Summary of the Meeting of December 6, 2021

Technical Advisory Committee (TAC) for Insurance Prudential Regulation and Supervision

Meeting summary

Date: December 6, 2021
Time: 9:00 am – 10:30 am
Location: Videoconference

FSRA’s Strategic Framework

FSRA’s Strategic Framework acts as the foundation for our strategic planning. The Framework reflects FSRA’s legislative objects, as well as its Vision and Mission. It consists of four main pillars, which articulate what FSRA will focus its efforts over the next three years:

1. operate effectively to be a high-performing regulator: it includes practices, staffs, directions and everything that FSRA does
2. protecting the public interest to enhance trust and confidence in the sectors we regulate: this is what FSRA will be doing over the next little while and insuring this year to this particular pillar
3. transform our regulatory processes to make evidence-based and risk-based decisions: it is going to become a –corner  stone to the frameworks, including the framework that will be taking about today
4. attract talent and evolve our culture to achieve the mission and vision of the organization

FSRA presented on the proposed FSRA principles, including being outcomes-focused, risk-based, transparent, collaborative, consumer-focused, and innovative. It was noted that the committee should recognize these elements in our approach going forward. Planned outcomes for the year, including effective regulation and supervision, were emphasized as a key outcome expected from the work with the insurance sector.

Proposed FSRA 2022-23 priorities

FSRA shared the proposed 2022-23 priorities with the committee and highlighted priority 4.4 - Implement Insurance Prudential Supervision. As part of this priority, FSRA is looking to modernize our approach, and the work with the committee will help to inform this priority through foundational building.

Current supervisory framework

FSRA wants to continue growing the relationship with the sector to have a better understanding of the sector and its business. 

The current approach and framework requires improvement. Work on this initiative will be brought to the committee and will be developed as a foundational piece. Further discussions will be held with the committee on what best practices are and what they mean to the sector. 

FSRA noted there will be a focus internally on growing resources going forward to support this framework.
The committee discussed the challenges and opportunities they are seeing in the sector. 

Insurance Prudential Supervisory Framework (IPSF)

FSRA noted the importance of ensuring the IPSF is scalable to the nature, size, risk profile and complexity of the insurers comprising the Ontario-provincially regulated insurance sector. The importance, from the consultation point of view, to recognize the uniqueness of the Ontario sector to ensure best practices are used in the development of the framework was discussed. 

Proposed Insurance Prudential Supervisory Framework – approach

The approach will incorporate national and international standards – for example, IAIS – and will contemplate how it can be applied collectively across Canada  and on a proportional basis for Ontario regulated insurers. 

Background was provided on IAIS and their 5-year FSAP reviews of financial sector assessment process. 

Further dialogue will continue with the committee on the development of the framework, sector experience, and FSRA expectations as the framework is implemented.  

Proposed Insurance Prudential Supervisory Framework (IPSF)

The IPSF will assess the risk profile of insurers and the level of supervisory engagement and intervention needed.

The primary focus is to determine the impact of current and potential future events, in both the internal and external environment. 

Risk-based supervision (RBS) is largely outcomes focused and principles based, by allocating resources to the areas of greatest risk. 

By its nature, RBS increases the effectiveness of supervision through improving supervisory outcomes while increasing efficiency through improved resource allocation and process. The idea is to improve the supervisory outcomes both for the regulators and regulating entities, in terms of ensuring that the right amount of resources are allocated to each insurer and have continuity in terms of the dialogue that happens as part of the supervisory process.

IPSF principles

The IPSF principles were shared with the committee for feedback. 

While not a specific IPSF principle, the committee was supportive of the overarching FSRA principles of being transparent and collaborative. 

The committee noted strong relationships and transparency are important to these principles as there may not always be agreement on execution or the degree to which something is required. 

The committee requested timeframes and implementation expectations be embedded around regulatory changes.

Recognition was given to the positive change from the previous regulator and appreciation was given to the holistic and risk-based approach. 

In terms of resources and expertise at FSRA, the committee requested additional information to understand what this will look like going forward. FSRA noted that part of the transition to this framework will be to develop a resourcing plan and funding has been set aside in the 2022-23 Budget. FSRA committed to discussing this further at future meetings.  

In a follow-up comment, it was noted that principles-based regulation requires more resources, higher education levels and a deeper experience. It was noted that it is critical that FSRA has the right resources in order to implement a principles-based framework.  FSRA advised that this level of expertise and resources is also applicable to the institutions to ensure they can demonstrate they are safe and sound. 

Questions regarding scalability were discussed. It was noted that the size shouldn’t be the only driving factor, as there are various collaborative initiatives that happen at the sector or group level. FSRA confirmed in developing the framework, various views will be considered including the sector as a whole, within groups, and at an individual basis. 

One change will be made regarding the principle for ‘Risk-Based’ where the mention will be changed to policy holders vs. depositors as presented. 

Overall, the committee was supportive of the proposed IPSF principles. 

Next steps

The next committee meeting will be held in January 2022. FSRA will aim to share a more detailed framework and timelines over the next 12-18 months.

The committee is encouraged to reach out to FSRA with any further feedback or comments.