Source Property & Casualty Insurance in Canada.pdf – form Government of Canada The federal and provincial governments share jurisdiction over insurance matters in Canada; therefore both levels of government are involved in the regulation and supervision of participants in Canada’s P&C insurance industry. Federal authorities look after the solvency of companies incorporated federally as well as Canadian branch operations of firms incorporated outside Canada. Provincial authorities are responsible for the solvency of provincially incorporated insurers, for reviewing and interpreting insurance contracts and for licensing and supervising agents and adjusters. Approximately three-quarters of the P&C insurers active in Canada are supervised by the federal government through the Office of the Superintendent of Financial Institutions (OSFI), as they operate in more than one province or are branches of foreign companies. These federally regulated insurers make up more than 80 per cent of the total business of the P&C insurance industry in Canada. Federally regulated companies must, however, also be licensed in each province and territory in which they undertake insurance activities. P&C insurers in Canada must satisfy regulatory authorities that their policy reserves are sufficient to meet the anticipated requirements of their policyholders. In addition, they must satisfy capital requirements, which are expressed as a minimum percentage by which assets must exceed liabilities. In this regard, OSFI administers the Minimum Asset Test for federally regulated insurers. Since 1999 the Dynamic Capital Adequacy Testing (DCAT) must also be filed with OSFI every year. DCAT is a formal approach to test the financial strength of a company by projecting its future financial condition under various possible sets of consistent scenarios. DCAT enables the systematic quantification of the major business risks faced by an insurance company.
Canadian financial institutions in other areas of the financial services sector are subject to legislative and regulatory restrictions on their participation in Canada’s P&C insurance industry. For example, banks and other federally chartered deposit-taking institutions may own insurance underwriting subsidiaries, but they are generally not permitted to become directly involved in the retailing of insurance through their branches. However, they are allowed limited participation in some lines related to their banking activities, such as credit card and travel insurance. Canadians are permitted to purchase insurance from insurers not licensed in Canada. However, the extent to which these unlicensed insurers can solicit business in Canada from Canadians is strictly limited and monitored by the regulatory authorities. Policyholder Protection Additional protection for many Canadian policyholders is provided by the industry-run Property and Casualty Insurance Compensation Corporation (PACICC), which has guaranteed most P&C insurance policies in Canada, up to certain limits, since 1988.2 PACICC membership is required in all Canadian jurisdictions for the licensing of P&C insurers in PACICC-covered lines. PACICC has established a reserve fund of approximately $30 million. In addition, it has the power to levy assessments on its members should an insolvency occur. Foreign insurers with branches in Canada must vest assets in Canada to ensure policyholder protection. Competition Refer to the Competition Bureau Web Site. Top of page
Clayton Act Federal legislation (U.S. Code Title 15, Chapter 1) enacted in 1914 that amended the Sherman Antitrust Act to prohibit price-fixing conspiracies in interstate commerce. Gramm-Leach-Bliley Act. (Financial Services Modernization Act of 1999) Provisions of the Financial Services Modernization Act of 1999 provide for the creation of the National Association of Registered Agents and Brokers (NARAB), a semi-autonomous producer multi-state licensing clearinghouse, if at least 29 states do not enact full reciprocal or uniform producer licensing laws by November 2002. Insurance department A state agency that is responsible for administering the laws regulating insurance, including the licensing of insurance companies, agents and brokers.
McCarran-Ferguson Act Federal legislation (U.S. Code Title 15, Chapter 20) enacted in 1945 to permit the states to continue regulating the insurance business after the Supreme Court, in U.S. v. South-Eastern Underwriters Association, overruled the decision in Paul v. Virginia, declaring insurance to be interstate commerce and therefore within Congress’s constitutional authority to regulate. Under the Act, insurance is exempt from some federal antitrust statutes to the extent that it is regulated by the states. The exemption primarily applies to gathering data in concert for the purpose of ratemaking. Otherwise, antitrust laws prohibit insurers from boycotting, acting coercively, restraining trade, or violating the Sherman or Clayton Acts. Sherman Antitrust Act Federal legislation (U.S. Code Title 15, Chapter 1) passed in 1890 that prohibits a monopoly or restraint of trade in interstate commerce. It did not apply to the insurance industry because the Supreme Court had ruled in Paul v. Virginia (1869) that insurance was not interstate commerce and thus not subject to federal regulation. Top of page
Financial Services Authority (FSA) On 1 December 2001 the FSA assumed its full powers and responsibilities under the Financial Services and Markets Act 2000. They are now the single statutory regulator responsible for regulating deposit-taking, insurance and investment business. Regulating insurance intermediaries FSA will also regulate the sale of general insurance products. This follows from action in the European Union on the Insurance Mediation Directive.
The directive requires statutory regulation of general insurance brokers. HM Treasury will have to bring forward legislation to enact this directive. They will then consult widely to ensure that the new regime provides appropriate protection for consumers and that the benefits of competition and innovation are retained. The proposed date for implementing the directive across Europe is currently early 2004. Top of page
- Alberta Finance
- Alberta Insurance Council
- Autorite Des Marches Financiers
- B.C. Financial Institutions Commission
- Canadian Council of Insurance Regulators
- Chambre D’Lassurance De Dommages
- Financial Services Commission of Ontario
- FINTRAC – FINTRAC receives, analyzes, assesses and discloses financial intelligence on suspected money laundering, terrorist financing, and threats to the security of Canada.
- General Insurance Statistical Agency
- Insurance Council of B.C.
- Insurance Council of Manitoba
- Insurance Councils of Saskatchewan
- Lawrie Savage & Associates – A firm that assists clients in Canada and internationally with all manner of insurance and supervisory issues.
- Manitoba Consumer & Corporate Affairs
- New Brunswick – Justice & Consumer Affairs
- Nova Scotia Office of the Superintendent of Insurance
- Newfoundland & Labrador Government Services
- Office of the Superintendent of Financial Institutions – Federal.
- Ontario Commercial Liabiiity Statistical Plan
- Ontario Insurance Commission
- PACICC – Property and Casualty Insurance Compensation Corporation.
- Saskatchewan Justice
- National Conference of Insurance Guaranty Funds
- National Conference of Insurance Regulators
- National Insurance Producer Registry
- National Society of Compliance Professionals
- Uniform Certificate of Authority Application – US
- U.S. Securities & Exchange Commission
- Wolters Kluwer – Compliance Tools, Research, Analysis, Forms.
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