OSFI Finalizing New Guidance for Reinsurance Security Agreements in Canada

On August 9, the Office of the Superintendent of Financial Institutions (OSFI) released draft guidance for reinsurance security agreements (the RSA Guidance), marking a shift away from the use of standard form reinsurance trust agreements. The RSA Guidance (i) sets out OSFI's minimum standards for reinsurance security agreements, (ii) includes a requirement to secure a legal opinion to accompany each agreement, and (iii) outlines expectations regarding the operation of the reinsurance security agreement process.

This RSA Guidance applies to all federally regulated insurers, including life insurers and property and casualty insurers, domestic and foreign insurance companies in respect of their business in Canada, and registered reinsurers and societies for reinsurance cessions and retrocessions. All newly entered agreements should follow the RSA Guidance beginning January 1, 2011. OSFI expects companies to replace existing agreements by January 1, 2012. The draft