Economical Insurance awaits demutualization regulations as budget implementation act gets Royal Assent

Economical Mutual Insurance Company has welcomed enactment of amendments to Canada’s Insurance Companies Act (ICA), calling the move a significant milestone in the implementation of a framework for property and casualty insurance company demutualizations.

Bill C-31, the budget implementation act, was tabled March 28 and recently received Royal Assent. That enacts amendments to several acts, including the ICA.

The ICA changes include broadening the Governor in Council’s regulation-making authority under the act, which supports the “eventual implementation of the regulations that will allow federally regulated mutual p&c insurance companies that choose to do so to demutualize,” notes a statement from Economical Insurance issued Monday.

Bill C-31 notes that Cabinet could make regulations “respecting the process that precedes the calling of a special meeting” of a carrier’s eligible policyholders, “including the development of a conversion proposal, and respecting the calling of” the eligible policyholders’ meeting.

In 2010, Economical Insurance announced its intention to demutualize, subject to the approval of both its policyholders and the federal regulators.

“Now that the budget implementation bill has been enacted, the next step would be for the Department of Finance to release draft demutualization regulations, which are expected to be subject to a public comment period before coming into force,” John Bowey, chair of Economical’s special committee on demutualization, says in the statement. “At that point, Economical’s Board of Directors will be in a position to determine whether demutualization within the final regulatory framework would be in the best interests of the company,” Bowey continues.

In early April, Liberal MP Scott Brison had expressed concerns in the House of Commons. Citing the federal government’s report on demutualization, Brison noted that concerns were expressed that demutualization could lead to consolidation, reduce competition, access to services, and weaken ties to rural communities in which most mutual companies are based.

New Democrat MP Helene Leblanc also said at the time that Bill C-31 “does not indicate exactly what this government’s intentions are in terms of demutualization.” Noted Leblanc, “The Canadian Association of Mutual Insurance Companies stated that these companies do not want the government to create a framework that would include incentives for demutualization.”