Title: Runoff Business A Canadian Perspective
1Run-off BusinessA Canadian Perspective
- AIRROC Quarterly Meeting
- February 12, 2009
2Objectives of This Session
- Provide perspective on the history, current state
and future of the Canadian run-off marketplace - Gain better understanding of the Canadian
regulatory and legal environment - Compare and contrast Canadian run-off business
with other countries - Outline hidden Canadian business in foreign
portfolios
3Overview of the Canadian Marketplace
- Elaine Collier
- Vice President Portfolio Solutions
- Omega General Insurance Company
- Toronto, Canada
4A Few Facts About Canada
5A Few Facts Figures Banks
- Deposit Taking Institutions 149 in total
- 75 banks
- 21 domestic
- 24 foreign
- 23 foreign branches full service
- 7 foreign branches lending only
- 47 trust companies
- 19 loan companies
- 7 co-operative credit associations
- 1 co-operative retail association
6A Few Facts Figures Banks
- Current state of banks in Canada
- In Liquidation
- 3 foreign banks
- 1 trust company
- 6 loan companies
7A Few Facts Figures - Insurance
- Federally regulated property casualty insurers
and reinsurers 192 - 94 are domestic Canadian companies
- 98 are branches of foreign owners
- Federally regulated life insurers and reinsurers
92 - 46 are domestic Canadian companies
- 98 are branches of foreign owners
- Provincially regulated, mutuals, reciprocals,
risk retention groups - 90
8A Few Facts Figures Run-Off Business
- Domestic companies currently in run-off 7
- Foreign branches in run-off - 21
9Overview of the Canadian Marketplace
- Whats the same and whats different?
- Public versus private market
- Lines of business
- Broker versus direct
- Regulatory framework
- Legal framework
10The Canadian Regulatory Environment
- Phil Cook
- Chief Executive Officer
- Omega Insurance Holdings Inc.
- Toronto, Canada
11Regulatory Environment
- Federal (OSFI)
- Provincial
- Domestic versus Branches
- Approvals
- Oversight (solvency market conduct)
12Business Environment
- Rates and Forms
- Reinsurance (licensed unlicensed)
- Commutations
- Buy-backs
- Novations
13Run-off Environment
- Insolvent (Courts and PACICC)
- Solvent
- Strategic
- Discontinued operations
- Actuarial (discounts and PFAD)
- Releases
14Settlement Environment
- International
- Local
- Parent Branch
- Finality
- Negotiations
- Cost of Run-off
15The Canadian Legal Environment
- Frank Palmay
- Partner Chair, Corporate Insurance Group
- Lang Michener LLP
- Toronto, Canada
16Some Important Features
- Federal solvency and governance of branches
(exclusive) - Provincial and Federal incorporation and
solvency of insurance companies - Provincial marketplace regulation (exclusive)
- Federal banking (exclusive)
17Some Important Features
- 12 common law 1 civil law
- Other than auto no regulatory approval of
insurance contracts - Auto government monopoly in 3 provinces and
partial monopoly (BI) in Quebec - Health Workers Compensation - government run
18Provincial Legislation
- Largely unchanged for over 30 years fair bit of
harmonization - Alberta enacted new Insurance Act recently
- British Columbia has introduced new Act
- Maritime provinces looking at new Act
- Automobile has been political lightning rod in
the past
19Insurance Companies Act
- Introduced 1992 amended 1997, 2002, 2007
- Corporate provisions modeled on CBCA which was
influenced by Delaware - Substantial regulatory and regulation making
discretion
202007 Amendments
- Revamped the regulatory requirements for
portfolio transfers by Canadian companies - Introduced changes for branches (January 1, 2010)
- Clarification threshold for registration
insure in Canada a risk - Clarification what is reflected on branchs
books - Approval requirements for portfolio transfers
21Risk Transfers
- Indemnity reinsurance in the ordinary course of
business - Indemnity reinsurance not in the ordinary course
of business - Assumption reinsurance
- Some but not all
- All or substantially all
- Novation
- Some but not all
- All or substantially all
- Sale of all or substantially all assets
22Risk Transfers Pre-2007 Canadian Insurance
CompaniesMinisterial Approval
- Indemnity reinsurance in the ordinary course of
business - Indemnity reinsurance not in the ordinary course
of business - Assumption reinsurance
- Some but not all
- All or substantially all
- Novation
- Some but not all
- All or substantially all
- Sale of all or substantially all assets
23Risk Transfers Now Canadian Insurance
CompaniesMinisterial Superintendent Approval
- Indemnity reinsurance in the ordinary course of
business - Indemnity reinsurance not in the ordinary course
of business - Assumption reinsurance
- Some but not all
- All or substantially all
- Novation
- Some but not all
- All or substantially all
- Sale of all or substantially all assets
24Risk Transfers Now Canadian BranchesMinisterial
Approval
- Indemnity reinsurance in the ordinary course of
business - Indemnity reinsurance not in the ordinary course
of business - Assumption reinsurance
- Some but not all
- All or substantially all
- Novation
- Some but not all
- All or substantially all
25Risk Transfers gt 2009 Canadian
BranchesMinisterial Superintendent Approval
- Indemnity reinsurance in the ordinary course of
business - Indemnity reinsurance not in the ordinary course
of business - Assumption reinsurance
- Some but not all
- All or substantially all
- Novation
- Some but not all
- All or substantially all
26Case Study 1 Old Regime
- 100 indemnity reinsurance
- 100 novation
- Branch withdrawal
- Anticipated maintenance saving10 million
27Case Study 1 Recent
- A Assumption Reinsurance
- B 100 Indemnity Reinsurance (with assets in
trust) - Branch withdrawal
28Run-off BusinessA Canadian Perspective
29Misconceptions About Run-off in Canada
- Getting in and out of the market
- Timeframes for exit
- Leave business as is less trouble
30Canadian Run-off Business Outside of Canada
- Canadian risks hidden in foreign portfolios
31Run-off Business in Canada
- Opportunities you never knew you had
- Opportunities we know we have
32Questions???
- Phil Cook 416-361-1728
- pcook_at_omegageneral.com
- Frank Palmay 416-307-4037
- fpalmay_at_langmichener.ca
- Elaine Collier 416-801-0579
- ecollier_at_omegageneral.com