The Financial Markets Authority published its guidelines on capital adequacy requirements for insurers on July 21, 2022, together with the publication of the requirements of the Office of the Superintendent of Financial Institutions (OSFI).
Like OSFI, the Quebec regulator has adapted its capital requirements in anticipation of the entry into force of IFRS 17 — Insurance Contracts as of January 1, 2023. Through its amendments, the AMF says it recognizes the increased transparency and the better comparability of risks provided by IFRS 17.
Solvency under IFRS 17
The AMF notes that the guidelines are the result of sharing with OSFI, industry and “other stakeholders”. Chairman and CEO of the Authority, Louis Morisset particularly hailed the efforts made by the industry, “for whom the transition to the new IFRS 17 standard has mobilized energies and generated significant investments”. He underlined OSFI’s close collaboration in this multi-year project.
The AMF adds that the transition to IFRS 17 will be smooth for the Quebec insurance industry. The regulator considers this industry well capitalized as a whole, and that it will remain so during the transition to IFRS 17.
Caution in the face of volatility
The AMF explains that IFRS 17 will impact insurers’ accounting, actuarial valuation and disclosure practices, as well as insurers’ systems that support these activities.
The impacts of IFRS 17 will not be fully revealed until its full deployment from 2023, reports the Authority. The regulator adds that this environment is also marked by a rise in interest rates and high volatility on the stock markets. He said he expects insurers to take decisions that have an impact on their level of capital with caution.