TERMINATION OF INSURANCE BUSINESS IN CANADA OF FOREIGN INSURANCE COMPANIES

Document Properties

  • Type of Publication: Transaction Instructions
  • Revised: July, 2012
  • Index A No: 9
  • Category: Non Deemed Approval

Legislative Authorities

Definitions

In this document,

“non-policy financial obligation”

means any actual or contingent financial obligation of the applicant in respect of its insurance business in Canada, other than a policy liability. It includes, without limitation, chief agency rent obligations, salaries to the chief agent, legal expenses incurred in connection with the discontinuance of the applicant’s insurance business in Canada, Canadian regulatory expenses, tax liabilities on income from an applicant’s assets vested in Canada, and unfunded retirement benefits provided by the applicant to its former employees in Canada.

“policy liability”

means any actuarial and other liability, whether actual or contingent, of the applicant in respect of its insurance business in Canada, that arises from the terms and conditions of a policy, including, where applicable, any declared and unpaid policy dividends.

Information Requirements

The applicant is generally expected to provide:

  1. audited financial statements in respect of the applicant’s insurance business in Canada, as at a date no more than three months prior to the application for the release of its assets in Canada, showing no policy liabilities, and nominal or no non-policy financial obligations, together with the related report from the auditor of the applicant for its insurance business in Canada confirming that the statements present fairly the financial position of the applicant’s insurance business in Canada (collectively, the “Audited Statements”);

  2. a report from the actuary of the applicant for its insurance business in Canada supporting the valuation of the policy liabilities reported in the Audited Statements;

  3. where the Audited Statements show non-policy financial obligations, in the form of commitments described in the notes to the statements or otherwise:

    1. a written description of the nature and amount of each of these obligations (where this description is not contained in the Audited Statements), and

    2. a written confirmation from a senior officer (who, by virtue of his or her duties and responsibilities, has knowledge of the applicant’s insurance business in Canada) that the applicant has discharged them or provided for them, together with a description of how it has done so;

  4. proof of publication of the notice described in paragraph 651(c) of the Act;

  5. written confirmations from the senior officer that:

    1. the applicant will promptly inform OSFI of the nature and amount of any policy liabilities and non-policy financial obligations that arise after the date of the Audited Statements, until the Superintendent has, by order, authorized the release of the applicant’s assets in Canada (the “Release Order”)Footnote 1,

    2. in the period since the applicant has ceased to issue and renew policies in respect of its insurance business in Canada, no policy liabilities or non-policy financial obligations have been removed from the applicant’s records in respect of its insurance business in Canada on account of having been transferred to the head office,Footnote 2

    3. Assuris or PACICC, as applicable, and the insurance regulators of all provinces and territories in which the applicant is licensed, have each been directly notified in writing, concurrently with the first publication of the notice referred to in item 4 above, of the applicant’s intention to seek the release of its assets in Canada, and

    4. the applicant has not received any objections related to the notices referred to in items 4 and 5(c), Text for screen readers: 5(c) = 5(3), above, or has addressed any objection received (together with a description of the manner in which the objection was addressed); and

  6. where liabilities or obligations referred to in item 5(a), Text for screen readers: 5(a) = 5(1), above arise or have arisen (including during the course of the application process), a written confirmation from the senior officer that the applicant has:

    1. in the case of policy liabilities, discharged them or provided for their discharge (together with a description of how it has done so), and

    2. in the case of non-policy financial obligations, discharged them or provided for them (together with a description of how it has done so).

Administrative Guidance

  1. This Transaction Instruction relates solely to the Act and does not address any provincial or territorial requirements, or Assuris or PACICC requirements, that may apply to the termination of an applicant’s insurance business in Canada. Accordingly, and in addition to item 5(c), Text for screen readers: 5(c) = 5(3), above, OSFI recommends that

    1. applicable provincial and territorial insurance statutes be reviewed, and the agencies that administer them be consulted, in connection with such proposed termination. Please note that the Canadian Council of Insurance Regulators has published a document setting out information requirements for foreign insurers wishing to withdraw from Canada (see: www.ccir-ccrra.org); and

    2. the applicable requirements of Assuris or PACICC in respect of termination of membership be reviewed, and that compensation fund officials be consulted accordingly.

  2. An applicant must continue to comply with the Act (e.g., record keeping, reporting, and appointment of chief agent, actuary and auditor) until the Release Order is made.

  3. The Superintendent has the discretion to make a Release Order if the Superintendent is satisfied that an applicant’s policy liabilities and non-policy financial obligations have been dealt with in accordance with paragraphs 651(a) and (b) of the Act, and that the publication requirement in paragraph 651(c) has been met.

  4. Subparagraphs 651(a)(i) to (iii) of the Act list the following specific ways of dealing with policy liabilities:

    1. obtaining the surrender of the related policies;

    2. transferring (i.e., novating) the related policies; or

    3. causing the risks undertaken under the related policies to be reinsured, on an assumption basis.

  5. Subparagraph 651(a)(iv) of the Act allows an applicant to deal with policy liabilities in ways not contemplated by subparagraphs 651(a)(i) to (iii). In such a case, the applicant must discharge, or provide for the discharge of, the policy liabilities in a manner satisfactory to the Superintendent.

