POR Registration Number: POR 015-14
PWGSC Contract number: 59017-140080/001/CY
Contract award date: July 14, 2014
Report Delivery date: June 25, 2015
Prepared for the: Office of the Superintendent of Financial Institutions (OSFI)
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For more information on this report, please e-mail:
information@osfi-bsif.gc.ca
Prepared by:
The Strategic Counsel
2 Bloor Street West, Suite 1902
Toronto, Ontario, Canada
Tel: (416) 975-4465 Fax: (416) 975-1883
Email: info@thestrategiccounsel.com
Website:www.thestrategiccounsel.com
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.
OSFI has commissioned consultations with senior members of the financial community to obtain their assessment of OSFI's effectiveness as a regulator and supervisor since 1998.
In the case of Property and Casualty (P&C) insurance companies, OSFI established a three-year consultations cycle in 2009. A subsequent consultation followed in 2011-2012. In 2014, OSFI commissioned The Strategic Counsel, an independent research firm, to conduct the 2014-2015 Property and Casualty Sector Consultation (PCSC). As per usual practice, the consultation comprised a series of confidential interviews with senior executives.
The primary objective of the research was to obtain impressions about how OSFI discharges key elements of its mandate as a regulator of federally incorporated P&C insurance companies.
More specific objectives were to obtain impressions of:
TYPE OF RESEARCH SESSIONS
The PCSC followed the methodological approach employed in prior consultations conducted for OSFI: qualitative, semi-structured, one-on-one interviews. This qualitative approach provided a depth of insight not achievable through other research methods, in particular through strictly quantitative surveys. One-on-one interviews allowed for probing deeply into underlying assessments of OSFI's effectiveness.
Whenever possible, interviews took place in the participant's office. This is because face-to-face interviews enable enhanced rapport between interviewee and interviewer, which provides for better quality information. Telephone interviews took place when requested by the interviewee.
SAMPLE
OSFI provided The Strategic Counsel with a sample of 153 active P&C insurance companies, from which it developed a sampling plan to ensure representation of large, small, domestic and foreign P&C companies. The Strategic Counsel then randomly selected CEOs and CFOs from companies within these categories. The primary contact at each company was invited to seek input from colleagues prior to the interview if they so wished. This approach enables the research reporting to reflect a company's comprehensive perspective while eliminating the need to speak with multiple individuals within each company.
RECUITMENT OF PARTICIPANTS
The Strategic Counsel sent selected potential interviewees a package containing an invitation letter from the Superintendent of OSFI, as well as a copy of the interview guide to allow potential interviewees to think about the issues to be discussed during the interviews.
Following distribution of the package, Strategic Counsel senior consultants contacted their respective interviewees to confirm their willingness to participate in the consultation and to set a date and time, as appropriate.
NUMBER AND AVERAGE LENGTH OF INTERVIEWS
The qualitative research findings in this report are based on a total of 44 one-on-one in person and telephone interviews completed among CEOs, CFOs and other senior executives designated as interviewees by participating companies.
DATES OF INTERVIEWS
Interviews took place between November 2014 and March 2015.
| HEADING | COMPANY DESCRIPTION | TOTAL NUMBER OF PARTICIPANTS INTERVIEWED | NUMER OF COMPANIES IN POPULATION FROM WHICH PARTICIPANTS WERE DRAWN |
|---|---|---|---|
| Total Sample | 44 | 153 | |
| Asset Size | Large – Participants at companies with assets of at least $1 billion | 19 | 34 |
| Small – Participants at companies with assets under $1 billion | 25 | 119 |
The research conducted was qualitative in nature. As such, the results provide an indication of participants' views on the issues explored, but cannot be generalized to the full population of P&C companies regulated by OSFI. Rather, the findings from this research provide themes and direction. They cannot be used to estimate the numeric proportion or number of individuals in the population who hold a particular opinion because they are not statistically projectable.
Q. Overall, how satisfied are you with OSFI as the principal prudential regulator and supervisor of Canada's financial services industry?
