Insurance Companies Act (S.C. 1991, c. 47)

Segregated Funds

Marginal note:Segregated funds restricted to life companies

450 A property and casualty company, or a marine company, shall not issue policies — or accept or retain, on the direction of a policyholder or beneficiary, policy dividends or bonuses, or policy proceeds that are payable on the surrender or maturity of the policy or on the death of the person whose life is insured — if the liabilities of the company in respect of the policies or the amounts accepted or retained vary in amount depending on the market value of a fund consisting of a specified group of assets.

Marginal note:Where segregated funds required

451 A life company that issues policies described in section 450 or accepts or retains amounts so described shall, in respect of those policies or amounts,

• (a) maintain separate accounts; and

• (b) establish and maintain one or more funds consisting of assets that are segregated from the other assets of the company and that are specified as the assets on the market value of which the liabilities of the company in respect of those policies or amounts depend.

Marginal note:Establishment and maintenance of segregated funds

452 For the purpose of establishing or maintaining a segregated fund required to be established and maintained by section 451, a company may, subject to the regulations and, in the case of a transfer from a participating account maintained pursuant to section 456, to section 463, transfer an amount to the separate account maintained in respect of the segregated fund.

Marginal note:Transfers from segregated funds

453 A company may return the current value of an amount transferred under section 452 to the account from which the amount was transferred.

Marginal note:Claims against segregated funds

454 A claim against a segregated fund maintained as required by section 451 under a policy or for an amount in respect of which the fund is maintained has priority over any other claim against the assets of that fund, including the claims referred to in section 161 of the Winding-up and Restructuring Act, except to the extent that the payment of that other claim is secured by a security interest in or on a specific, identifiable asset of the segregated fund.

Marginal note:Restriction of claims

455 The liability of a company under a policy or for an amount in respect of which a segregated fund is maintained pursuant to section 451

• (a) does not, except to the extent that the assets of the fund are insufficient to satisfy a claim for any minimum amount that the company agrees to pay under the policy or in respect of the amount, give rise to a claim against any assets of the company, other than the assets of that fund,

but

• (b) to the extent that the assets of the fund are insufficient to satisfy such a claim, gives rise to a claim against the assets of the company, other than the assets of that fund, that has the priority referred to in subsection 161(2) of the Winding-up and Restructuring Act.

Participating Policies

Marginal note:Participating account

456 A company shall maintain accounts, in the form and manner determined by the Superintendent, in respect of participating policies, separately from those maintained in respect of other policies.

Marginal note:Allocation of income

457 There shall be credited to, or debited from, a participating account maintained pursuant to section 456 that portion of the investment income or losses of the company for a financial year, including accrued capital gains or losses, whether or not realized, that is determined in accordance with a method that is

• (a) in the written opinion of the actuary of the company, fair and equitable to the participating policyholders;

• (b) approved by resolution of the directors, after considering the written opinion of the actuary of the company; and

• (c) not disallowed by the Superintendent, on the ground that it is not fair and equitable to the participating policyholders, within sixty days after receiving the resolution.

Marginal note:Allocation of expenses

458 There shall be debited from a participating account maintained pursuant to section 456 that portion of the expenses, including taxes, of the company for a financial year that is determined in accordance with a method that is

• (a) in the written opinion of the actuary of the company, fair and equitable to the participating policyholders;

• (b) approved by resolution of the directors, after considering the written opinion of the actuary of the company; and

• (c) not disallowed by the Superintendent, on the ground that it is not fair and equitable to the participating policyholders, within sixty days after receiving the resolution.

Marginal note:Filing of allocation method

459 A company the directors of which by resolution approve a method of allocating its investment income and losses and expenses to a participating account maintained pursuant to section 456 shall, within thirty days after making the resolution, file a copy of it with the Superintendent, together with a copy of the written opinion of the actuary of the company and any other information relevant to the allocation method that the Superintendent requests.

