June 2, 2005 by Canadian Underwriter
The Insurance Bureau of Canada (IBC) recently sent its submission to the federal Department of Finance on the Government’s consultation paper, “An Effective and Efficient Legislative Framework for the Canadian Financial Services Sector.” Part of “Budget 2005,” the consultation paper was released in February as a step towards the next periodic review of financial institutions statutes.
Currently, there is a five-year sunset clause in each of the federal financial institutions’ statutes that mandates the completion of a review and enactment of any necessary legislation, failing which companies shall not carry on business.
In its submission, IBC emphasizes that its members believe Canada’s financial services sector does not need any major structural reforms at this time. The submission also noted IBC members believe it is highly important for policymakers to recognize the distinct nature of P&C insurance, and that there is a real need for more federal-provincial regulatory coordination.
The submission discusses a number of themes the Government’s consultation paper has raised such as, financial institutions legislation disclosure provisions, regulatory approval regime, marine insurance and commercial investment power.
In addition to commenting on issues raised by the Government, IBC also highlighted other issues required to improve the legislative framework for insurers. Some of these issues includes: exempting reinsurers from the consumer provisions in the Insurance Companies Act (ICA), and Financial Consumer Agency of Canada oversight; eliminating the restriction in the ICA for P&C insurers on raising capital through debt or preferred shares; establishing privilege for insurer self-assessments of policies and procedures; facilitating a more competitive environment by setting out specific criteria for OSFI’s existing discretionary powers to direct financial institutions to increase levels of capital, liquidity or assets and introducing requirements for written reasons to be provided to financial institutions for these directions; clarifying the definition of an entity in the Office of the Superintendent of Financial Institutions Act for the purposes of the Administrative Monetary Penalty Regulations; easing the restriction for P&C insurers on equity investments; encouraging the federal and Quebec governments to reach an agreement to facilitate transfers of business from federal to Quebec insurers as contemplated by legislation passed as part of the previous five-year review; expanding the scope of exemptions in the ICA for public holding requirements; and, enhancing the ICA’s corporate governance provisions.
In fall 2005, the Department of Finance intends to release a White Paper for the financial institutions review, after which hearings will be held by the House of Commons Standing Committee on Finance and by the Standing Senate Committee on Banking, Trade and Commerce. This winter it is expected that legislation will be drafted and introduced into the House of Commons in the beginning of the new year. The intent is to have it implemented by October 24, 2006.