Participants were almost universal in reporting that overall they are highly satisfied with OSFI as the regulator and supervisor of Canada's financial services industry. Strong satisfaction appears to be consistent across both larger and smaller companies.
There are a number of factors that underlie these positive impressions:
Those with positive impressions also described OSFI as:
Although overall views were generally positive, a number of concerns were raised about OSFI's approach to regulation.
Q. How would you rate OSFI on the extent to which OSFI focuses on the appropriate areas of risk in the property and casualty insurance sector?
Overall, most participants tended to have positive perceptions of OSFI on this issue. OSFI was seen to be focusing on the same issues that the companies themselves consider to be of importance. Examples provided include:
Further, OSFI was generally perceived to have had a "good line of sight to emerging risks". In particular, participants often cited cyber risk as an example.
OSFI's approach to regulation of the P&C insurance sector was sometimes perceived to be informed by a banking perspective.
Q. Overall, how satisfied are you that OSFI is focusing on the appropriate capital-related issues?
Most participants were satisfied that OSFI is focusing on the appropriate capital-related issues, citing ORSA and the MCT as examples. Some identified ORSA as a beneficial undertaking that has enhanced their company's "quantification of risk". The revision of the MCT was viewed as a needed evolution.
OSFI's prudential approach to capital-related issues was considered appropriate and as placing it in-line with, or ahead of, other jurisdictions globally.
Some participants believed that OSFI's overall position on capital requirements is overly conservative. Further, some raised concerns about OSFI's treatment of specific capital-related issues. For example:
Q. What one or two risk areas do you believe should be priorities for OSFI in the next couple of years pertaining to companies in the property and casualty insurance sector?
Cyber risk was cited most frequently by participants as a risk area that should be an OSFI priority. A number of other risk areas were also cited:
Regulatory risk was identified by a number of participants on an unaided basis as a potential risk to the industry. Although not often raised in response to this particular question, it did arise in response to probing in other parts of the consultation.
Those who mentioned regulatory risk raised concerns that the volume and pace of regulatory change that has occurred over the past two to three years (e.g. changes to MCT, introduction of new guidance and/or revision to existing guidance including ORSA, Corporate Governance Guideline, B-9 Earthquake Exposure Sound Practices) could have unintended negative consequences for the industry.
Q. How would you rate OSFI with respect to how proactive it is in dealing with emerging issues pertaining to the property and casualty insurance sector?
A number of participants did not feel that they could provide an informed response on this issue because they have no direct exposure to OSFI activity in this area.
Among those with an opinion, impressions of OSFI's proactivity in dealing with emerging issues tended to be more moderately positive than strongly positive. Positive views were driven by the perception that OSFI is focusing on issues that the industry considers to be important (e.g. the dissemination of the "self-assessment" survey and the seminar held about cyber risk are both viewed as illustrations of OSFI's proactivity).
Other examples of issues on which OSFI is seen to be proactive are:
Q. As needed, OSFI develops Guidance (which may include guidelines and advisories) for companies in the property and casualty insurance sector. How would you rate OSFI with respect to responding in a timely manner to market changes or to industry suggestions that guidance needs updating?
Impressions of OSFI on this issue were generally positive, with commentary being fairly consistent across larger and smaller companies.
OSFI's commitment to keeping abreast of the Canadian P&C industry as well as global trends and initiatives was viewed as a key factor in its ability to respond appropriately to market changes. The introduction of the ORSA guidance was cited as an example.
A few participants felt that OSFI may be moving too quickly to introduce guidance in response to global initiatives, suggesting OSFI does not need to be on the "bleeding edge" of these global initiatives as it may competitively disadvantage Canadian companies.
OSFI's response to input from the P&C industry in a number of recent consultations (both through the Insurance Bureau of Canada and bilaterally with individual companies) was viewed as evidence that the regulator is responding to industry suggestions. The MCT consultation was most often cited as an example. Participants acknowledged that OSFI has made changes to final guidance based on industry comments.
Among those who evaluated OSFI more moderately on this issue, no single issue was raised consistently.
