This paper discusses Canadaas 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.Canadian life insurers now stand to gain from gradually rising interest rates, but the longer run impact of the low rate environment on business models remains unclear. ... products, insurers will be focusing on business where they face greater competition from other financial institutions, including banks. ... the sensitivity of their regime to rate changes, while addressing anomalies exposed by the crisis.
|Title||:||Canada: Financial Sector Assessment Program-Impact on the Insurance Sector of a Low Interest Rate Environment-Technical Note|
|Author||:||International Monetary Fund. Monetary and Capital Markets Department|
|Publisher||:||International Monetary Fund - 2014-03-07|