Regulation (December 01, 2008)

IBC ASKS ONTARIO TO WORK WITH FEDS IN POSTPONING CHANGES TO PART XIII OF ICA

Insurance Bureau of Canada (IBC) wants the government of Ontario to work with the federal government to delay changes to Part XIII of the Insurance Companies Act of Canada until the initiative is fully understood by provincial regulators.

IBC made the suggestion as part of its pre-budget submission to Ontario’s minister of finance.

The Office of the Superintendent of Financial Institutions (OSFI) changed the definition of whether or not an insurance policy is considered Canadian, effective Jan. 1, 2010.

“There is not a clear understanding by provincial regulators about the change [to Part XIII] OSFI has made,” IBC said in its submission. “Because the federal and provincial acts differ, it is possible for an insurance policy not to be Canadian according to the OSFI definition, but still be considered a policy in Ontario.”

BROKERS SAY CCIR MISSES OPPORTUNITY TO LICENSE SELLERS OF INCIDENTAL INSURANCE

The Insurance Brokers Association of Canada (IBAC) says the Canadian Council of Insurance Regulators (CCIR) has “missed an opportunity” to implement a new licensing regime for sellers of incidental insurance products. The national insurance market conduct regulator released its much-anticipated Incidental Selling of Insurance Report.

In it, the CCIR calls for the training and supervision of sellers of insurance products, including those for whom the selling of insurance is incidental to their operations. But it says insurers — and not regulators — should bear the ultimate responsibility for this. IBAC wanted to see regulators license sellers of incidental insurance products.

“By allowing an un-regulated, un-licensed sales force of merchants to offer consumers insurance products, the CCIR has missed an opportunity to recommend to its members to take action on a very basic consumer right — the right to deal with licensed and experienced insurance professionals,” IBAC CEO Dan Danyluk said in a statement.

INSOLVENCY CLAUSES SHOULD BE A REQUIRED FEATURE OF REINSURANCE CONTRACTS: PACICC

Canada’s solvency regulator should only count reinsurance as an allowable asset for an insurance company if an appropriate insolvency clause is part of the reinsurance arrangement.

The Property and Casualty Insurance Compensation Corporation (PACICC), which reimburses Canadian policyholders in the event of an insurer bankruptcy, made this and several other recommendations in its recent report, (Re)assurance of Solvency: reinsurance assets in insurance company liquidations.

Among other things, the report looks at the thorny issue of whether insolvent insurers should be able to recover from reinsurers (and therefore count those ‘recoverables’ against their assets in the event of an insurer bankruptcy).

Reinsurers have successfully argued in U. S. courts that insolvent insurers do not technically pay the claims they owe in the event of a bankruptcy, and therefore reinsurers should not have to pay the claims on their behalf if the primary insurer goes bankrupt.

An insolvency clause, which PACICC says should be a required part of any reinsurance contract, clarifies “that if the reinsured stops making payments for losses because of insolvency, the reinsurer must continue to make payments to the reinsured or to its liquidator as if the insolvency had not occurred.”