Q. How would you rate OSFI with respect to developing guidance that strikes an appropriate balance between prudential considerations and the need for institutions to compete?
Of all the issues explored in the consultation, positive assessments of OSFI were lowest for this question. This was particularly the case among smaller P&C companies.
Among those with more positive impressions, OSFI was seen to be regulating in a manner consistent with its prudential mandate.
More neutral and negative commentary focused on two themes:
Q. Overall, how effective do you think OSFI's guidance is in providing a clear indication of its expectations?
Overall, impressions of the clarity of guidance tended toward the positive, although more negative commentary was provided about specific pieces of guidance.
More favourable impressions were largely driven by perceptions that OSFI has been effective in communicating its expectations through discussions with the industry in advance of releasing guidance and that the guidance is clearly written (e.g. B-9 Earthquake Exposure Sound Practices and Corporate Governance Guideline).
The more negative commentary on this issue often stemmed from frustrations about ORSA. Some were of the view that the guidance did not provide sufficient clarity as to the expected nature and scope of submissions.
Q. How would you rate OSFI's guidance on the extent to which it conveys that the guidance may be scaled to reflect the nature, size and complexity of your company?
Commentary here was amongst the most negative of all areas explored in the consultation. While many participants acknowledged that the guidance clearly states that it may be scaled to reflect the nature, size and complexity of companies, many said they are unsure that OSFI would actually apply guidance in this manner.
Those with less positive assessments of this issue raised a number of concerns. Some believed that aspects of OSFI's guidance are so prescriptive that flexibility based on individual company characteristics is simply not feasible. In particular, some smaller companies were unsure as to how they would address "scalability" in practice and still comply with OSFI requirements. Further, they felt that the onus to apply scalability is placed on them. Other participants who provided negative assessments here felt that their company's size or complexity has not been taken into account during the supervisory process.
Those who had more positive perceptions of OSFI on this issue felt that OSFI had taken into account their company's characteristics in the application of guidance.
Q. Overall, how would you rate OSFI with respect to responding to questions your company has brought forward concerning OSFI guidance?
Impressions of OSFI on this measure were mainly positive. Among those who held positive views, commentary tended to focus on:
Those who held more negative views raised the following issues:
Q. In January 2013, OSFI introduced a revised Guideline on Corporate Governance. This Guideline had not been reviewed or updated since its original publication in 2003. How effective has OSFI been in communicating its expectations to the P&C insurance industry regarding corporate governance (e.g. as set out in the Guideline; as communicated via presentations and training following the release of the Guideline; responding to requests for information or interpretation of the Guideline)?
A number of participants did not provide commentary on this issue, either because they represent a branch and thus the guidance has limited applicability or because they did not feel sufficiently knowledgeable about this guidance to comment.
Among those who expressed a view, assessments of OSFI on this issue were generally positive. Positive impressions reflect a number of themes:
While the focus of this question was OSFI's effectiveness in communicating expectations, some comments about the substance of the guidance itself were made. A number of participants expressed concern that the guideline is too theoretical in nature. Some saw the guideline as intrusive.
Concerns raised by smaller companies included that OSFI is not applying guidance in a manner that takes into account the size of companies and that the guidance is challenging to interpret and implement.
Q. In February 2013, OSFI released a revised version of Guideline B-9: Earthquake Exposure Sound Practices. Overall, how effective has OSFI been in communicating its expectations to the industry regarding revised Guideline B-9: Earthquake Exposure Sound Practices (e.g. as set out in the Guideline; as communicated via presentations and training following the release of the Guideline; responding to requests for information or interpretation of the Guideline)?
A number of participants did not comment on this issue as B-9 does not apply to their companies.
Among those who did comment, evaluations of OSFI's effectiveness in communicating its expectations were generally positive. Key reasons for positive evaluations were that those affected by B-9 were provided with an opportunity to provide feedback to OSFI in the development of the guidance and that the guidance was perceived to be clear.
Several participants held negative perceptions of OSFI on this issue, driven primarily by one of the provisions in the guideline itself rather than the effectiveness of OSFI's communications: a change in the calculation of the Probable Maximum Loss (PML).
