FSRA: Principles-Based Regulation is a Journey

Last Monday, I attended the third-annual FSRA Exchange event in Toronto.  For those that aren’t aware, FSRA regulates more than just pensions in Ontario, they also regulate credit unions, property & casualty insurers, mortgage brokers, financial planners, to name a few; and this event included all the sectors under their supervision.  It was a well-attended event with over 600 in-person attendees, plus another 300 or so online.  If you missed it, apparently video recordings of the sessions will be online soon.

The theme of the event was ‘principles-based regulation’ or PBR for short.

What is PBR?

PBR is a regulatory philosophy that focuses on the outcomes that matter to stakeholders, rather than prescribing specific rules and processes. In theory, PBR allows regulators to be more flexible, responsive and proactive in addressing emerging risks and opportunities, while also empowering regulated entities to find the best ways to achieve the desired outcomes.

The Benefits of PBR

PBR has many potential benefits for both regulators and pension stakeholders, such as:

  • Enhancing consumer protection and trust by focusing on the results that matter
  • Reducing regulatory burden and costs by eliminating unnecessary or outdated rules and streamlining compliance processes
  • Encouraging innovation
  • Improving regulatory effectiveness and efficiency by enabling regulators to adapt to change and specific fact situations, and to allocate resources where they are most needed
  • Fostering collaboration and dialogue between regulators and pension stakeholders by promoting a shared understanding of the regulatory objectives and expectations, and by providing feedback and guidance


It’s clear that FSRA is at the early stages of a journey toward PBR, and many of the senior people at FSRA spoke more about a ‘hybrid’ approach to PBR which will still include plenty of “bright line rules”.  This will require patience and the building of trust between all the stakeholders as we go through this cultural shift together.

Apparently, the key will be to approach FSRA with potential solutions to your problem rather than expecting FSRA to give you the answer.  In particular, it will be your responsibility to justify how the proposed solution fits within the laws and FSRA’s statutory objects of promoting good pension administration and protecting members’ pension benefits.  Be prepared to be collaborative and work constructively with FSRA to achieve a wholistic solution that works for everyone.

FSRA readily admits that they are not looking for one-size-fits-all solutions and that pension problems tend to be very complex with unique fact situations that don’t lend themselves to relying on precedents.

Patience and Collaboration

We are seeing the need for patience and collaboration in action as FSRA works towards publishing final Guidance on Pension Plan Amendments.  This has already been going on for a couple of years, and they recently held a second consultation which concluded in January.  FSRA reported that they are still working through all the comments and are hosting follow-up meetings with stakeholders in the coming weeks/months.

When talking to my pension lawyer friends, many continue to think that FSRA has it wrong and changes are needed to the guidance.  To FSRA’s credit, they are still open to discussions and collaboration.  It would be nice to have additional clarity in this area sooner rather than later, but I’m trying to be patient.

My Experiences

I’m optimistic that the shift toward more PBR at FSRA will be a good thing although there will certainly be some bumps along the road.  In my experience, FSRA has been trying very hard to be a principles-based regulator, but it still drives me crazy sometimes when we need to fight with them over the difference in doing a valuation on December 31 or January 1 – that’s basically the same day and rarely makes a material difference in the actuarial valuation results.  They definitely have a road to travel before they can truly call themselves a principles-based regulator.

I guess it’s tough implementing PBR when the laws are already written and unfortunately they are very prescriptive in some areas where we wish they weren’t.

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