

On June 21, 2019, Canada’s Office of the Superintendent of Financial Institutions (“OSFI”) released Draft Guideline E-25: Internal Model Oversight Framework (the “Draft Guideline”), which applies to the risk oversight frameworks that property and casualty insurers create and apply to the internal models that certain of them develop to comply with OSFI’s regulatory capital requirements under the Minimum Capital Test (MCT) Guideline.

It is important to note (i) that the focus of the Draft Guideline is on how insurers deal with the risks inherent in developing and deploying their internal models, rather than on the substance of the models themselves; and (ii) that the Draft Guideline affects only those insurers that use an internal model, which requires OSFI approval.