The primary objective of the research was to explore impressions of OSFI in the discharge of a number of key elements of its mandate as a prudential regulator of property and casualty insurance companies, including guidance, supervisory activities and the approval process.
Findings are based on a total of 44 one-on-one in-person and telephone interviews completed among CEOs, CFOs and other senior executives of property and casualty insurance companies. Of these interviews, 43 were conducted in English and 1 was conducted in French. Interviews were undertaken from November 2014 to March 2015. The average interview length was 70 minutes.
A more detailed description of the methodology is provided in the report.
This consultation employed a qualitative methodology. While the findings provide an indication of participants' views about the issues explored, they cannot be generalized to the full population of P&C companies regulated by OSFI. The findings from this research are intended to provide themes and direction.
OSFI was viewed consistently as a regulator with which the industry can work effectively. Participants pointed to a number of factors that contribute to this impression:
There was a perception that OSFI has worked to enhance relationships with the P&C companies it regulates through open and professional dialogue. These efforts, in tandem with complementary efforts on the part of the industry, were seen as fostering transparency, which participants considered fundamental to effective regulation.
Participants praised OSFI for its efforts to engage members of the industry in advance of implementing new guidance. The multi-stage discussions that OSFI had with P&C companies regarding changes to the MCT were often cited as an effective industry engagement process. Participants considered these discussions effective because OSFI:
While OSFI was viewed as having established a strong and constructive working relationship with industry members, three issues were identified as sources of increasing concern: rising capital requirements; regulatory burden; increasingly prescriptive guidance.
Although participants recognized that OSFI has a prudential mandate, there was a perception that OSFI is requiring companies to hold ever-increasing levels of capital. Particularly among smaller companies, or those with highly specialized product lines, increasing capital requirements were viewed as disadvantaging some companies. Some observed that high capital levels place companies operating in global markets at a competitive disadvantage.
Regulatory burden was perceived as a concern to the industry for two reasons. First, regulatory compliance was viewed as requiring an increasing allocation of time and resources, with the associated additional operational costs having the potential to adversely impact competitiveness. Second, participants reported that a greater allocation of management focus and time is being required to ensure regulatory compliance and this is impinging on management's principal responsibility to run the company.
Finally, there was a perception that OSFI is becoming increasingly prescriptive in some of its guidance, to the extent, some participants suggested, that OSFI may be moving beyond its regulatory role and edging into "management". Some provisions of the Corporate Governance Guideline were cited in this context.
OSFI was generally viewed as responding in a timely manner to market changes or to industry suggestions that guidance needs updating. OSFI's efforts to keep abreast of developments in the Canadian P&C industry, as well as global trends and initiatives, were viewed as enhancing OSFI's ability to respond appropriately to market changes. The introduction of the ORSA guidance was cited as an example.
Overall, OSFI's guidance was perceived to be clearly written. However, the principles-based nature of OSFI's guidance was viewed by some, particularly smaller companies, to pose challenges in interpretation and application.
The weakest evaluations of OSFI emerged from guidance-related issues. Particularly among smaller companies, there was a perception that OSFI has not fostered a level playing field in its application of guidance and that this has adversely affected the competitiveness of some companies. Concern was also raised about the application of guidance in a manner that reflects the nature, size and complexity of companies. While many acknowledged that the guidance clearly states that it can be scaled to reflect individual company characteristics, many were unsure whether OSFI follows this in practice.
Other concerns raised about guidance related to content rather than clarity. Concerns included:
Only those whose companies had made an application for an approval in the past 1-2 years were asked to provide their impressions of the approval process (18 participants). Among this group, evaluations were positive. Participants commented that OSFI maintains an open dialogue with companies throughout the process, that it shows an understanding of the fundamental business issues associated with the applications, and that it is sensitive to the need for a timely response to applications.
While overall evaluations of the approval process tended to be positive, some concerns were raised.
There was a perception among some that the approval process has been unreasonably slow. Some reported that OSFI has communicated that it is currently experiencing a back-log in the Approvals Division.
Some participants were left with an impression of unclear lines of responsibility and a lack of coordination within OSFI for some approvals. This was perceived to result in overlapping requests for information being made of the company (as different levels within OSFI are asking for information).
Further, some felt that OSFI may not have a sufficiently clear understanding of issues specific to companies whose book of business is different from the norm.
Both large and small companies perceived OSFI to be effective in supervising their companies. Most participants felt their company has had an opportunity to discuss issues of concern with OSFI prior to OSFI coming to a conclusion and believe that OSFI is responsive to concerns raised. Further, most evaluate OSFI's written correspondence positively. It was generally viewed as clear, timely and consistent with verbal communications.
Overall evaluations of Relationship Managers tended to be positive and were often attributed to:
Smaller companies often raised a concern about RM turnover. Companies that have experienced this find the lack of continuity disruptive.
When asked to identify areas for improvement, participants suggested that RMs could be better briefed on new or significantly revised guidance.
Cyber risk was cited most frequently. A number of other risk areas were also cited, although by fewer participants in each case.
Participants were provided with an opportunity to identify areas in which OSFI might improve. Given the comprehensiveness of the questionnaire, suggested improvements were identified both in response to this question as well as in response to questions delving into specific aspects of OSFI's mandate. Suggestions made included that OSFI might:
The cost of this research was $59,710.90 (HST included).
The Strategic Counsel certifies that the deliverables fully comply with the Government of Canada political neutrality requirements outlined in the Communications Policy of the Government of Canada and Procedures for Planning and Contracting Public Opinion Research. Specifically, the deliverables do not contain any reference to electoral voting intentions, political party preferences, standings with the electorate, or ratings of the performance of a political party or its leader.