Canadian insurance industry encouraged to talk to regulators

Canadian insurers must engage in an ongoing dialogue with industry regulators to avoid a “death by best practices,” according to a panelist speaking at the Insurance Bureau of Canada’s sixth annual regulatory affairs symposium in Toronto.
Paul Belanger, a partner at Blake Cassels & Graydon LLP, said risk-based regulation is to be applauded when best practices are implemented in a way that takes into account the specific business contexts of particular insurers.
The danger, he said, is when regulators start to believe everyone in the financial services industry, without exception, should be following the same best practices. He warned that if the insurance industry did not keep communicating with regulators, there would be a danger of “best practices” becoming inflexible, blunt instruments.
“At the senior level of OSFI, the idea on best practices is the right one you’ve got to have things that fit your business strategies, your organizational structure and what you’re doing,” Belanger said. “But at the working level, there are times when we sort of find that there’s never really a best practice that particular people wouldn’t like to see applied by every company no matter what they’re doing or what business they’re in and [companies] are sort of inundated with these things.
“At the margins, it’s always easy to go along and implement best practices. But in an overall sense, you’re sort of hampering your governance and compliance and making it less efficient and effective.”
Belanger said insurers need to engage in a constant dialogue with regulators to make sure best practices remain flexible. Also, insurers should maintain an ongoing communication with regulators to make sure all parties have a common understanding as to what the rules mean. It is important for insurers to make sure they are not left following rule interpretations that have shifted long ago, Belanger said. “Communication is critical.”