November 11, 2008 by Canadian Underwriter
Canada’s federal solvency regulator is requiring federally-regulated insurance companies to anticipate in their annual actuarial reports exactly how nation-wide court challenges to auto injury caps will affect their bottom lines.
In a Nov. 3 memorandum to the nation’s insurers, the Office of the Superintendent of Financial Institutions (OSFI) noted the successful Charter challenge against Alberta’s Cdn$4,000 cap, adding that “the impact may be significant for any insurance company actively writing automobile insurance in Alberta.”
It noted similar constitutional challenges to minor auto injury caps that are either expected or have already been heard in Nova Scotia, New Brunswick and Prince Edward Island.
Regardless of the outcome of these court challenges in the provinces, the matter is expected to be appealed to the Supreme Court of Canada, OSFI notes.
“The [company’s] actuary’s report should clearly show the provisions (both case and IBNR) that the company is currently holding in connection with these [court challenges] in each of these provinces,” OSFI notes in its memorandum.
“The report should also disclose the potential liability should the challenges ultimately succeed…
“Where no liability exists or where the amounts are not material, a comment to that effect should be included in the report.”