Marginal note:Review of allocation method

460 The actuary of a company shall annually report in writing to the directors on the fairness and equitableness of the method used by the company for allocating its investment income and losses and expenses to a participating account maintained pursuant to section 456.

Marginal note:Payments to shareholders from participating account

461 A company that has share capital may, from a participating account maintained pursuant to section 456, in a financial year and at any time within six months after the end of that financial year, make a payment to its shareholders, or transfer an amount to an account (other than a participating shareholder account as defined in section 83.01) from which a payment can be made to its shareholders, if

• (a) the aggregate of the amounts so paid or transferred in that financial year does not exceed the percentage of the portion of the profits of the participating account that is determined by the directors as the portion to be distributed for that financial year to the shareholders and participating policyholders, which percentage shall not exceed the number, expressed as a percentage, that is the aggregate of

  • (i) 10 multiplied by the lesser of

    • (A) the sum of the opening balances for that financial year of all participating accounts of the company, and

    • (B) two hundred and fifty million dollars,

  • (ii) 7.5 multiplied by the amount, if any, by which the lesser of

    • (A) the sum of the opening balances for that financial year of all participating accounts of the company, and

    • (B) five hundred million dollars

    exceeds two hundred and fifty million dollars,

  • (iii) 5 multiplied by the amount, if any, by which the lesser of

    • (A) the sum of the opening balances for that financial year of all participating accounts of the company, and

    • (B) one billion dollars

    exceeds five hundred million dollars, and

  • (iv) 2.5 multiplied by the amount, if any, by which the sum of the opening balances for that financial year of all participating accounts of the company exceeds one billion dollars,

  divided by the sum of the opening balances for that financial year of all the participating accounts;

• (b) the company pays dividends or bonuses to its participating policyholders out of the profits of the participating account for that financial year in accordance with its dividend or bonus policy established pursuant to paragraph 165(2)(e); and

• (c) the payment to the shareholders, or the transfer to the account from which a payment can be made to the shareholders, would not, in the opinion of the actuary of the company, materially affect the company’s ability to continue to comply with its dividend or bonus policy or to maintain the levels or rates of dividends or bonuses paid to the company’s participating policyholders.

Marginal note:Transfers from participating account

462 The only transfers that may be made from a participating account maintained pursuant to section 456 are

• (a) transfers made pursuant to sections 461 and 463;

• (b) transfers made in respect of transfers or reinsurance of all or any portion of the participating policies in respect of which the participating account is maintained;

• (c) transfers, with the approval of the Superintendent, of amounts that can be reasonably attributed to sources not related to the participating policies in respect of which the account is or has been maintained, if the transfer would not, in the opinion of the actuary of the company, materially affect the company’s ability to continue to comply with its dividend or bonus policy, maintain the levels or rates of dividends or bonuses paid to the company’s participating policyholders or meet the company’s obligations under its participating policies; and

• (d) transfers made in respect of the conversion of a mutual company into a company with common shares.

Marginal note:Transfers to segregated funds from participating account

• 463 (1) A company may transfer from a participating account maintained pursuant to section 456 to a segregated fund maintained pursuant to section 451 an amount not exceeding the amount determined in accordance with the formula

  A - (B - C)

  where

  A

  is 25 per cent of the unappropriated earned surplus of that account;

  B

  is the aggregate amount of all previous transfers from that account to the segregated funds; and

  C

  is the aggregate amount returned to the participating account from the segregated funds.

• Marginal note:Ceiling

  (2) The aggregate amount of all transfers from participating accounts maintained pursuant to section 456 to the segregated funds maintained pursuant to section 451 may not exceed the amount determined in accordance with the formula

  A - (B - C)

  where

  A

  is 10 per cent of the aggregate unappropriated earned surplus of the participating accounts;

  B

  is the aggregate amount of all previous transfers from those accounts to those funds; and

  C

  is the aggregate amount returned to those accounts from those funds.