Q. In November 2013, OSFI issued final versions of Guideline A-4: Regulatory Capital and Internal Capital Targets and Guideline E-19: Own Risk and Solvency Assessment (ORSA) for implementation beginning January 1, 2014. How effective has OSFI been in communicating its expectations to the industry regarding Regulatory Capital and Internal Capital Targets as set out in Guideline A-4 (e.g. as set out in the Guideline; as communicated via presentations and training before or following the release of the Guideline; responding to requests for information or interpretation of the Guideline)?
Perceptions in this area were mainly positive, and did not vary based on size of company. Many evaluated OSFI positively because they believed that OSFI had actively communicated its expectations regarding A-4 to the industry at various conferences and seminars and that companies were having no difficulty in applying the Guideline.
Q. How effective has OSFI been in communicating its expectations to the industry regarding Own Risk and Solvency Assessment (ORSA) as set out in Guideline E-19 (e.g. as set out in the Guideline; as communicated via presentations and training before or following the release of the Guideline; responding to requests for information or interpretation of the Guideline)?
Comparatively, this is an issue on which participants tended to evaluate OSFI more negatively. However, there was also a strong representation of positive commentary.
Many believed that OSFI had been effective in communicating the rationale behind ORSA and its objectives for the industry. Further, a number felt, philosophically, that ORSA has been an exercise in which companies should be engaged.
Much of the negative commentary regarding ORSA related to the process of preparing the ORSA documents for submission to OSFI. Strong feelings were expressed that OSFI should have provided greater direction on how to complete the ORSA submission, including more clearly articulating what it was expecting to receive.
A few participants noted they had found the key metrics report unclear.
Expressions of concern extended beyond preparation of submissions to the potential outcome of the exercise. Some felt their efforts were a shot in the dark given what they perceived as the vague nature of the guidance. As such, they were concerned there will be a need to rework significant portions of their submissions.
Some expressed strong concern about how the capital requirements calculated through the MCT will be affected in light of the outcomes of ORSA. Some raised the concern that capital requirements may be increased as a consequence.
Q. In May 2013, OSFI published a Discussion Paper outlining proposed changes to the Minimum Capital Test (MCT) and the Branch Adequacy of Assets Test (BAAT), and invited the P&C industry to comment. At the same time, OSFI also requested all P&C insurers to participate in a quantitative impact study (QIS) to estimate the capital impact of the proposed changes.
Subsequent to these activities, in December 2013, the 2015 Draft Minimum Capital Test (MCT) Guideline was issued for industry comment. Finally, in September 2014 the final 2015 MCT Guideline was issued, to be effective January 1, 2015.
How satisfied are you that your company had an opportunity to participate in the consultation process concerning revisions to the Minimum Capital Test Guideline?
Participants were strongly satisfied with the opportunity afforded to the industry to participate in the consultation process for MCT revisions. Most participants reported that in some manner, whether by providing feedback through the Insurance Bureau of Canada (IBC), providing feedback directly to OSFI or through participation in a Quantitative Impact Survey (QIS), their companies had been given an opportunity to participate in the consultation process.
Participants felt that the consultation process was exemplary for a number of reasons:
Q. Overall, how effective has OSFI been in communicating its expectations to the industry with regards to the new MCT requirements, to be implemented in January 2015 (e.g. as set out in the Guideline; as communicated via presentations and training before or following the release of the Guideline; responding to requests for information or interpretation of the Guideline)?
Most companies believed that OSFI has been effective in communicating its expectations. This was attributed in the main to the lengthy, detailed, and dialogue-based consultation process that led up to the introduction of the guideline.
Q. As you know, OSFI's Superintendent, and in some cases, the Minister of Finance, must approve certain initiatives companies in the property and casualty insurance sector wish to take. The following questions pertain to OSFI's approvals process as it relates to your company. Has your company made a request for a regulatory approval in the past 1-2 years?
Q.: Thinking about request(s) for a regulatory approval your company has submitted in the past 1-2 years, what is your overall level of satisfaction with OSFI in processing applications from your company?
