Canada: Financial Sector Assessment Program-Impact on the Insurance Sector of a Low Interest Rate Environment-Technical Note

International Monetary Fund

No 2014/068, IMF Staff Country Reports from International Monetary Fund

Abstract: This paper discusses Canada’s Financial Sector Assessment Program (FSAP) impact on the insurance sector of a low interest rate environment. It highlights that actuarial standards on valuation of liabilities require that assumed reinvestment rates take increasing account of current market rates that led to higher liabilities as low rates persisted. The note outlines the effect of Canadian accounting and actuarial standards that further increases in liabilities need to be recognized in the short term. Policy measures have been undertaken by Office of the Superintendent of Financial Institutions (OSFI) in the banking sector to address broader risks.

Keywords: ISCR; CR; firm; interest rate; return; product; life company; company report; rate change; reinvestment rate; companies' market shares; design regulation; companies' inability; interest rate scenario; company's liability; wealth management products; Insurance; Insurance companies; Personal income; Accounting standards; Capital adequacy requirements; Europe; North America; Asia and Pacific; Global (search for similar items in EconPapers)
Pages: 23
Date: 2014-03-07
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