Canada has one of the world's most sophisticated and internationally integrated insurance markets, marked by robust capital requirements and an increasing orientation towards ESG- and climate-related considerations. Continuing Skadden’s global tour of prudential solvency regimes, host Rob Chaplin and colleague Chiara Iorizzo examine Canada’s insurance regulation structure, valuation approach, capital quality standards and modernization efforts.

Top takeaways from this episode

• Division of Oversight: Canada’s federal Office of the Superintendent of Financial Institutions (OSFI) is responsible for prudential regulation of most insurers. Provincial regulators also play a role, with market conduct and licensing insurers and intermediaries falling under provincial jurisdiction.
• Life Insurance Capital Adequacy Test (LICAT): LICAT is Canada's risk-based capital framework for life insurers, which establishing rigorous standards set minimum target ratios for core capital at 55% and total capital at 90%, as well as supervisory target ratios for core capital at 70% and total capital at 100%..
• International Financial Reporting Standard 17 (IFRS 17): Canadian insurers prepare their financial statements in accordance with Canadian GAAP and life insurance liabilities are valued using the new IFRS 17 valuation approach (often referred to in Canada as an Asset Liability Method, or ALM). This phased out the previously used Canadian Asset Liability Method, or CALM, which was used under IFRS 4 when IFRS 17 came into effect at the start of 2023. IFRS 17 represents a transformative shift in accounting for insurance contracts in Canada, introducing a comprehensive framework that enhances transparency, consistency and comparability.
• The Future of Canadian Involvency Regulation: Canada is actively modernising its solvency framework. Despite rejecting the International Association of Insurance Supervisors’ Insurance Capital Standard, with the adoption of IFRS OSFI is moving toward a total balance sheet approach for capital adequacy, which will bring Canadian standards closer to Solvency II and other international regimes. The new framework will emphasize economic valuation principles, greater transparency, and more risk-sensitive capital requirements. The goal is to maintain the competitiveness and resilience of the Canadian insurance sector in a global market.

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II.

Connect: LinkedIn

Name: Chiara Iorizzo

What she does: Chiara advises on domestic and cross-border mergers and acquisitions, group restructurings, regulated financings, governance and regulatory matters for private equity sponsors, asset...

In this episode of The Standard Formula, host Robert Chaplin and Skadden colleague Theo Charalambous provide a high-level refresher on Solvency II, Solvency UK and relevant recent developments as part of Skadden’s year-long podcast series on global prudential solvency requirements. The hosts detail both regimes and relevant topics, including the Matching Adjustment Accelerator (MAIA), enhanced liquidity reporting requirements, and new exit planning obligations for Solvency UK that represent a shift away from Solvency II toward a U.K.-focused approach.

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II.

Connect: LinkedIn

Name: Theo Charalambous

What he does: Theo counsels insurers, brokers and private equity sponsors on mergers and acquisitions, disposals, investments, reorganizations, alternative transaction structures and multijurisdictional regulatory matters.

Organization: Skadden

Words of wisdom: “In the U.K., the PRA requires that insurers’ investment strategies should be aligned with its investment objectives and asset allocation, the board's risk appetite, risk tolerance limits, investment risk-return objectives, as well as alignment of the investment strategy with its business model.”

Connect: LinkedIn

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The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

India has emerged as the 10th-largest insurance market in the world by total premium volume, yet its insurance penetration level sits around 3%-4%, well below the global average of 7%. In the eighth episode of Skadden's year-long podcast series on global prudential solvency requirements, host Robert Chaplin and colleague Anika Goodfellow explore the country’s evolving insurance regulatory landscape and outline its goal of transforming the sector to allow for companies to more easily conduct business.

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II.

Connect: LinkedIn

Name: Anika Goodfellow

What she does: Anika has extensive experience advising reinsurers, brokerages, asset managers and financial sponsors on a wide range of transactions, including U.K., cross-border and global mergers and acquisitions, disposals, investments, carve-outs, consortium deals and group restructurings.

Organization: Skadden

Words of wisdom: “The insurance sector in India is shifting toward a risk-based capital, or RBC, regime. This is part of IRDA's “Insurance for All by 2047” initiative to bring the Indian insurance industry in line with international standards and to catch up with India's payers in North America and Europe.”

Connect: LinkedIn

☑️ Follow us on X and LinkedIn.

☑️ Subscribe to The Standard Formula on Apple Podcasts, Spotify, or your favorite podcast app.

The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.