Canadian Underwriter

Regulation plays important role in supporting a healthy economy: IBC’s Forgeron

April 22, 2015   by Angela Stelmakowich, Editor

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Regulation plays an important role in achieving financial system safety and stability, but another key function is “to ensure that the financial sector does its job effectively and efficiently to support a healthy economy,” says Don Forgeron, president and CEO of the Insurance Bureau of Canada (IBC).

Canada’s annual ranking of economic performance dropped to 15th place from 9th position in 2009

Speaking at IBC’s 19th Annual Financial Affairs Symposium in downtown Toronto Wednesday, Forgeron cited the critical need for insurers and regulators alike to ensure that the property and casualty insurance industry continues its historical role of promoting economic growth.

As part of its annual ranking of economic performance for 144 countries last year, the World Economic Forum (WEF) dropped Canada to 15th place, down from 9th position in 2009, and its lowest ranking since 2006, he said. “Among other things, WEF says Canada is underperforming in business innovation.”

Forgeron emphasized that well-designed, risk-based regulation can bring great benefits to both society and the insurance industry. “But we also know that inappropriate or excessive regulation has a clear cost not just to our industry, but to the wider economy,” he said.

Beyond the importance of regulation is the considerable time that executive personnel and boards spend on related issues, said Forgeron. “This is why one of our three key priorities at IBC is ‘striving for regulatory balance.’”

That being the case, Forgeron welcomed comments made last fall by Jeremy Rudin, the new Superintendent of the Office of the Superintendent of Financial Institutions (OSFI), who spoke about “how to restrain excessive risk-taking while encouraging responsible risk-taking.”

“For our industry, Mr. Rudin’s comments are a welcome affirmation of his balanced and practical approach to risk management,” Forgeron told attendees of the symposium. “It’s gratifying to know that our top regulator recognizes the critical role for responsible risk-taking,” he added.

Don Forgeron, president and CEO of the Insurance Bureau of Canada

“We understand that an element of risk is involved in every new idea, project, transaction and dream,” Forgeron said. “And our job is to help reduce, mitigate or – even, in some cases – eliminate this risk.”

Forgeron (pictured right) suggested that the relationships of mutual respect and information-sharing between Canada’s insurance industry and its regulators are paying off in better decisions. He cited, for example, OSFI’s final 2015 MCT Guideline, which took effect in January, and the outcome of four long years of discussion with the federal finance department and Canada Revenue Agency on taxation of related-party cross-border reinsurance premiums.

“In the end, it also was well worth the effort. In October, the finance department finally sent us a letter agreeing to our interpretation. This also resulted in a very significant cost savings to the industry and our customers,” Forgeron explained.

Still, challenges remain. Forgeron told attendees that international, federal and provincial regulators are expected to soon bring forward new initiatives in solvency through the International Capital Standard and market conduct regulation via the revised International Association of Insurance Supervisors (IAIS) principles on business conduct.

“We will meet these challenges by continuing to converse, to share insights and practical knowledge about how to preserve our well-deserved reputation for stability. We will do this at the same time as we ensure openness to healthy risk that supports economic growth,” he said.

“Canadians are the ultimate winners when our industry collaborates with governments and regulators to ensure regulatory initiatives support not just safety and security, but also efficiency and effectiveness,” Forgeron added.

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