Superintendent’s Minimum Capital Test Guideline

About the Minimum Capital Test (MCT)

The MCT is a harmonized capital adequacy solvency test that is intended to apply throughout Canada to property and casualty (P&C) insurers. It was developed to ensure consistency among jurisdictions throughout Canada, by applying the same capital framework to P&C insurers operating in Canada. Since 2004, it has been applied on a mandatory basis to P&C insurers that are licensed in Ontario.


Effective January 1, 2018: Updates to Superintendent's Guideline


The Office of the Superintendent of Financial Institutions (OSFI) has traditionally led the update of the MCT, in alignment with international best practices, through its Guideline A, Minimum Capital Test for Federally Regulated Property and Casualty Insurance Companies.


On October 19, 2017, OSFI released a revised Minimum Capital Test (MCT) Guideline [New Window], which takes effect on January 1, 2018 for federally regulated P&C insurers. The amendments to the MCT Guideline include:


  • removal of transition requirements that are no longer applicable; and
  • providing clarification on a number of provisions for which OSFI received inquiries over the past year.

The Superintendent of Financial Services has adopted OSFI's updated MCT Guideline, and has incorporated OSFI’s updates into the Minimum Capital Test Guideline for Property and Casualty Insurance Companies – Superintendent's Guideline No. 08/04 [PDF Document] Size: ## kb, effective on January 1, 2018.


Who the Superintendent's MCT Guideline applies to


Under section 102(8) of the Insurance Act [New Window], all licensed P&C insurance and reinsurance companies in Ontario (except for those noted below) are required to maintain adequate capital "in compliance with such requirements as may be prescribed by regulation…"


Ontario Regulation 259/04: Minimum Capital Test [New Window]  (under the Insurance Act) requires that insurers comply with Superintendent's Guideline, which may be updated periodically.


Reciprocal insurance exchanges and farm mutual insurers are exempt from complying with the MCT because they have either a subscribers' agreement (reciprocals), or membership in the Fire Mutuals Guarantee Fund (farm mutuals) to provide support for their capital. However, reciprocals and farm mutual insurers are still required to file the MCT with the Financial Services Commission of Ontario (FSCO), as the MCT provides an evaluation that is comparable to other insurers.


Federally-regulated P&C insurers that are licensed in Ontario, but that are filing the MCT with OSFI, are not required to file with FSCO. P&C insurers that are incorporated in other provinces, and that are licensed in Ontario, are not required to file the MCT with FSCO when OSFI's MCT Guideline or an equivalent MCT framework has been adopted by the other province.


Supervision of insurer solvency


In its 2013 Budget, the Ontario government indicated its intent to amend legislation to require insurance companies in Ontario to be incorporated in jurisdictions where solvency is regulated in accordance with modern international standards. (Insurers that are members of the Fire Mutuals Guarantee Fund were excepted). As of November 2017, no legislation has been introduced to cease FSCO's role as the solvency regulator of insurers that are incorporated in Ontario. Unless and until such legislation were to be enacted, FSCO will continue to supervise the solvency of its chartered companies, which includes compliance with the Superintendent's Guideline.


Additional resource