    The Superintendent is generally satisfied that an applicant has discharged its policy liabilities for the purpose of subparagraph 651(a)(iv) where:

    1. the Audited Statements show no policy liabilities; and

    2. if the applicant has issued “claims occurring” policiesFootnote 3, the applicant has satisfied the Superintendent that it is reasonable to believe that no claims will be made under those policies, having regard to, among other things, the types of risks insured and the history of claims made under those policies.

    The Superintendent is generally satisfied that an applicant has provided for the discharge of a policy liability for the purpose of subparagraph 651(a)(iv) where it has either:

    1. entered into a written agreement with another financial institution in Canada whereby that institution has undertaken to discharge, or has guaranteed the discharge of, the liability; or

    2. in the exceptional case where the applicant demonstrates that (c), Text for screen readers: (c) = (5)(3), above is not commercially reasonable in the circumstances, established a trust in Canada acceptable to OSFI for the benefit of a prospective claimant under the policy where the amount vested is equal to the maximum liability amount under the policy.

  6. Paragraph 651(b) of the Act states that the Superintendent must be satisfied that an applicant has discharged, or provided for, its non-policy financial obligations.

    The Superintendent is generally satisfied that an applicant has discharged a non-policy financial obligation where it has carried out, or has otherwise put an end to, the obligation (e.g., where the applicant has prepaid a future payment obligation).

    The Superintendent is generally satisfied that an applicant has provided for a non-policy financial obligation where it has carried out one of the following four measures in regards to that obligation:

    1. entered into a written agreement with a person in Canada acceptable to OSFI whereby that person has undertaken to discharge, or has guaranteed the discharge of, the obligation;

    2. established a trust in Canada acceptable to OSFI for the benefit of the creditor where the amount vested is equal to the amount owed to that creditor;

    3. obtained, in writing, the creditor’s

      1. acknowledgement of the applicant’s intention to request the Release Order, and acknowledgement that following the making of the Release Order, the applicant will no longer have any assets in Canada under the Superintendent’s oversight in support of its obligation to the creditor, and

      2. consent to the measures that the applicant proposes to implement to provide for its obligation to the creditor following the making of the Release Order; or

    4. in the exceptional case where the applicant demonstrates that neither (a), (b) nor (c), Text for screen readers: (a), (b) nor (c) = (6)(1), (6)(2) nor (6)(3), above is commercially reasonable in the circumstance, the applicant has sent to the creditor, at his/her/its last known address, a notice of the applicant’s intention to request the Release Order together with:

      1. a statement to the effect that following the making of the Release Order, the applicant will no longer have any assets in Canada under the Superintendent’s oversight in support of its obligation to the creditor, but the applicant will nonetheless continue to honour its obligation to the creditor,

      2. a description of the measures that the applicant proposes to implement to provide for its obligation to the creditor following the making of the Release Order, and

      3. information on how the creditor may contact the applicant in the event that the creditor has questions about these proposed measures, and

      the applicant has either received no objections related to the creditor notification in a period of at least six weeks following the date of the notification, or has addressed any objection received (together with a written description provided to OSFI of the manner in which the objection was addressed).

  7. The applicant must provide a completed OSFI 298 Form to OSFI’s Securities
    Administration Unit to obtain the release of its remaining assets in Canada.

  8. The following is an example of a notice referred to in item 4 of the Information Requirements above (a French language example of this notice is available in the French language version of this document):

    [Name of the applicant and, if applicable, other name under which it is authorized to insure in Canada risks]

    RELEASE OF ASSETS

    Pursuant to section 651of the Insurance Companies Act (Canada) (the “Act”), notice is hereby given that [name of the applicant] intends to apply to the Superintendent of Financial Institutions (Canada) on [date that is at least six weeks after the date of the notice] for an order authorizing the release of the assets that it maintains in Canada in accordance with the Act.

    Any policyholder or creditor in respect of [name of the applicant]’s insurance business in Canada opposing that release is invited to file an opposition by mail to the Office of the Superintendent of Financial Institutions (Canada), Legislation and Approvals Division, 255 Albert Street, Ottawa, Ontario K1A 0H2, or by email at approvalsandprecedents@osfi-bsif.gc.ca, on or before [same date as above].

    [Date of the notice (note: for the four consecutive weeks, the date remains the date of the first publication)]

  9. This request for approval is not subject to a user pay fee.

The information requirements and administrative guidance are intended to satisfy typical applications. They have been derived from OSFI’s experience in assessing applications. Applicants who provide all information and material requested can generally expect a more timely assessment of their applications. As appropriate to the circumstances, OSFI may request additional information, take into account other matters, impose terms and conditions, or require undertakings.

Footnotes

Footnote 1

Pursuant to section 654 of the Act, the order authorizing the applicant to insure in Canada risks is deemed to be revoked when the Release Order is made.

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Footnote 2

For certainty, the written confirmation does not apply in respect of any policy liabilities that were removed from the applicant’s records in respect of its insurance business in Canada where the applicant had satisfied OSFI that these liabilities were in respect of the applicant’s insurance business outside Canada.

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Footnote 3

These are generally “long tail” liability policies that provide coverage based on when the event occurs and that allow claims to be made for a considerable period of time.

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