OSFI ready to roll out risk ratings

The federal insurance supervisor will soon begin sharing its new “risk ratings” with insurers for the 2002 year. At a recent luncheon of the Canadian Insurance Accountants Association (CIAA) in Toronto, speaker John Fernandes, director of regulatory and supervisory practices at the Office of the Superintendent of Financial Institutions (OSFI) told the audience while one of the composite risk ratings, board oversight, will be shared for this year, full implementation will take three years.

The new system is a response to regulatory streamlining which puts the onus on insurers to oversee their own risk management.

Some debate was heard over the sharing of ratings and the fear insurers would use other company ratings to gain a competitive advantage. Fernandes notes that composite ratings will be made unidentifiable and act as benchmarks. He adds that the system has been made flexible to accommodate different sized institutions and different operating systems, and to allow companies to focus on areas of the highest net risk.

OSFI intends to rate this process for each insurer based on criteria including credit, markets, liquidity, operations, legal and strategic risks.

The ratings have been pilot tested and refined with input from the Insurance Bureau of Canada (IBC).