Canada's Office of the Superintendent of Financial Institutions Canada (OSFI) has issued revised general guidelines to simplify the use of letters of credit (L/Cs) for federally regulated insurance companies (FRIs).

The guidance is relevant for issuing banks and trustees as well as FRIs, and aims to improve efficiency in the issuance of L/C approvals.

Simplifying amendments

OSFI is amending its process to reduce the amount of time L/Cs spend in transit.

Under the amendments, all L/Cs issued by banks will be forwarded to the respective insurance company for review.

The insurance company then performs an initial review to ensure the L/C meets OSFI guidelines and is free from errors.

Approval process

Following review, a soft copy of the L/C is emailed to OSFI for approval. Once approved, OSFI will notify the insurance company and, if applicable, the trustee.

The insurance company will retain the L/C or forward it to the trustee for safekeeping as required.

The amended guidelines are effective as of 8 November 2023.

More information on OSFI's revised general guidance for the use of L/Cs can be found here.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.