B.C. bucks the federal system and sets own reinsurance standards

Part XIII is insufficient in protecting policyholders from unlicensed and unscrupulous foreign reinsurers and insurers and, as a result, B.C. will require P&C operators to obtain provincial licensing, over and above federal approval.

This was the message Alan Clark, superintendent of Financial Institutions for B.C., gave to P&C delegates during a market misconduct panel discussion at the National Insurance Conference of Canada that ended Friday Oct. 2, 2009.

Given the amount of unlicensed activity by managing general agencies (MGAs) in the P&C business, Clark and his office decided to examine whether or not federal revisions to Part XIII of the Insurance Companies Act were sufficient in protecting the end-user, the consumer.

“Change in the federal regime—from location of risk to location of insurer—makes it easier for bogus insurance companies from other jurisdictions to operate in Canada,” said Clark.

Clark uses two recent examples of “bogus” insurance companies/brokerages that began operating in B.C. in the last 18 months. Under the B.C. regulator, these two companies were given cease and desist orders, but “under Part XIII changes, both of these companies would have been able to operate in Canada.”

Clark is particularly concerned with the federal revisions to the Act, as it means that federally regulated insurers can move business off the books, or move it out of Canada entirely.

As a result, Clark is warning carriers, reinsurers and MGAs operating in B.C. that they will require provincial regulator approval, over and above federal endorsement.

P&C operations “conducting business in Canada will require business authorization from B.C. and this will be different from federal authorization,” said Clark. That means, those operating in B.C. should “not rely on federal rulings,” said Clark. “A foreign company must contact our office and there will be situations were a foreign company will not be required to obtain authority federally, but will require provincial authorization.”

This story was originally published by Canadian Insurance Top Broker.