Marginal note:Declaration of policy dividend or bonus

• 464 (1) Subject to this section, the directors of a company that issues participating policies may declare, and the company may pay or otherwise satisfy, a dividend, bonus or other benefit on those policies in accordance with its dividend or bonus policy established pursuant to paragraph 165(2)(e).

• Marginal note:Report of actuary

  (2) The company’s actuary shall, in writing, report to the directors on the fairness to participating policyholders of a proposed dividend, bonus or other benefit and whether it is in accordance with the policy. The directors shall consider the actuary’s report before declaring the dividend, bonus or other benefit.

• Marginal note:Generally accepted actuarial practice

  (2.1) The report of the actuary referred to in subsection (2) shall be prepared in accordance with generally accepted actuarial practice with such changes as may be determined by the Superintendent and any additional directions that may be made by the Superintendent.

• Marginal note:When dividend not to be declared

  (3) The directors of a company shall not declare a dividend, bonus or other benefit to participating policyholders if there are reasonable grounds for believing that the company is, or the payment or other satisfaction would cause the company to be, in contravention of subsection 515(1), any regulation made under subsection 515(2) or any order made under subsection 515(3).

Adjustable Policies

Marginal note:Report of actuary

• 464.1 (1) The actuary of a company that has adjustable policyholders shall, annually and in writing, report to the directors on whether the changes that the company made in respect of its adjustable policies during the preceding 12 months are in accordance with the criteria established under paragraph 165(2)(e.2) and are fair to the adjustable policyholders.

• Marginal note:Generally accepted actuarial practice

  (1.1) The report of the actuary referred to in subsection (1) shall be prepared in accordance with generally accepted actuarial practice with such changes as may be determined by the Superintendent and any additional directions that may be made by the Superintendent.

• Marginal note:Information to policyholder

  (2) A company that made changes in respect of its adjustable policies during the preceding 12 months shall within the prescribed period send the prescribed information to the policyholder, if the adjustable policy was issued in Canada or if it confers voting rights.

• Marginal note:Information to policyholder — renewal

  (3) In the case of the renewal of an adjustable policy, the company shall within the prescribed period send the prescribed information to the policyholder.

Reinsurance

Marginal note:Regulations

• 465 (1) The Governor in Council may make regulations limiting the extent to which a company may cause itself to be reinsured against risks undertaken under its policies.

• Marginal note:Regulation may provide for discretion

  (2) A regulation made pursuant to subsection (1) may provide that the Superintendent may, by order, determine the matters or exercise the discretion that the regulation may specify.

Restrictions

Marginal note:Restriction on fiduciary activities

466 No company shall act in Canada as

• (a) an executor, administrator or official guardian or a guardian, tutor, curator, judicial adviser or committee of a mentally incompetent person; or

• (b) a trustee for a trust.

Marginal note:Restriction on deposit taking

467 Except as otherwise permitted by this Act, a company shall not accept deposits.

Marginal note:Restriction on securities activities

468 A company shall not deal in Canada in securities to the extent prohibited or restricted by such regulations as the Governor in Council may make for the purposes of this section.

Marginal note:Prohibition

• 468.1 (1) It is prohibited for a company to issue a debt obligation in relation to which the amounts of principal and interest owing are guaranteed to be paid from loans or other assets held by an entity that is created and organized for the principal purpose of holding those loans or other assets and with the intention of legally isolating those loans or other assets from the company, unless

  • (a) the debt obligation is a covered bond as defined in section 21.5 of the National Housing Act;

  • (b) the company is a registered issuer as defined in section 21.5 of that Act other than one whose right to issue covered bonds has been suspended; and

  • (c) the debt obligation is issued under a registered program as defined in section 21.5 of that Act.

• Marginal note:Exception

  (2) The Governor in Council may make regulations exempting any type of debt obligation from the application of subsection (1).