OSFI updates Minimum Capital Test guideline to allow natural catastrophe bonds

Original title: Regulatory notice on using natural catastrophe bonds in the Minimum Capital Test guideline

OSFI has issued a regulatory notice providing guidance on the use of natural catastrophe bonds in the Minimum Capital Test (MCT) guideline. The notice clarifies how property and casualty insurers should incorporate natural catastrophe bonds into their capital adequacy calculations. This update allows insurers to better manage catastrophic risk and diversify their risk transfer strategies while maintaining appropriate regulatory capital levels.

What changed

• OSFI provides clarification on the treatment and recognition of natural catastrophe bonds within the Minimum Capital Test guideline for determining minimum capital requirements
• Property and casualty companies can now incorporate natural catastrophe bonds into their capital adequacy calculations under specified conditions
• The regulatory notice establishes guidelines for how natural catastrophe bonds qualify as eligible capital or risk mitigation tools in MCT calculations

Who is affected

Property and casualty insurance companies regulated by OSFI in Canada

Summary generated by a language model; the official text prevails. Not legal advice.