Over one-half of participants reported that their company had not made a request for a regulatory approval or ruling in the past one to two years. Only those whose company had made a request within this timeframe were asked to provide opinions regarding the approval process. Consequently, the number of participants providing commentary on the approvals-related questions is very small (18 or fewer).
Overall, satisfaction with OSFI in processing applications was strong, although positive comments were tempered by some concerns.
Distilling both positive and negative comments suggests that turnaround time is a key driver of satisfaction with OSFI's approval process. Positive opinions focused on OSFI's responsiveness, ability to turn approvals around quickly, and, clear understanding of the nature of the request, based on the pertinence of questions asked by Approvals' employees about the applications.
Those with more negative commentary tended to focus on two issues:
Q. How would you rate OSFI with respect to communicating its expectations as it relates to the information required in support of processing a request for a regulatory approval?
Positive impressions on this issue were considerably more muted than in other areas explored in the consultation.
Those who believed OSFI has been effective in communicating its expectations reported either that they have experienced no "surprises" in the process or simply that OSFI has been efficient in processing their applications.
Some respondents felt that while OSFI's expectations were clearly articulated at the outset of the approval process, many questions and issues subsequently arose during the course of the process.
Q. How would you rate OSFI with respect to responding to your company's requests for updates on the status of applications?
Q. How would you rate OSFI with respect to providing an opportunity for your company to discuss issues of concern with OSFI prior to OSFI coming to a conclusion?
The group that provided an opinion about OSFI's response to update requests was very small (13 participants).
Among those who provided commentary, impressions were generally positive. Most reported that either a representative from the Approvals Division or their Relationship Manager had been responsive when requests were made.
When exploring the issue of having an opportunity to discuss areas of concern prior to OSFI reaching a conclusion, most of those with an opinion held at least somewhat positive impressions. However, a few participants suggested that while OSFI is open to discussion, they were less sure about the extent to which OSFI takes into account the points that companies bring forward during the process.
Q. The following questions pertain to OSFI's supervision as it relates to your company. Overall, how effective do you think OSFI is in supervising your company (e.g., ongoing monitoring, on-site reviews including supervisory recommendations, reporting requirements, etc.)?
Overall, evaluations of OSFI's supervision were highly positive among both large and small companies. Positive comments focused on perceptions that:
Q. How would you rate OSFI on the extent to which it supervises (e.g., ongoing monitoring, on-site reviews including supervisory recommendations, reporting requirements, etc.) in a manner that is scaled to reflect the nature, size and complexity of your company?
Impressions of OSFI on this issue were mixed. Impressions tended toward the positive among larger companies. OSFI was perceived to have the requisite knowledge of the companies to ensure that their size and characteristics are taken into account.
Neutral to negative impressions were driven mainly by participants from some smaller companies and branches who raised concerns that OSFI appears to be taking a "one-size fits all" approach to the application of guidance.
Q. How would you rate OSFI with respect to providing an opportunity for your company to discuss issues of concern with OSFI prior to OSFI coming to a conclusion?
Impressions of OSFI on this measure were generally positive. Providing an opportunity to discuss issues of concern was perceived by many to be one of OSFI's strengths. A number of factors contributed to these positive impressions:
Negative commentary was limited and did not disclose any consistently held concerns.
Q. Overall, how would you rate OSFI with respect to its written correspondence (e.g., clarity; timeliness; and, consistency between written and oral communications)?
Most participants provided positive feedback about OSFI's written correspondence. It was generally viewed as being well-written.
Among those who commented on the area of consistency, most said that written correspondence is indeed consistent with oral communications.
Among a small number of respondents who expressed more negative perceptions, comments tended to focus on a perception that the delivery of supervisory letters had not been timely.
Q. Which members of the supervisory staff have you dealt with over the past 12 months?
Q. How would you rate the overall knowledge level of your OSFI Relationship Manager (e.g. knowledge of legislation, OSFI guidelines and supervisory practices; property and casualty insurance sector issues and risks; and, your company)?
