{
  "title": "Canada: Financial Sector Assessment Program-Impact on the Insurance Sector of a Low Interest Rate Environment-Technical Note",
  "publication": "IMF Staff Country Reports, March 7, 2014",
  "sourceUrl": "https://www.imf.org/en/publications/cr/issues/2016/12/31/canada-financial-sector-assessment-program-impact-on-the-insurance-sector-of-a-low-interest-41404",
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  "summary": "This paper discusses Canada’s Financial Sector Assessment Program (FSAP) impact on the insurance sector of a low interest rate environment.",
  "sections": [
    {
      "heading": "Key findings on low interest rate impact",
      "content": "- Actuarial standards on valuation of liabilities require that assumed reinvestment rates take increasing account of current market rates.\n- As low rates persisted, the increased use of current market rates in assumptions led to higher reported liabilities.\n- Canadian accounting and actuarial standards require that further increases in liabilities need to be recognized in the short term."
    },
    {
      "heading": "Implications for insurers and financial stability",
      "content": "- Persistently low interest rates raise measured liabilities for life insurers through lower assumed reinvestment rates.\n- Short-term recognition requirements under Canadian standards can amplify balance sheet impacts when market rates decline.\n- The note highlights potential broader risks to the financial sector stemming from these valuation and recognition effects."
    },
    {
      "heading": "Policy responses noted",
      "content": "- Policy measures have been undertaken by the Office of the Superintendent of Financial Institutions (OSFI) in the banking sector to address broader risks.\n- The technical note discusses implications for supervisory and regulatory approaches to ensure resilience of insurance companies in a low interest rate environment.\n\n---\n\n Content in this bundle\n\n- cr1468\n  - cr1468 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - cr1468 (PDF){rel=\"external\" type=\"application/pdf\"}"
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    "Published: March 7, 2014",
    "Series: IMF Staff Country Reports",
    "DOI: https://doi.org/10.5089/9781484330272.002",
    "Actuarial standards on valuation of liabilities require that assumed reinvestment rates take increasing account of current market rates.",
    "As low rates persisted, the increased use of current market rates in assumptions led to higher reported liabilities.",
    "Canadian accounting and actuarial standards require that further increases in liabilities need to be recognized in the short term.",
    "Persistently low interest rates raise measured liabilities for life insurers through lower assumed reinvestment rates.",
    "Short-term recognition requirements under Canadian standards can amplify balance sheet impacts when market rates decline.",
    "The note highlights potential broader risks to the financial sector stemming from these valuation and recognition effects.",
    "Policy measures have been undertaken by the Office of the Superintendent of Financial Institutions (OSFI) in the banking sector to address broader risks.",
    "The technical note discusses implications for supervisory and regulatory approaches to ensure resilience of insurance companies in a low interest rate environment.",
    "**_cr1468**"
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