Investment Limits (Insurance Holding Companies) Regulations (SOR/2001-397)

Interpretation

Marginal note:Definitions

1 The following definitions apply in these Regulations.

Act

Act means the Insurance Companies Act. (Loi)

designated entity

designated entity means an entity other than

• (a) a joint venture;

• (b) an insurance company;

• (c) a securities dealer; or

• (d) a subsidiary of an insurance company or securities dealer. (entité désignée)

insurance company

insurance company means an insurance company that is incorporated by or under the laws of Canada or a province. (société d’assurances)

joint venture

joint venture means a real property entity

• (a) that was formed by an insurance holding company, or by a designated entity controlled by an insurance holding company, and one or more other persons for the purpose of a specific business undertaking;

• (b) in which the insurance holding company or designated entity has a substantial investment; and

• (c) in respect of which the persons who formed it have agreed on joint control, regardless of the distribution of their equity. (coentreprise)

minority interest

minority interest means an equity interest, in an entity that is controlled by an insurance holding company, that is held by a person other than

• (a) the insurance holding company; or

• (b) an entity controlled by the insurance holding company. (participation minoritaire)

real property entity

real property entity means an entity that is primarily engaged in holding, managing or otherwise dealing with

• (a) real property;

• (b) shares of a body corporate that is primarily engaged in holding, managing or otherwise dealing with real property, including shares of a body corporate that is another real property entity; or

• (c) ownership interests in an unincorporated entity that is primarily engaged in holding, managing or otherwise dealing with real property, including ownership interests in an unincorporated entity that is another real property entity. (entité immobilière)

related real property entity

related real property entity, in respect of an insurance holding company, means

• (a) a real property entity, other than a designated entity controlled by the insurance holding company, in which the insurance holding company or a designated entity controlled by the insurance holding company beneficially owns sufficient shares or ownership interests to cause the insurance holding company or designated entity to have a substantial investment in the real property entity; or

• (b) a real property entity that is controlled by a real property entity described in paragraph (a). (entité immobilière apparentée)

securities dealer

securities dealer means an entity described in paragraph (g) of the definition financial institution in subsection 2(1) of the Act. (négociant en valeurs mobilières)

third party

third party, in respect of an insurance holding company, means a person other than

• (a) the insurance holding company;

• (b) a designated entity controlled by the insurance holding company; or

• (c) a related real property entity of the insurance holding company. (tierce partie)

Marginal note:Book value of interest in real property

2 For the purposes of sections 8 to 11, the book value of an asset that is an interest of an insurance holding company in real property, at a particular time, is

• (a) if the asset is real property, the gross book value of the real property, less any accumulated depreciation on the real property, that would be reported on a balance sheet of the insurance holding company prepared as at that time in accordance with the accounting principles and specifications of the Superintendent referred to in subsection 887(4) of the Act; and

• (b) if the asset is a security or loan, the book value of the security or loan that would be reported on a balance sheet of the insurance holding company prepared as at that time in accordance with the accounting principles and specifications of the Superintendent referred to in subsection 887(4) of the Act.

Exemptions

Marginal note:Exempt bank holding companies

3 Sections 981 to 983 of the Act do not apply to

• (a) a widely held insurance holding company with equity of five billion dollars or more; or

• (b) an insurance holding company with equity of five billion dollars or more that is controlled by

  • (i) a widely held bank holding company,

  • (ii) a widely held insurance holding company,

  • (iii) an eligible financial institution, as defined in section 370 of the Bank Act, other than a foreign bank as defined in section 2 of that Act, or

  • (iv) a foreign bank, as defined in section 2 of the Bank Act, that is widely held as defined in section 2.3 of that Act.

Prescribed Subsidiary

Marginal note:Prescribed subsidiary

4 For the purposes of sections 981 to 983 of the Act, a prescribed subsidiary of an insurance holding company is a subsidiary of the insurance holding company other than

• (a) an insurance company;

• (b) a securities dealer; or

• (c) a subsidiary of an insurance company or securities dealer.

