Canada should focus on cyber and climate change after IFRS 17, say life re/insurers
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Canadian life insurers and reinsurers are generally satisfied with their regulator’s performance and suggest that its priorities should be cyber security and climate change risks after its work on IFRS 17.
Canada’s Office of the Superintendent of Financial Institutions was praised for being proactive in identifying and responding to emerging risks, effective in communication and having appropriately focused on the transition to IFRS 17, research the regulator commissioned earlier this year has found. Firms overall were happy with OSFI’s supervisory activities and its process for regulatory approval applications.
Insurers ‘overloaded’ with IFRS 17 demands
Canada is one of the countries in the world to integrate IFRS 17 into its capital standards. OSFI recently finalised the Life Insurance Capital Adequacy Test 2023, its life insurance capital guideline, to reflect the transition to IFRS 17 for fiscal years beginning on or after 1 January 2023.
The most commonly mentioned concern – by just under half of the participants – was the number of different consultations and data requests companies have been asked to respond to, particularly with IFRS 17 preparations and LICAT revisions.
The authority was described as “overloading” the industry with a variety of other consultations, “with no clear prioritisation”.
Going forward, after IFRS 17, the most commonly suggested priorities were cyber security, followed by climate change.
In a survey conducted in 2016/17, climate change risk was not perceived as a priority and is now considered an emerging risk.
OSFI ‘overly prescriptive’ with cyber security
OSFI said it was widely perceived to be actively addressing cyber security. However, for participants that had issues in this area, the regulator was said to be “overly prescriptive” in its approach and its cyber incident reporting requirements were perceived to be “unnecessarily onerous”.
Some suggested OSFI should consult more with the industry, both on regulatory principles and to develop useful and realistic incident reporting requirements.
The regulator said most respondents had little to say about issues regarding changing technology, such as predictive analytics, artificial intelligence and machine learning, which could pose underwriting risks.
Those who commented perceived OSFI as “not to be doing much” in this area.
Commissioned by OSFI, the research was based on 42 interviews with 58 top executives across 35 life re/insurers between 28 February and 3 May.
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