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

_IMF Staff Country Reports, March 7, 2014_

## Source details

**Canonical URL:** [Canada: Financial Sector Assessment Program-Impact on the Insurance Sector of a Low Interest Rate Environment-Technical Note](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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## Bibliographic details
- Published: March 7, 2014
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781484330272.002

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### Key findings on low interest rate impact
- 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.

### Implications for insurers and financial stability
- 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 responses noted
- 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.

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_Source: 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_