Liberal, NDP politicians say government’s intentions on demutualization are unclear

The federal Liberal finance critic expressed concern Thursday about a proposal from the ruling Conservatives that could lead to regulations enabling the demutualization of property and casualty insurance companies.

Scott Brison, Liberal MP for Kings Hants, Nova Scotia, spoke about Bill C-31, which was tabled March 28. If passed into law, the 380-page omnibus bill would not only implement part of the 2014-15 budget, but would also change several existing laws, including the Motor Vehicle Safety Act, the Transportation of Dangerous Goods Act, the Hazardous Products Act and the Bank Act, among others.

“There are also provisions in this budget (implementation) act for demutualization,” Brison told the Commons. “I have heard from insurance providers in Nova Scotia who worry that these changes potentially will hurt rural Canadians.

“Even the government’s own report on demutualization tells us, quote: 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.”

If passed into law, Bill C-31 would give federal Cabinet the power to 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 a press release March 31, Economical Insurance of Waterloo, Ont. stated that the powers proposed in Bill C-31 would “support the eventual implementation of the regulations that are needed to allow federally regulated mutual property and casualty (P&C) insurance companies to demutualize.”

At the time, Economical expected that the government would eventually release draft demutualization regulations, which would undergo public consultation before coming into force.

“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,” the carrier said after Bill C-31 was tabled.

The Insurance Act gives the federal government the power to make regulations “governing the ownership of shares issued by a mutual company that has been converted into a company with common shares.”

If passed into law, Bill C-31 would stipulate that regulations regarding an insurance company’s application — to convert from a mutual firm to a company with common shares — “may provide for court intervention in the process … including the circumstances in which the court is to be seized of any matter in relation to that process, and may govern the court’s powers and procedures in that regard.”

The bill would also give Cabinet power to limit “the circumstances in which” the finance minister “may give approval” under subsection 407(1) of the Insurance Act.

“The government’s intentions with this bill are not clear,” Brison said Thursday. “We hope that when we discuss this bill in committee, we will get a better understanding of the direction the government wants to take. This is another case where, with omnibus bills, the government is making it difficult for us to do our jobs and assess bills responsibly.”

Helene Leblanc, the New Democratic Party MP for LaSalle-Émard, Quebec, echoed Brison’s concerns.

“The bill does not indicate exactly what this government’s intentions are in terms of demutualization,” she said in the Commons. “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.”

Two Conservative MPs spoke Thursday in favour of Bill C-31 but did not mention demutualiztion.

“We on this side of the House are concerned with action on jobs, long-term growth, and continued prosperity for all Canadians,” said Harold Albrecht – Conservative MP for Kitchener-Conestoga, Ontario – of the government’s Economic Action Plan.

“We have set aside $53 billion for the building Canada plan,” said Dean Allison, Conservative MP for Niagara West-Glanbrook. “Among other things, this plan would fund transfers to provinces and municipalities and would accept applications for the building Canada fund. It would also renew the P3 Canada fund to find new ways for state and private actors to co-operate on projects.”