AMF Releases Proposed Reinsurance Risk Management Guideline

On July 10, 2009, Quebec's financial services regulator, the Autorité des marchés financiers (AMF), released a draft guideline respecting reinsurance risk management by insurers carrying on business in Quebec. Reinsurance, while obviously an important risk management tool for insurers, exposes them to a number of risks, including residual insurance, legal, counterparty and liquidity risks. Citing the AMF's principles-based approach to regulation, the guideline sets out four broadly-drafted principles for the management of reinsurance risks by insurers:

1. A reinsurance risk management framework should be supported by effective governance. The AMF considers the board of directors and senior management to be ultimately responsible for reinsurance decisions and expects that they should, among other things, develop and implement a reinsurance strategy and risk management policy tailored to the insurer's risk profile, adequately monitor reinsurance transactions and review