Right to Reimbursement for Defense Fees The reservation of rights letter may provide the insurer with the right to seek reimbursement for defense costs it pays if it later establishes that those costs were incurred in defending non-covered claims, although whether such a provision is enforceable varies from jurisdiction to jurisdiction.
1 In many jurisdictions, a reservation of rights to recoup defense costs is only enforceable if it is later determined that there was no duty to defend; courts in those jurisdictions will not allow apportionment of defense costs between covered and non-covered claims.
A reduction in required capital for the potential risk-mitigating effect of dividend reductions or contractual adjustability is calculated separately for participating and adjustable products (refer to Chapter 9).
Insurers should also refer to OSFI's Guideline B-5: , which outlines the regulatory framework for asset securitization transactions, including transactions that give rise to off-balance sheet exposures.
The ROR letters allow insurers to decline indemnifying the insured for any portion of a judgment not covered under the policy.
RORs or non-waiver agreements should be used when an insurer identifies either coverage defenses or policy defenses.
Credit equivalent amounts are used to determine the potential credit exposure of off-balance sheet instruments.
Structured Trade Finance (STF) is a specialist and more complex type of finance, which is usually associated with commodity trading or other high value underlying products or large quantities.
Notwithstanding that a bank, bank holding company, a trust and loan company, or cooperative credit association may meet these standards, the Superintendent may direct a bank or bank holding company to increase its capital under subsections 485(3) or 949(3) of the BA, a trust and loan company to increase its capital under subsection 473(3) of the TLCA, or a cooperative retail association to increase its capital under section 409(3) of the CCAA.
OSFI, as a member of the Basel Committee on Banking Supervision, participated in the development of the international leverage ratio framework, (January 2014).
The major risk to insurers associated with off-balance sheet activities is the default of the counterparty to a transaction (i.e., counterparty credit risk).
The face amount of an off-balance sheet instrument does not always reflect the exposure to the credit risk in the instrument.