A Global Strategy Of Mutual Recognition Essay
Canada’s financial supervisory body, the Office of the Superintendent of Financial Institutions (OSFI) is often praised as the reason Canada’s financial institutions escaped the 2008 global economic recession unscathed. The current framework in Canada is characterized by stringent rules on the proportion of reinsurance from foreign entities to domestic companies and to gross premiums, level of collateral required, and capital requirements for reinsurers licensed with OSFI. However, stakeholders are now asking OSFI to review the policies as the rigorous regulations that once saved Canada is now holding itself back from keeping up with an increasingly intertwined global/international financial landscape. The focus of this paper is to recommend that OSFI should adopt a global strategy of mutual recognition as this will lead to growth within the Canadian reinsurance industry/market. Mutual recognition by definition, is a situation where a supervisor acknowledges and abides by the standards of the jurisdiction where a foreign company resides and vice versa (Gambrill, 2009). Mutual recognition can lead to growth as it will reduce compliance costs, reduce barriers to entry, provide greater certainty in regulations, and allow for efficient allocation of capital for reinsurance organizations operating outside the country of their ceded insurance companies.
Reduced Compliance Costs
The most obvious reason to loosening reinsurance regulations and adopting mutual…