Section 4.3.3.2 vs 4.3.3.3

Bryden38Bryden38
in OSFI.MCT

I'm having difficulty understanding the differences between these two sections.

In particular, I don't see why in 4.3.3.2 we are using (A+B+C)-(D+E+F+G+H) whereas in 4.3.3.3 we are using (D+E+F+G+H)-(A+B+C). Can you please elaborate on what this exactly is?

Comments

  • Staff-T1Staff-T1

    In Section 4.3.3.2:
    What we are trying to do here is adjust the capital available for assets or receivables that are uncollateralized. A+B+C is your receivables, while D+E+F+G is your collateral for those receivables. If your collateral is < Receivables, then in theory you would not be made fully whole if the reinsurer were to go bust, which is why you need to reduce your capital available to account for it.

    In Section 4.3.3.3: It's the same thing phrased differently. If your Collateral is > receivables, then in theory, the reinsurer would be able to easily pay you back everything owed in the event that they go bust, which reduces the capital required for unregistered reinsurance

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