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Capital Adequacy

Brookfield Annuity Company is a Canadian life insurance company regulated by the Office of the Superintendent of Financial Institutions (OSFI), which introduced a new regulatory capital framework, the Life Insurance Capital Adequacy Test (LICAT), on January 1, 2018.

Brookfield Annuity exceeds all of OSFI’s minimum capital requirements. At March 31, 2019, we had a LICAT total ratio of 216%, as compared to OSFI’s regulatory minimum of 90%.

See our white paper, LICAT – An Evolution in Risk Assessment and Risk Management, to learn more about the standards Brookfield Annuity has to meet and the steps we take to fulfill our obligations to our clients and annuity members.

LICAT Ratios Public Disclosure Summary

(thousands of dollars, except percentages)

Companies are required, at minimum, to maintain a Core Ratio of 55%1 and a Total Ratio of 90%. OSFI has established supervisory target levels of 70% for Core and 100% for Total Capital.

  31 Mar 2019 31 Dec 2018 % Change
Available Capital (AC [AC1 + B]) 74,196 70,906 +5%
Tier 1 Capital (AC1)      
Tier 2 Capital (B)      
Surplus Allowance and Eligible Deposits (SA + ED) 10,914 20,637 -47%
Base Solvency Buffer (BSB) 39,314 45,304 -13%
Total Ratio ([AC + SA + ED]/BSB) x 100 216% 202% +7%
Core Ratio ([AC1 + 70% SA + 70% ED]/BSB) x 100 208% 188% +11%

1) Regulated insurance holding companies and non-operating insurance companies

The LICAT Total Ratio increased by 7% in the first quarter of 2019 for two reasons:

(i) The Company entered into agreements with third-party reinsurers whereby a portion of the longevity risk associated with our insurance contract liabilities was reinsured; this has the impact of reducing the surplus allowance and base solvency buffer under LICAT;

(ii) Available Tier 1 Capital increased by $3.29M during the first quarter.