Backgrounder: Mortgage Insurer Capital Adequacy Test (MICAT) - Guideline (2025)

Overview

The Mortgage Insurer Capital Adequacy Test (MICAT) is a guideline specifically for mortgage insurers. It outlines the minimum amount of capital mortgage insurers must hold to stay financially secure. Mortgage insurers are expected to maintain capital above this baseline, which acts as a financial cushion to ensure they can manage unexpected losses and economic shifts.  

Introduced on January 1, 2019, the MICAT allows the Office of the Superintendent of Financial Institutions (OSFI) to monitor the financial stability of these insurers more closely and customize capital requirements to the unique risks in mortgage insurance. It’s one of several indicators OSFI uses to assess an insurer’s financial health and compliance with regulatory standards, supporting a robust framework for financial resilience in the mortgage insurance sector.

Key changes in the final 2025 MICAT guideline

The new MICAT for mortgages on multi-unit (MU) residential properties—rental buildings with at least five housing units—uses a standardized approach and leverages the Capital Adequacy Requirements (CAR) risk weight factors for real estate exposures that are materially dependent on cash flows generated by the property.

Why it’s important

The updated capital rules for residential mortgage insurance are designed to strengthen the financial sector’s stability. By requiring insurers to maintain sufficient capital, these rules help protect policyholders, ensure that MICAT reflects the full range of risks associated with mortgage insurance, and ensure that companies have the resources to handle potential losses specific to the mortgage insurance business.

By ensuring that insurers are well-capitalized, MICAT reduces the risk of insurer insolvency, which strengthens the overall housing finance system. This stability can, in the long term, protect the housing market from sudden disruptions due to financial downturns. A more stable capital framework generally promotes confidence among buyers and lenders, indirectly supporting sustained housing availability.

Links to other OSFI guidelines

The MU capital framework leverages the Capital Adequacy Requirements (CAR) Guideline for federally regulated mortgage lenders based on the International Basel Committee on Banking Supervision’s Basel III reforms. These reforms offer an independent, credible, and unbiased perspective on the adequacy of capital in respect of the multi-unit residential risk.  

Effective date

The final MICAT 2025 guideline comes into effect on January 1, 2025.