Actuarial Notes

Financial Services Regulatory Authority of Ontario

Study guide: Exam 6C

The Financial Services Regulatory Authority of Ontario (FSRA) is Ontario's insurance regulator, created in 2019 to replace FSCO. It licenses insurers, agents and adjusters in Ontario, regulates market conduct, and — the piece that matters most to actuaries — approves private passenger automobile rates and risk classification systems before they may be used.

  • FSRA is a self-funded, principles-based regulator: it is financed by industry assessments rather than the provincial budget, and it was designed to be more outcome-focused and less rules-prescriptive than its predecessor.
  • Auto rate filings. Ontario private passenger auto is file-and-approve: an insurer files a proposed rate level and classification change, FSRA reviews the actuarial support, and the rates may not be used until approved. FSRA publishes approved average rate changes quarterly, which makes Ontario's rate history unusually public.
  • FSRA also administers the Statutory Accident Benefits framework in practice — the Minor Injury Guideline, the professional services guideline, and the arbitration/dispute rules — and supervises the Facility Association and Ontario's risk sharing pool arrangements.
  • It publishes technical notes and bulletins that tell filers what actuarial support FSRA expects: trend selections, development, expense and profit provisions, and the treatment of reform savings.
  • FSRA does not regulate solvency of federally incorporated insurers — that remains OSFI's. A national insurer therefore satisfies FSRA on price and conduct and OSFI on capital, simultaneously.

A Rate Filing That Will Not Be Approved An insurer files for a 9.8\% Ontario private passenger auto rate increase. The indication is supported by a loss trend of +8\% per year selected from four years of the insurer's own data, which comprises about 1{,}200 claims per year. No adjustment is made for a recently enacted benefit reform that industry analysis suggests will reduce accident benefit costs by roughly 5\%.

Identify the problems FSRA would raise.

Answer Three, and each is independently fatal to approval:

  1. Trend credibility. 1{,}200 claims a year over four years is thin for an 8\% severity-and-frequency trend selection. FSRA expects the filer to blend its own experience with industry data (credibility-weight it), and to show the fit rather than assert the selection.
  2. The reform is ignored. An approved rate must reflect the cost level that will apply during the policy period. Filing a rate that omits an enacted benefit reduction charges policyholders for costs the law has removed — the single most common ground for rejection after a reform.
  3. Double counting risk. If the historical years already contain part of the reform's effect, applying an unadjusted historical trend forward compounds the error.

The insurer's corrected indication would be materially below 9.8\%. The wider exam point is that Ontario rate regulation is a prospective cost test: the question is never "what did we earn?" but "what will the coverage cost, under the law as it will then be?"