All participants reported having had contact with their Relationship Manager (RM) over the past year.
Impressions of RM knowledge levels tended to be positive. These assessments were driven by the perception that RMs have a depth of understanding concerning the company to which they are assigned and of the business and industry issues relevant to that company's operations.
Positive impressions were also linked to RM activity on two fronts:
There was a group of participants who held more neutral impressions of RM knowledge. Their assessment was linked to frustrations arising from RM turnover. These participants observed that with the arrival of a new RM there is a period of acclimatization that presents challenges to the company. Already heavily subscribed, company resources must be allocated to educating the new RM about the company and its book of business. Further, there was a perception that during the acclimatization period it is sometimes necessary to elevate issues or questions to a more senior member of the OSFI team because the new RM lacks the necessary detailed knowledge of the company.
For others, a new RM had not led to any issues or concerns. These participants reported that their new RM had worked hard to get to know their business and to grasp relevant issues. However, due to the short tenure of the RM with their company, these participants did not feel they could provide further commentary.
Q. How would you rate the efforts of your Relationship Manager in coordinating the activities of OSFI's actuarial and other specialist teams?
A number of companies did not comment on this issue because there had been little, if any, need for the RM to coordinate activities with any of the specialist support groups.
Among those who offered an opinion, there tended to be strongly positive impressions of RM efforts in coordinating the activities of OSFI's actuarial and other specialist teams.
Comments reflected perceptions that:
Q. Thinking of your company's interactions with your Relationship Manager, what one or two things does OSFI need to improve?
Few suggestions for improvements were provided. Those who brought forward recommendations tended to be from smaller companies. They recommended reducing RM turnover because of its implications for the relationship with OSFI:
Beyond the issue of RM turnover, some participants recommended that RMs should be more comprehensively trained in support of new guidance. There was a perception that RMs are sometimes unable to provide clear or informed responses to questions concerning new guidance.
A limited number of participants offered suggestions for other improvements. These were:
Q. Overall, how satisfied are you with OSFI actuarial and other specialist teams that you have dealt with over the past 12 months?
Q. Thinking of your company's interactions with OSFI actuarial and other specialist teams (other than your Relationship Manager), what one or two things does OSFI need to improve?
Eighteen participants did not provide responses to questions about actuarial and specialist teams, with most of these reporting that they had not had direct or recent dealings with any of OSFI's actuarial and other specialist teams.
Among those with an opinion, most reported strong satisfaction with their interactions.
A number of comments focused on the Actuarial Division, which was perceived as:
When asked to identify areas of improvement for the actuarial or other specialist teams, some respondents had no suggestions and among the small group who did, no consistent suggestions emerged.
Q. Thinking about your dealings with OSFI's staff on any supervisory or regulatory matter, how satisfied are you with OSFI's capacity to interact with you in the official language of your choice (i.e., English or French)?
Q. (If dissatisfied) Which of the following are areas in which you are dissatisfied?
Almost all participants reported that they are very satisfied with OSFI's capacity to interact in their official language of choice. Of the very few who held negative perceptions, no one area of concern emerged.
Q. What one or two things does OSFI need to improve upon as a regulator and supervisor?
Participants were provided with an opportunity to identify areas in which OSFI might improve. The following are the key themes:
The Strategic Counsel has been retained by the Office of the Superintendent of Financial Institutions (OSFI) to conduct this survey with senior executives of property and casualty insurance and reinsurance companies.
Since 1998, OSFI has commissioned consultations with senior members of the financial community to obtain their assessment of its effectiveness as a supervisor and regulator. OSFI is committed to monitoring how well it is achieving its strategic objectives, both to be accountable to stakeholders and to help improve effectiveness. It is for these reasons that we are asking your company to participate in this research.
You can be assured that The Strategic Counsel, as an independent third party, will hold your comments in strict confidence. OSFI will not know who was interviewed or what specific companies have said about it.
As a standard industry practice, The Strategic Counsel has put in place secure communication and usage procedures to ensure that confidentiality is maintained at all times.
