OSFI Response Paper Outlines Reforms to Reinsurance Regulatory Regime

Introduction

Late last month, the Office of the Superintendent of Financial Institutions (Canada) (OSFI) released its long-awaited response paper (the Response Paper) on its regulatory and supervisory approach to reinsurance. The Response Paper followed an initial discussion paper (the Discussion Paper), which was released in late 2008 and summarized in the June 2009 edition of our Insurance Law Update.

The Response Paper contains numerous proposed changes to the regulation of reinsurance business in Canada, many of which OSFI hopes to implement by the end of 2010. The proposed changes will provide additional flexibility for insurers and will replace a number of quantitative limits with principles-based guidance relating to sound practices and governance.  This shift is consistent with OSFI's move away from a rules based regime and, further, is consistent with the principles contained in the Guideline on reinsurance risk management recently enacted in Quebec (as