March 30, 2005 by Canadian Underwriter
The Insurance Bureau of Canada (IBC) is asking insurers to help it craft a response to a consultation paper on financial institutions produced by the federal government.
As part of its recent federal budget, the government started the process of addressing a legislative framework for financial services, with the five-year sunset on Canada’s financial services legislation fast approaching.
Unlike other legislation, the five-year sunset of October 24, 2006 for financial services legislation is firm, notes Steven Lingard, assistant general counsel for the IBC. If the legislative framework is not renewed or revised by that date, “insurance companies, banks and other financial institutions cannot operate this is a real sunset”, he explains.
There is one “escape clause” but this would only provide a six-month extension for the government to devise new legislation.
Among the provisions in the 10-page consultation paper which may be of note to insurers is one addressing disclosure provisions. Finance Canada is proposing a review of complaint-handling procedures and asking “should companies be required to disclose their complaint-handling procedures directly to the public”. Another key area is improvements to the regulatory approval regime, with the government hoping to streamline the processing of routine transactions. Lingard notes that in the Office of the Superintendent of Financial Institutions (OSFI) 2004 annual report, 42% of the transactions requiring ministerial approval came from the p&c industry indication there may be cost and time savings to be found within a new regime.
The consultation paper also points to the need to address insurers who write solely marine coverage, who have heretofore been excluded from the Insurance Companies Act, with a view to having those insurers be regulated by OSFI. And lastly, Lingard says insurers may be interested in the consultation paper’s comments on commercial investment, which could expand the power of financial institutions to own other commercial entities Lingard says insurers may want to look at what this change could mean with respect to limits currently placed on what services insurers can provide under legislation.
The IBC will comment on the consultation paper before the June 1 deadline for submissions, with Finance Canada planning to introduce a white paper in the fall (which may address more issues than mentioned in the consultation document, Lingard warns).