The Strategic Counsel will provide OSFI with a full report aggregating the findings from this survey.
1. Overall, how satisfied are you with OSFI as the principal prudential regulator and supervisor of Canada's financial services industry?
2. Why do you offer that response?
3. How would you rate OSFI on the extent to which it focuses on the appropriate areas of risk in the property and casualty insurance sector?
4. Why do you offer that response?
5. What one or two risk areas do you believe should be priorities for OSFI in the next couple of years pertaining to companies in the property and casualty insurance sector?
6. What one or two things does OSFI need to improve upon as a regulator and supervisor?
As needed, OSFI develops Guidance (which may include guidelines and advisories) for companies in the property and casualty insurance sector.
7. How would you rate OSFI with regard to responding in a timely manner to market changes or to industry suggestions that guidance needs updating?
8. Why do you offer that response?
9. How would you rate OSFI with respect to developing guidance that strikes an appropriate balance between prudential considerations and the need for companies to compete?
10. Why do you offer that response?
11. Overall, how effective do you think OSFI's guidance is in providing a clear indication of its expectations?
12. Why do you offer that response?
13. How would you rate OSFI's guidance on the extent to which it conveys that the guidance may be scaled to reflect the nature, size and complexity of your company?
14. Why do you offer that response?
15. Overall, how would you rate OSFI with respect to responding to questions your company has brought forward concerning OSFI guidance?
16. Why do you offer that response?
The following series of questions focus on several different work streams related to Guidance that OSFI has either issued recently or expects to issue in the future.
In January 2013, OSFI introduced a revised Guideline on Corporate Governance. This Guideline had not been reviewed or updated since its original publication in 2003.
17. How effective has OSFI been in communicating its expectations to the P&C insurance industry regarding corporate governance (e.g. as set out in the Guideline; as communicated via presentations and training following the release of the Guideline; responding to requests for information or interpretation of the Guideline)?
18. Why do you offer that response?
In February 2013 OSFI released a revised version of Guideline B-9: Earthquake Exposure Sound Practices.
19. Overall, how effective has OSFI been in communicating its expectations to the industry regarding revised Guideline B-9: Earthquake Exposure Sound Practices (e.g. as set out in the Guideline; as communicated via presentations and training following the release of the Guideline; responding to requests for information or interpretation of the Guideline)?
20. Why do you offer that response?
The next few questions focus on activities related to capital.
In November 2013, OSFI issued final versions of Guideline A-4: Regulatory Capital and Internal Capital Targets and Guideline E-19: Own Risk and Solvency Assessment (ORSA) for implementation beginning January 1, 2014.
21. How effective has OSFI been in communicating its expectations to the industry regarding Regulatory Capital and Internal Capital Targets as set out in Guideline A-4 (e.g. as set out in the Guideline; as communicated via presentations and training before or following the release of the Guideline; responding to requests for information or interpretation of the Guideline)?
22. Why do you offer that response?
23. How effective has OSFI been in communicating its expectations to the industry regarding Own Risk and Solvency Assessment (ORSA) as set out in Guideline E-19 (e.g. as set out in the Guideline; as communicated via presentations and training before or following the release of the Guideline; responding to requests for information or interpretation of the Guideline)?
24. Why do you offer that response?
In May 2013, OSFI published a Discussion Paper outlining proposed changes to the Minimum Capital Test (MCT) and the Branch Adequacy of Assets Test (BAAT), and invited the P&C industry to comment. At the same time, OSFI also requested all P&C insurers to participate in a quantitative impact study (QIS) to estimate the capital impact of the proposed changes.
Subsequent to these activities, in December 2013, the 2015 Draft Minimum Capital Test (MCT) Guideline was issued for industry comment. Finally, in September 2014 the final 2015 MCT Guideline was issued, to be effective January 1, 2015.
25. How satisfied are you that your company had an opportunity to participate in the consultation process concerning revisions to the Minimum Capital Test Guideline?
