B.C. Insurance Council announces new rule for placing coverage with unauthorized insurers

A new rule outlining procedures that B.C. brokers must follow when placing coverage with an unauthorized insurer will take effect on Feb. 28, 2011.
Section 76(1)(c) of the Financial Institutions Act in British Columbia provides a limited exemption from the restriction that prohibits placing insurance with an unauthorized insurer.
Rule 7(11.1), which takes effect in February, establishes a course of action when conducting an insurance transaction related to this exemption.
According to Rule 7(11.1), brokers must notify the Insurance Council of British Columbia in writing prior to conducting any insurance transactions with an unauthorized insurer.
The written notification must include:

• the name of the individual broker or agency;
• the primary broker at the agency; and
• confirmation that the broker understands the disclosure and trust requirements contained in Rule 7(11.1).

Related to the last point, the broker must disclose to a client in writing the risks associated with an unauthorized insurer. The written notice must include:

• details about the financial strength rating and creditworthiness of the unauthorized insurer;
• the course of action available – or the consequences – to the client if a claim is made but not paid by the unauthorized insurer;
• the consequences if the unauthorized insurer ceases to do business; and
• the client’s obligation to pay the insurance premium tax owed to the provincial government.

Finally, pursuant to the Insurer Exemption Regulation, the broker must provide the following details to the Superintendent of Financial Institutions within 30 days of each quarter:

• names of the insureds;
• the particulars of the insurance;
• the amount of insurance placed with each insurer referred to and the rate and amount of premiums paid.