Toronto, ON, October 28, 2025
The Office of the Superintendent of Financial Institutions (OSFI) has released a new framework, Guideline E-23 – Model Risk Management, to help federally regulated financial institutions manage the growing risks associated with model use — from traditional actuarial models to artificial intelligence technologies.
Model risk arises when models are flawed, misused, or poorly implemented, which can result in poor business decisions or even financial losses.
As predictive models and AI tools become increasingly embedded in insurance and financial services, OSFI’s new guideline seeks to ensure that institutions follow responsible, transparent, and well-governed modeling practices.
Guideline E-23 is principles-based, offering institutions flexibility while reinforcing governance, accountability, and oversight.
Its main objectives are to:
- Protect consumers from the consequences of poor model management
- Maintain financial stability across Canada’s financial system
- Encourage innovation in modeling, while ensuring the use of sound risk-management practices
The new guideline will take effect in May 2027, with an 18-month transition period to allow institutions to align their existing practices.
It applies to all federally regulated financial institutions, except pension plans.
During this transition, OSFI has committed to supporting institutions as they adjust to the new standards.
The complete text of Guideline is available on the Office of the Superintendent of Financial Institutions Canada website.
At IPFS Canada, we are committed to helping our broker partners navigate these regulatory changes. We work closely with brokers to help them implement innovation responsibly, ensuring client solutions remain effective and compliant.
