FSRA targets efficient and streamlined regulation for Ontario credit unions, insurers, pension plans, and mortgage brokers

As previously reported, the Ontario government is moving ahead to support financial regulatory reform including by establishing the Financial Services Regulatory Authority (FSRA), the new Ontario provincial regulator for provincially regulated insurers, credit unions, loan and trust corporations, pension plans, mortgage brokers and certain auto insurance service providers. On June 8, 2019, FSRA officially assumed the regulatory responsibilities of the Financial Services Commission of Ontario (FSCO) and the Deposit Insurance Corporation of Ontario (DICO). Decisions and proposed decisions of FSRA will continue to be appealed to or reviewed by the independent Financial Services Tribunal.

FSRA aims to become a nimble and accountable regulator with a stated goal to reset the regulatory foundation for the aforementioned industries. Its 2019-2022 business plan, as approved by the Ontario Ministry of Finance, has two over-arching priorities: burden reduction and regulatory effectiveness.

Burden reduction entails a thorough examination of existing guidance and requirements to ensure they are relevant, provide value and support FSRA’s mandate. This mirrors the recent burden reduction initiative of the OSC. In particular, FSRA will review all 1,100 pieces of regulations and guidance inherited from its predecessors, and streamline or remove unnecessary material where possible. Regulatory effectiveness entails achieving legislative objectives and protecting the public interest through enhanced consumer, industry and regulatory expertise, collaboration, transparency, efficient processes, the use of technology and by enabling innovation.

Sector specific initiatives

FSRA’s business plan also sets out its regulatory initiatives specific to the insurance, credit union, pension, and mortgage brokering industries as follows.

Automobile insurance

Streamline rate regulation process: FSRA will consult with stakeholders to improve the rate regulation process, which is currently viewed as inflexible, lengthy and overly complex and bring barriers to innovation.

Support auto reform strategy: FSRA will support the government’s review of auto insurance to remove barriers to effective pricing, cost control, good underwriting and innovation.

Review health service provider regulation: FSRA will review how health service providers are regulated by FSRA, streamline the licensing process, revise the supervisory approach to health service providers, identify the appropriate role for auto insurers in fraud cost control and health service provision, and review the role of information and technology in fraud reduction.

Develop fraud and abuse reduction strategy: FSRA will lead a government-regulator-stakeholder initiative to reduce fraud and abuse in both health and vehicle repair claims, with a focus on information, technology, data, analytics and public communications.

Credit unions

Integrate prudential and conduct supervision: Dovetailing the integration of DICO (prudential oversight and deposit insurance) and FSCO (market conduct), FSRA intends to build an integrated credit union regulatory team to cover prudential, transactional and conduct matters, supported by an integrated and modernized regulatory methodology.

Modernize regulatory framework: FSRA will participate in the Ministry of Finance’s initiative to modernise the credit union legislative and regulatory framework, including changes to the capital adequacy framework, while reviewing DICO guidance for modernisation.

Adopt industry code of conduct: FSRA will accept the Canadian Credit Union Association’s proposed code of conduct or articulate reasons why the code cannot be used, while discussing harmonization with other credit union regulators. If appropriate, FSRA will implement ongoing supervision against the code.

Ensure appropriate resolution and Deposit Insurance Reserve Fund (DIRF) Framework: FSRA will administer the DIRF. With stakeholder consultation, FSRA will develop an enhanced resolution strategy and recovery plan requirements, update the framework for assessing DIRF adequacy and monitor DIRF governance to ensure its effectiveness post transition to FSRA, including an assessment of liquidity needs and investment strategies.

Insurance (conduct)

Adopt effective conduct standards: FSRA will launch a consultation to improve conduct requirements in the Life & Health (LAH) and Property & Casualty (P&C) Insurance segments with the potential of adopting industry codes of conduct. In particular, FSRA will focus on industry concerns such as the lack of regulation over intermediaries between insurers and agents (e.g. licensed corporate agents or managing general agents) in the LAH sector and the “take all corners” auto insurance requirement in the P&C sector.

Improve licensing effectiveness and efficiency: FSRA will develop an implementation plan to integrate licensing and tracking systems to align systems and reduce burden. FSRA will also launch consultations to develop new licensing requirements to ensure appropriate continuing education, insurance requirements and restrict entry/require exit of non-compliant registrants, including “bad actors” in other industries (e.g. securities).

Harmonise Fair Treatment of Consumers (FTC) Guidance: FSRA will review existing FTC guidance issued by the Canadian Council of Insurance Regulators (CCIR), Canadian Insurance Services Regulatory Organizations (CISRO) and FSCO and work with other regulators to seek harmonized and clarified conduct expectations across Canada.

Mortgage brokering

Provide Syndicated Mortgage Investments (SMIs) Oversight: FSRA will evaluate and improve effectiveness of SMI disclosures and supervision of mortgage brokers/administrators and SMI transactions, while ensuring the smooth transfer of oversight of the regulation of non-qualified SMI offerings to the OSC, including the delivery of any oversight by FSRA of mortgage broker registrants and legacy transactions.

Improving licensing effectiveness and efficiency: FSRA will integrate the licensing and tracking systems and increase its capacity to manage/analyze data to support regulatory initiatives. FSRA will develop new licensing requirements in consultation with stakeholders, and identify how they could help control entry and remove non-compliant registrants from the sector.

Adopt industry code of conduct: FSRA will support the development of a national industry code of conduct, work with stakeholders to review such code for appropriateness, communicate FSRA’s expectations and potentially establish supervisory practices to implement ongoing supervision against such code.


Support plan evolution: FSRA will make organizational changes to attract and optimally deploy resources (e.g. instituting a relationship model for larger plans/Jointly Sponsored Pension Plans (JSPPs)) and implement a framework for improved relationships with larger and evolving plans. FSRA also intends to better support complex transactions (e.g. plan mergers) and evolution of more robust plans, and to initiate consultation on key pension policies and guidance.

Review prudential supervision framework: FSRA will improve data/systems to ensure proper assessment of risks, and develop and consult on a prudential framework for evaluating and supervising plan governance, risk management, controls and effective challenge processes. FSRA will further evaluate how it identifies and communicates best prudential risk practices.

Refocus pension regulation on burden reduction: FSRA will consult with stakeholders to tailor regulatory processes to focus resources on higher-value regulatory and supervisory objectives. FSRA will also develop and solicit input on a principles-based framework to guide changes to processes, structures, policies and guidance. Furthermore, FSRA will develop and commence a plan to implement improved principles-based processes to use discretion and issue guidance to provide clarity/simplicity and reduce burden.

FSRA’s business plan reflects an ambitious regulatory agenda. We will continue to monitor its activities with interest as it moves forward.

Osler partner Lawrence Ritchie was one of a three person expert panel that recommended the creation of FSRA, and currently sits on its board.