Osfi Reinsurance Security Agreement Guidance

The Office of the Superintendent of Financial Institutions (OSFI) of Canada published a draft guidelines for reinsurance guarantee agreements in August 2010. The document defines the new capital/capital credit regime for unregistered reinsurance. The notice, which can be invoked by OSFI and the receiving society, may be subject to the usual qualifications. It must be made available to a lawyer who has technical knowledge in the area of personal property security legislation in the province where the assets are held, or who reasonably relies on the legal advice of those with such expertise. With respect to a given RSA, in which the divested company authorizes a new type of assets that are not yet covered by the accompanying legal opinion, OSFI expects the entity to receive additional legal advice stating that a valid and enforceable security interest has been or will be created in its favour for this new type of asset. If the foreign company`s chief agent is legal counsel to the company, the foreign company should seek outside legal advice. If the legal advice of a recipient company is provided by an in-house legal advisor, OSFI expects the notice to indicate that it is provided by a lawyer in his or her professional capacity and not under any other title. Where the reinsurance contract provides for a successful agreement, the contract must clearly provide that in the event of insolvency of the client or reinsurance insurer, the retained funds, net of any surplus owed to the reinsurer, must be a part of the estate of the general estate of the client or a portion of the assets of a foreign insurance company within the meaning of the WURA and the law in Canada. The OSFI process is divided into three phases. Phase I includes a parallel consultation process for reinsurance activities contained in the draft Minimum Capital Testing (MCT) directive for 2019. Phase II includes changes to the guidelines for (1) prudential limits and restrictions (i.e.: