October 2, 2009 by Canadian Underwriter
Amendments to Part XIII of the federal Insurance Companies Act make it easier for a bogus insurer to operate outside the Canadian regulatory regime and yet do business in Canada, said Alan Clark, superintendent of the Financial Institutions Commission of British Columbia (FICOM).
Clark spoke as a panel member at the session, ‘Market (Mis)Conduct – Shades of Grey,’ at the National Insurance Conference of Canada in Ottawa on Oct. 1.
“Although I can understand the rationale for the changes [to Part XIII], the changes are a significant issue for my office and most other provincial regulators,” Clark told NICC delegates.
“In my opinion, a rule change that moves a federal regime from a location of risk to a location of business makes it easier for bogus insurers to operate outside the Canadian regulatory regime and yet do business in Canada,” he said.
Over the years, he added, FICOM has issued two cease-and-desist orders to bogus insurers, both of which would have complied with the new regime under the Part XIII changes.
B.C. has drafted legislative changes as a reaction to the federal Part XIII amendments, Clark said.
“Authorized insurers insuring risks located in B.C. will be required to conduct this business in Canada, and unless an exemption is granted by regulation, require a business authorization,” he said.
“At the end of the day, I hope that we will have a modern framework for the placement of insurance with unauthorized insurers through qualified licensed insurance agents and a procurement process that meets certain requirements and conditions,” Clark said.
The qualifications for licensed agents will likely be similar to the special-broker licensing scheme in Alberta, he added.
The requirements and conditions for procuring unauthorized insurance for British Columbians by agents will be established by regulation and will probably be dependent on whether:
• the policy was solicited or not;
• the availability of insurance in Canada by authorized companies;
• any disclosure of the financial strength and credit worthiness of the unauthorized insurer;
• disclosure of the capability of the unauthorized insurer’s primary regulator;
• specific reporting to FICOM and the policyholder; and
• the payment of premium taxes.
“Under B.C. law there will be a significant difference between the federal and provincial legislation and how we determine whether insurers are doing business in our province,” he said.