Canada Reinsurance Security Arrangements

Canadian registered insurance and reinsurance companies operating in the domestic Canadian market often buy reinsurance from affiliated or unaffiliated offshore companies that are not federally registered in Canada.

Because the reinsurer is not a registered reinsurance company in Canada, in order for the Canadian licensed insurance company to obtain reserve credit for the reinsured business, the offshore reinsurer must provide collateral that complies with the Reinsurance Security Arrangement (“RSA”) guidelines. RSA collateral can be in the form of securities or a bank letter of credit, however regulation stipulates that letters of credit can satisfy no more than 30% of the required collateral amount.