https://www.insurerbrain.com/w/index.php?action=history&feed=atom&title=Definition%3ALife_Insurance_Capital_Adequacy_Test_%28LICAT%29 2026-06-14T12:32:28Z Revision history for this page on the wiki MediaWiki 1.43.8 https://www.insurerbrain.com/w/index.php?title=Definition:Life_Insurance_Capital_Adequacy_Test_(LICAT)&diff=16724&oldid=prev 2026-03-15T07:33:48Z

<p>Bot: Creating new article from JSON</p> <p><b>New page</b></p><div>📋 &#039;&#039;&#039;Life Insurance Capital Adequacy Test (LICAT)&#039;&#039;&#039; is the regulatory capital framework used by Canada&#039;s [[Definition:Office of the Superintendent of Financial Institutions (OSFI) | Office of the Superintendent of Financial Institutions (OSFI)]] to assess whether federally regulated [[Definition:Life insurance | life insurance]] companies hold sufficient capital to absorb losses and protect [[Definition:Policyholder | policyholders]]. Introduced in 2018 as a replacement for the earlier Minimum Continuing Capital and Surplus Requirements (MCCSR) framework, LICAT brought Canadian life insurer capital standards closer to a risk-sensitive, economic-value approach. While it serves a function analogous to the [[Definition:Solvency II | Solvency II]] framework in Europe or the [[Definition:Risk-based capital (RBC) | risk-based capital (RBC)]] system overseen by the [[Definition:National Association of Insurance Commissioners (NAIC) | NAIC]] in the United States, LICAT reflects Canadian-specific regulatory philosophy and market conditions.<br /> <br /> ⚙️ Under the framework, a life insurer calculates its available capital and compares it against required capital, which is derived from risk charges applied to five major categories: [[Definition:Credit risk | credit risk]], [[Definition:Market risk | market risk]], [[Definition:Insurance risk | insurance risk]], [[Definition:Operational risk | operational risk]], and segregated fund guarantee risk — the last of these being particularly important in Canada, where segregated funds (similar to variable annuities elsewhere) carry maturity and death benefit guarantees. The resulting ratio — total available capital divided by the supervisory target — produces a percentage that OSFI monitors against internal supervisory targets and a public floor. Insurers whose ratios approach the floor face escalating supervisory intervention, including restrictions on dividends and new business.<br /> <br /> 🌍 For Canada&#039;s major life insurers, several of which operate on a global scale, LICAT plays a decisive role in capital allocation, product design, and strategic planning. Because the framework imposes specific charges on asset-liability mismatches and guarantee exposure, it directly shapes how Canadian companies structure their investment portfolios and price long-duration products. International observers and rating agencies track LICAT ratios closely, and the framework&#039;s design has contributed to broader discussions about how different jurisdictions balance economic-value measurement with policyholder protection — a conversation that also involves [[Definition:International Association of Insurance Supervisors (IAIS) | IAIS]] work on global [[Definition:Insurance capital standard (ICS) | insurance capital standards]].<br /> <br /> &#039;&#039;&#039;Related concepts:&#039;&#039;&#039;<br /> {{Div col|colwidth=20em}}<br /> * [[Definition:Risk-based capital (RBC)]]<br /> * [[Definition:Solvency II]]<br /> * [[Definition:Insurance capital standard (ICS)]]<br /> * [[Definition:Minimum capital requirement (MCR)]]<br /> * [[Definition:Office of the Superintendent of Financial Institutions (OSFI)]]<br /> * [[Definition:Solvency ratio]]<br /> {{Div col end}}</div>

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