Canada's Office of the Superintendent of Financial Institutions (OSFI) launched three public consultations on proposed updates to its liquidity and capital frameworks and issued a Regulatory Notice making targeted adjustments to the Life Insurance Capital Adequacy Test (LICAT) Guideline. For the draft Liquidity Adequacy Requirements (LAR) Guideline (2026), the proposed revisions introduce new funding categories to better capture liquidity risks from products such as structured notes and deposits sourced through non-bank financial intermediaries, clarify liquidity treatment for products that sit between retail and wholesale classifications, update expectations for early redemption features, and remove references to Bankers’ Acceptances and the discontinued Canadian Dollar Offered Rate (CDOR). The Internal Liquidity Adequacy Assessment Process (ILAAP) discussion paper seeks feedback on a more structured approach to Pillar 2 liquidity supervisory review aligned with international practices. For property and casualty insurers, OSFI consulted on the draft Minimum Capital Test (MCT) Guideline (2026), including a simplification of the unexpired coverage formula and other minor changes with no impact on capital, with further calculation support expected from the Canadian Institute of Actuaries. The ILAAP and draft MCT 2026 consultations are open for 90 days. OSFI plans to publish the final MCT 2026 Guideline on November 20, 2025, with effect from January 1, 2026. Under LICAT 2025, OSFI removed the 5% cap on the reduction in Tier 1 capital deduction for stop-loss reinsurance and adjusted the calculation of credit risk and market risk capital requirements for segregated fund guarantees to align with other products.

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