Ontario's insurance regulator has published guidance setting out how it will assess whether provincially incorporated insurers hold enough capital to withstand stress and stay solvent.
The Financial Services Regulatory Authority of Ontario released its Own Risk and Solvency Assessment Guidance, numbered PC0055APP, which took effect on June 8, 2026. It applies to Ontario-incorporated insurance companies and reciprocal insurance exchanges, which the document groups together as Insurers. FSRA will review the guidance no later than June 8, 2031.
The guidance describes FSRA's principles-based approach for reviewing an insurer's Own Risk and Solvency Assessment, or ORSA - the process an insurer uses to determine its Supervisory Capital Target Ratio and its Internal Capital Target Ratio. FSRA does not approve an insurer's ORSA. Instead, it assesses how the insurer arrives at its internal target, and it can factor that assessment into the insurer's overall risk rating. Adoption of the principles is not mandatory, and FSRA states the guidance does not on its own create a compliance obligation.
What the document does is spell out what a sound capital assessment looks like. It rests on five principles: governance and oversight, comprehensive identification and assessment of risk, relating risk to capital, monitoring and reporting, and internal controls and objective review. At a minimum, an insurer's ORSA is expected to weigh insurance, credit, market, operational, liquidity and concentration risk, along with other risks that could turn material.
Capital sits at the center. FSRA expects an insurer's internal targets to exceed the supervisory targets it sets above the regulatory minimum. An insurer whose capital resources approach or fall below the supervisory target can expect closer supervisory engagement and, potentially, a higher intervention level. If capital drops toward the minimum, FSRA says it will be concerned about the insurer's ongoing viability and the risk to policyholders and creditors. Where an insurer expects its capital to fall below its internal target within two years, it is to tell FSRA promptly and lay out how it will restore the position.
The guidance leans on forward-looking work. Insurers are expected to run stress and scenario tests, including wind-up and reverse stress tests, and to document an ORSA report at least annually. Senior management receives regular reporting, including a Key Metrics Report - P&C Insurers from the Office of the Superintendent of Financial Institutions, comparing actual capital to internal targets. The ORSA is also subject to periodic objective review by an auditor or other qualified party reporting to the board.
For insurers and the professionals who advise them, the practical message is that FSRA will read the ORSA as a window into how well a company understands and funds its own risks. The guidance follows a 60-day public consultation held from November 28, 2024 to January 28, 2025, and it is meant to be read alongside FSRA's Minimum Capital Test Guideline, its Risk Based Supervisory Framework, and its operational risk and corporate governance guidance.
The full text of the guidance is available at https://www.fsrao.ca/media/29786/download.