26. Why do you offer that response?
27. Overall, how effective has OSFI been in communicating its expectations to the industry with regards to the new MCT requirements, to be implemented in January 2015 (e.g. as set out in the Guideline; as communicated via presentations and training before or following the release of the Guideline; responding to requests for information or interpretation of the Guideline)?
28. Why do you offer that response?
29. Overall, how satisfied are you that OSFI is focussing on the appropriate capital-related issues?
30. Why do you offer that response?
As you know, OSFI's Superintendent, and in some cases, the Minister of Finance, must approve certain initiatives companies in the property and casualty insurance sector wish to take. The following questions pertain to OSFI's approvals process as it relates to your company.
31. Has your company made a request for a regulatory approval in the past 1-2 years?
If no, please go to question 40.
Thinking about request(s) for a regulatory approval your company has submitted in the past 1-2 years…
32. What is your overall level of satisfaction with OSFI in processing applications from your company?
33. Why do you offer that response?
34. How would you rate OSFI with respect to communicating its expectations as it relates to the information required in support of processing a request for a regulatory approval?
35. Why do you offer that response?
36. How would you rate OSFI with respect to responding to your company's requests for updates on the status of applications?
37. Why do you offer that response?
38. How would you rate OSFI with respect to providing an opportunity for your company to discuss issues of concern with OSFI prior to OSFI coming to a conclusion?
39. Why do you offer that response?
The following questions pertain to OSFI's supervision as it relates to your company.
40. Overall, how effective do you think OSFI is in supervising your company (e.g., ongoing monitoring, on-site reviews including supervisory recommendations, reporting requirements, etc.)?
41. Why do you offer that response?
42. How would you rate OSFI on the extent to which it supervises (e.g., ongoing monitoring, on-site reviews including supervisory recommendations, reporting requirements, etc.) in a manner that is scaled to reflect the nature, size and complexity of your company?
43. Why do you offer that response?
44. How would you rate OSFI with respect to providing an opportunity for your company to discuss issues of concern with OSFI prior to OSFI coming to a conclusion?
45. Why do you offer that response?
46. Overall, how would you rate OSFI with respect to its written correspondence (e.g., clarity; timeliness; and, consistency between written and oral communications)?
47. Why do you offer that response?
48. Which members of OSFI's supervisory staff have you dealt with over the past 12 months? (CHECK ALL THAT APPLY)
If you have not dealt with your Relationship Manager in the past 12 months, please skip to Q. 54.
49. How would you rate the overall knowledge level of your OSFI Relationship Manager (e.g. knowledge of legislation, OSFI guidelines and supervisory practices; property and casualty insurance sector issues and risks; and, your company)?
50. Why do you offer that response?
51. How would you rate the efforts of your Relationship Manager in coordinating the activities of OSFI's actuarial and other specialist teams?
52. Why do you offer that response?
53. Thinking of your company's interactions with your Relationship Manager, what one or two things does OSFI need to improve?
54. Overall, how satisfied are you with OSFI actuarial and other specialist teams that you have dealt with over the past 12 months?
55. Why do you offer that response?
56. Thinking of your company's interactions with OSFI actuarial and other specialist teams (other than your Relationship Manager), what one or two things does OSFI need to improve?
57. How would you rate OSFI with respect to how proactive it is in dealing with emerging issues pertaining to the property and casualty insurance sector?
58. Why do you offer that response?
59. Thinking about your dealings with OSFI's staff on any supervisory or regulatory matter, how satisfied are you with OSFI's capacity to interact with you in the official language of your choice (i.e., English or French)?
If "very dissatisfied" or "somewhat dissatisfied", please answer Q.60
60. Which of the following are areas in which you are dissatisfied? (SELECT ALL THAT APPLY)
61. Are there any other comments or suggestions for improvements you would like to make concerning the issues raised in this questionnaire, or concerning any other issues you feel are particularly relevant at this time?
On behalf of OSFI, The Strategic Counsel would like to thank you for your participation.
Participants were recruited from a list of potential interviewees provided by OSFI. The list provided by OSFI included a total of 153 active property and casualty insurance companies.
The following process was used in administering the interviews: