OSFI draft guideline tightens oversight of Canadian branches of foreign insurers Canadian Underwriter

Canada’s solvency regulator has unveiled a new draft guideline that tightens the regulator’s oversight of foreign insurance policies and lender branches in Canada.

Among the other improvements to current polices, the Office of the Superintendent of Economical Establishments (OSFI) is requiring local branches in Canada to document the move of money in between the Canadian branch and its residence workplace outside the house of Canada. It is also expanding its definition of “branch management” to increase over and above just chief brokers or other single-individual reps.

“It has been commonly anticipated that the draft guideline would heighten governance anticipations of branches and their property offices, in aspect to handle a notion in some quarters that branches had it considerably simpler from a governance standpoint than federally incorporated insurers and banking institutions,” Stuart S. Carruthers and Andrew S. Cunningham of Stikeman Elliott LLP noticed in a weblog write-up. “Branches, specifically coverage branches, vary significantly in measurement and sophistication, from large running entities to very modest branches often in operate-off or just about dormant and without having regional total-time workers.”

OSFI does not regulate foreign coverage organizations as a total, but it does be expecting the Canadian branches to be compliant with the Insurance policy Organizations Act.

The new guideline, which is topic to general public consultation right until Dec. 18, proposes new regulations for documenting the move of cash between the Canadian branch and the international home business office.

“In predicaments wherever the international entity’s home business office performs product capabilities on behalf of the [Canadian] department, both directly or by way of its have outsourcing arrangements, OSFI expects department administration to document this sort of preparations with the international entity’s home workplace in prepared company amount agreements,” OSFI’s draft pointers examine. “In unique, any arrangements that contain the stream of money between the foreign entity’s home office and its branch really should be clearly documented.

“The facts of these kinds of arrangements should be provided to OSFI. Branch administration should really deliver OSFI with 30-days progress detect of any proposed fund transfer(s), or series of proposed fund transfers, to the foreign entity’s house workplace that materially deviate from the documented process provided to OSFI.”

Also new is the definition of “Branch Administration,” as Carruthers and Cunningham observe.

“As envisioned, the draft guideline defines the persons who keep regulatory responsibility for a foreign department much more broadly than the existing suggestions, which focus these kinds of duty on just one individual (the Chief Agent for an insurance coverage branch or the Principal Officer for a lender department), with allowance for delegation by that individual to the entity’s house office environment or somewhere else,” the Stikeman Elliott legal professionals wrote.

“In distinction, the draft guideline sites this kind of responsibilities on ‘Branch Administration,’ described as ‘individuals who have the authority and accountability of overseeing the business in Canada for, or on behalf of, the international entity.’ These people today may possibly incorporate the Chief Agent or Principal Officer, as properly as senior officers of the foreign entity, irrespective of the place they are located. OSFI expects the composition of branch administration to be commensurate with the total dimensions and complexity of the branch.”


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