Application

This section applies to authorized Québec insurers seeking the following from the AMF under the Capital Adequacy Requirements Guideline:

• Confirmation of the capital quality of an instrument, or
• Prior authorization to redeem a capital instrument.

Overview

Capital quality of instruments

The Capital Adequacy Requirements Guideline sets out the qualifying criteria for capital instruments and establishes capital composition limits.

For insurers of persons, these criteria are set out in Chapter 2 of the Capital Adequacy Requirements Guideline – Life and Health Insurance (“CARLI”).

For damage insurers, these criteria are set out in Annexes 1, 2 and 3 of the Guideline on Capital Adequacy Requirements – Property and Casual Insurance (hereinafter, “MCT”).

Capital quality has a direct impact on “available capital” as defined in the CARLI and the MCT and therefore on the capital ratios insurers must meet. Insurers are encouraged to seek confirmations of capital quality from the AMF prior to issuing capital instruments.

Prior authorization to redeem a capital instrument

In certain circumstances, an insurer must seek prior authorization from the AMF before redeeming a capital instrument.

The conditions for receiving the prior authorization of the AMF for a redemption or repurchase are set out by tier of capital in sections 2.1.1.1, 2.1.1.2 and 2.2.1.1 of the CARLI and by category of capital in Annexes 1 to 3 of the MCT.

Checklists

The following checklists summarize the information and documents to be included in or with requests for confirmation of capital quality of an instrument and for authorization to redeem a capital instrument.

Requests for confirmation of capital quality

Information to be included in the request

Information/Document	Clarification by the AMF
1. Brief description of the instrument (proposed date of issuance, rate, amount, etc.)	n/a
2. Context of and/or rationale for issuance	n/a
3. Capital projections immediately before the proposed issuance and following issuance	Include a comment regarding compliance with the limits for each category (sections 2.2 of the MCT and 2.3 of the CARLI)
4. Assessment of the features of the instrument against qualifying criteria and additional elements for the category as specified in the guideline	The AMF expects a comment regarding compliance with each qualifying criterion

Documents to be included with the request

Information/Document	Clarification by the AMF
1. Draft terms and conditions of the proposed instrument	n/a
2. Copy of any documents that may affect the capital quality of the instrument	For example, by-laws or other constating documents, shareholders’ agreements, etc.

Request for prior authorization to redeem a capital instrument

Information to be included in the request

Information/Document	Clarification by the AMF
1. Brief description of the proposed redemption (capital instrument, proposed timing, rate, amount, etc.) and the rationale for the redemption	n/a
2. Capital projections immediately before the proposed redemption and following the redemption	n/a

Documents to be included with the application

Information/Document	Clarification by the AMF
1. Copy of the board resolution(s) (or draft resolution(s)) authorizing the proposed redemption	If the resolution is not adopted, indication of when the redemption will be submitted to the board of directors
2. Copy of the terms and conditions of the instrument at issuance and any amendments	n/a
3. Copy of any documents that may affect the capital quality of the instrument	For example, by-laws or other constating documents, shareholders’ agreements, etc.

Confirmation and authorization

Depending on the type of request, provided all the criteria set out in the guidelines (CARLI and MCT) are met, the AMF will confirm the capital quality, or authorize the redemption, of the instrument.

Fees and costs payable

Refer to the complete list of fees and costs payable to the AMF for more information.

Processing time

Except in specific circumstances, the AMF will rule on an insurer’s application within 90 days from the date the application is complete.