Amount Determined

Marginal note:Amount determined — real property and equity

• 5 (1) For the purposes of sections 981 and 982 of the Act, the amount determined in respect of an insurance holding company is 70% of the amount determined by the formula

  A - B

  where

  A

  is the regulatory capital of the insurance holding company; and

  B

  is the sum of

  • (a) all amounts each of which is an amount of shareholders’ equity or subordinated indebtedness of an insurance company or securities dealer controlled by the insurance holding company, or of an entity controlled by an insurance company or securities dealer controlled by the insurance holding company, that is included in the amount of regulatory capital of the insurance holding company,

  • (b) all amounts each of which is the amount of a minority interest in an insurance company or securities dealer controlled by the insurance holding company, or in an entity controlled by an insurance company or securities dealer controlled by the insurance holding company, that is included in the amount of regulatory capital of the insurance holding company,

  • (c) all amounts each of which is the amount of an investment, other than shareholders’ equity or subordinated indebtedness referred to in paragraph (a), of the insurance holding company or a designated entity controlled by the insurance holding company in an insurance company or securities dealer controlled by the insurance holding company, or in an entity controlled by an insurance company or securities dealer controlled by the insurance holding company, if the investment is part of

    • (i) the regulatory capital, within the meaning of the Regulatory Capital (Insurance Companies) Regulations, of an insurance company to which the Act applies, or

    • (ii) an amount that would be treated as the capital of any other insurance company, or of a securities dealer, by a regulatory body that regulates the insurance company or securities dealer, and

  • (d) all amounts each of which is the amount of a loan, other than subordinated indebtedness referred to in paragraph (a), made by the insurance holding company or by a designated entity controlled by the insurance holding company to an insurance company or securities dealer controlled by the insurance holding company, or to an entity controlled by an insurance company or securities dealer controlled by the insurance holding company, if the loan is part of

    • (i) the regulatory capital, within the meaning of the Regulatory Capital (Insurance Companies) Regulations, of an insurance company to which the Act applies, or

    • (ii) an amount that would be treated as the capital of any other insurance company, or of a securities dealer, by a regulatory body that regulates the insurance company or securities dealer.

• Marginal note:Amount determined — aggregate limit

  (2) For the purpose of section 983 of the Act, the amount determined in respect of an insurance holding company is 100% of the amount determined by the formula in subsection (1).

Valuation of Equity

Marginal note:Value equals book value

6 For the purposes of sections 982 and 983 of the Act, the value of the participating shares and ownership interests referred to in those sections that are beneficially owned by an insurance holding company and its subsidiaries prescribed by section 4 is equal to their book value as reported on the consolidated balance sheet of the insurance holding company.

Interests of an Insurance Holding Company in Real Property

General

Marginal note:Definition and value of interest in real property

• 7 (1) For the purposes of Division 9 of Part XVII of the Act, other than subsection 978(3) of the Act, sections 8 to 12 define the interests of an insurance holding company in real property and set out how those interests are to be valued.

• Marginal note:Exception

  (2) For the purpose of subsection 978(3) of the Act, the interests of an insurance holding company in real property means real property referred to in paragraph 11(1)(a) and shares and ownership interests referred to in paragraph 11(1)(b) that become beneficially owned by the insurance holding company, or by a designated entity controlled by the insurance holding company, as a result of the realization of a security interest on a loan or debt obligation referred to in subsection 11(1).

Direct Interests — Real Property and Debt Obligations

Marginal note:Direct interests

• 8 (1) The following are interests of an insurance holding company in real property:

  • (a) real property beneficially owned by the insurance holding company or by a designated entity controlled by the insurance holding company; and

  • (b) a debt obligation, for which the insurance holding company or a designated entity controlled by the insurance holding company is liable, that was issued for the purpose of acquiring or improving real property referred to in paragraph (a).

• Marginal note:Value of direct interests

  (2) The value of the interests of an insurance holding company in real property is

  • (a) in respect of real property referred to in paragraph (1)(a), the book value of the real property; and

  • (b) in respect of a debt obligation referred to in paragraph (1)(b), any amount by which the book value of the debt obligation exceeds the book value of the real property referred to in that paragraph.

Indirect Interests — Real Property, Shares and Ownership Interests

Marginal note:Certain indirect interests

• 9 (1) The following are interests of an insurance holding company in real property:

  • (a) at a particular time, real property

    • (i) that is beneficially owned by

      • (A) a related real property entity of the insurance holding company that is a joint venture, or

      • (B) an entity in which an entity described in clause (A) has a substantial investment, and

    • (ii) that would be reported on a balance sheet of the insurance holding company prepared as at that time in accordance with the accounting principles and specifications of the Superintendent referred to in subsection 887(4) of the Act; and

  • (b) shares and ownership interests beneficially owned by the insurance holding company, or by a designated entity controlled by the insurance holding company, in any related real property entity of the insurance holding company other than a related real property entity referred to in clause (a)(i)(A).

• Marginal note:Value of those interests

  (2) The value of the interests of an insurance holding company in real property is

  • (a) in respect of real property referred to in paragraph (1)(a), the book value of the real property; and

  • (b) in respect of shares and ownership interests referred to in paragraph (1)(b), the book value of the shares and ownership interests.