Company: FRFXF
Filing Date: 2025-03-14
Form Type: F-4
Source: 0001104659-25-024010
Chunk: 78

Company: FAIRFAX FINANCIAL HOLDINGS LTD/ CAN
Filing Date: 2025-03-14
Form: F-4
Chunk 78
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 less than the supervisory target of 150% of the MCT amount. OSFI expects federally
regulated property and casualty insurers to establish an internal target capital ratio, and maintain ongoing capital, above the supervisory
target. OSFI may, however, on a case-by-case basis, establish in consultation with an insurer an alternate supervisory target based upon
the company’s risk profile. The ICA requires property and casualty insurance companies to maintain adequate levels of capital and
adequate and appropriate liquidity. The MCT calculates the required capital by reference to, and varying with, the risk characteristics
of each category of on and off-balance sheet assets held by the company, the company’s policy liabilities and reinsurance receivable
and recoverable. This MCT calculation typically requires the application of quantitative factors to assets, as well as to certain off-balance
sheet items, based on a number of prescribed risk components. The calculation of policy liabilities takes into account the risk associated
with variations in claims, provisions, possible inadequacy of provisions for unearned premiums, possible inadequacy of provisions for
premium deficiencies, and the occurrence of catastrophes. The calculation of reinsurance receivable and recoverable includes the risk
of default for recoverables from reinsurers arising from both credit and actuarial risk.

Restrictions on Dividends and Capital Transactions

The ICA prohibits the declaration
by the directors of a federally incorporated insurance company, or the payment by the insurance company, of any dividend on shares of
an insurance company if there are reasonable grounds to believe the company is, or the payment of the dividend would cause the company
to be, in contravention of applicable capital and liquidity requirements. The ICA also requires the directors of an insurance company
to notify the Superintendent of Financial Institutions of the declaration of a dividend at least 15 days prior to the date fixed
for its payment. Similarly, the ICA prohibits the purchase for cancellation of any shares issued by an insurance company or the redemption
of any redeemable shares or other similar capital transactions, if there are reasonable grounds for believing that the company is, or
the payment would cause the company to be, in contravention of its applicable capital and liquidity requirements. These latter transactions
would also require the prior approval of the Superintendent of Financial Institutions.

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Constraints on Shares

The ICA contains certain
restrictions on the purchase or other acquisition, issue, transfer and voting of any shares of an insurance company.