Insights Header image
Insights Header image
Insights Header image

OSFI Releases Revised Guidelines to Reflect IFRS 17

April 6, 2022 Financial Services Bulletin 2 minute read

On April 4, 2022, the Office of the Superintendent of Financial Institutions (“OSFI”) released a letter to Federally Regulated Insurers (“FRIs”) outlining certain consequential changes as a result of the adoption of International Financial Reporting Standard 17 – Insurance Contracts (“IFRS 17”).  The letter (i) describes revisions to current Guideline D-5: Accounting for Structured Settlements (“Guideline D-5”) and International Financial Reporting Standard 9 – Financial Instruments and Disclosures (“IFRS 9”) and (ii) lists guidelines that will be rescinded for annual periods beginning on or after January 1, 2023, as a reflection of the changing regulatory landscape.

Guidelines Revised to Reflect IFRS 17

Revised versions of Guideline D-5 and IFRS 9 will come into force on January 1, 2023, to coincide with the implementation of IFRS 17.  Revisions to Guideline D-5 reflect stakeholder feedback received during the consultation process to enhance consistency with IFRS 17, particularly regarding financial reporting implications of Type 2 structured settlement arrangements (for instance, clarifying that the annuity asset may take the form of a financial asset (IFRS 9) or a reinsurance asset (IFRS 17) depending on the structure of the arrangement).  Similarly, revisions to IFRS 9 reflect updated references and terminology to ensure consistency with IFRS 17, especially relating to IFRS 9 section 3.2 (Annual Disclosures for Property & Casualty Insurers).

In addition, Guideline E-16: Participating Account Management and Disclosure to Participating Policyholders and Adjustable Policyholders remains under review. OSFI expects to release a revised version in Q1 of 2023.

OSFI also expects to publish revised capital guidelines including Life Insurance Capital Adequacy Test (LICAT), Minimum Capital Test (MCT) and Mortgage Insurer Capital Adequacy Test (MICAT) in August of 2022.  While the revised guidelines will be updated to reflect IFRS 17, OSFI intends to maintain capital frameworks consistent with current capital policies to the extent possible to reduce potential industry-wide impacts.

Guidelines Rescinded Upon the Implementation of IFRS 17

Based on the consultation, OSFI determined that a number of current guidelines will no longer be necessary or relevant after the adoption of IFRS 17 and IFRS 9 by all FRIs.  In particular, the following guidelines will be rescinded for annual periods beginning on or after January 1, 2023:

Incorporated into IFRS 9:

  • Guideline D-1A: Annual Disclosures (IFRS 9 section 3.1)
  • Guideline D-1B: Annual Disclosures (IFRS 9 section 3.2)
  • Guideline D-6: Derivatives Disclosure (IFRS 9 section 3.3)
  • Guideline D-10: Accounting for Financial Instruments Designated as Fair Value Option (IFRS 9 section 1.IV)

No longer relevant:

  • Guideline C-1: Impairment – Sound Credit Risk Assessment and Valuation Practices for Financial Instruments at Amortized Cost
  • Guideline D-9: Source of Earnings Disclosure (Life Insurance Companies)
  • Guideline E-12: Inter-segment Notes for Life Insurance Companies
  • Guideline F1-F12: Rescinded Letter

These guidelines will be removed from OSFI’s website in December of 2023.

FRIs should review revised Guideline D-5 and IFRS 9 to prepare for their implementation alongside IFRS 17 on January 1, 2023, and to ensure compliance moving forward.  While several guidelines remain under review, the final revised D-5 and IFRS 9 Guidelines demonstrate OSFI’s progress towards a successful implementation of IFRS 17.

By Darcy Ammerman and Ricki-Lee Williams (Articling Student)

A Cautionary Note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© TRC-Sadovod LLP 2022

Insights (5 Posts)View More

Featured Insight

Corporate Counsel CPD Webinar | Essential Leadership Practices: Supporting the resilience, engagement, and impact of your team

Join professional coach and certified stress management educator, Marla Warner, for an engaging program that will help you focus on elevating performance outcomes, while supporting your team’s engagement and wellbeing. You will learn how to foster trust and respect in your team, the benefits of “coaching”, and why gratitude, empathy and compassion are the superpowers for leaders in 2023 and beyond.

Details
Friday,  November 24, 2023
Featured Insight

TRC-Sadovod’s Employment and Labour Webinar 2023

Join us for TRC-Sadovod's annual Employment and Labour Webinar as we review and discuss current trends, emerging employment legal issues and provide practical solutions to help you manage your workforce.

Details
Thursday, November 30, 2023
Featured Insight

Enforcing Arbitration Agreements: Ontario Superior Court Raises a ‘Clause’ for Concern

This bulletin discusses a recent decision that found that an arbitration clause that contracts out of applicable employment standards legislation is invalid.

Read More
Nov 8, 2023
Featured Insight

Transparency for Talent: Proposed Legislation Would Mandate Salary Range and Artificial Intelligence Disclosure in Hiring Process

Ontario will propose legislation aimed at providing additional transparency to Ontario workers, including salary ranges and use of artificial intelligence.

Read More
Nov 8, 2023
Featured Insight

Environmental Obligations Trump Lenders: The Trend Continues

Re Mantle Materials Group, Ltd continues a recent trend in Alberta in which environmental remediation obligations are found to have a super priority.

Read More
Nov 8, 2023