Runoff Business A Canadian Perspective

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Runoff Business A Canadian Perspective

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Buy-backs. Novations. Insolvent (Courts and PACICC) Solvent. Strategic. Discontinued operations ... Other than auto no regulatory approval of insurance contracts ... – PowerPoint PPT presentation

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Title: Runoff Business A Canadian Perspective


1
Run-off BusinessA Canadian Perspective
  • AIRROC Quarterly Meeting
  • February 12, 2009

2
Objectives 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

3
Overview of the Canadian Marketplace
  • Elaine Collier
  • Vice President Portfolio Solutions
  • Omega General Insurance Company
  • Toronto, Canada

4
A Few Facts About Canada
5
A 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

6
A Few Facts Figures Banks
  • Current state of banks in Canada
  • In Liquidation
  • 3 foreign banks
  • 1 trust company
  • 6 loan companies

7
A 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

8
A Few Facts Figures Run-Off Business
  • Domestic companies currently in run-off 7
  • Foreign branches in run-off - 21

9
Overview of the Canadian Marketplace
  • Whats the same and whats different?
  • Public versus private market
  • Lines of business
  • Broker versus direct
  • Regulatory framework
  • Legal framework

10
The Canadian Regulatory Environment
  • Phil Cook
  • Chief Executive Officer
  • Omega Insurance Holdings Inc.
  • Toronto, Canada

11
Regulatory Environment
  • Federal (OSFI)
  • Provincial
  • Domestic versus Branches
  • Approvals
  • Oversight (solvency market conduct)

12
Business Environment
  • Rates and Forms
  • Reinsurance (licensed unlicensed)
  • Commutations
  • Buy-backs
  • Novations

13
Run-off Environment
  • Insolvent (Courts and PACICC)
  • Solvent
  • Strategic
  • Discontinued operations
  • Actuarial (discounts and PFAD)
  • Releases

14
Settlement Environment
  • International
  • Local
  • Parent Branch
  • Finality
  • Negotiations
  • Cost of Run-off

15
The Canadian Legal Environment
  • Frank Palmay
  • Partner Chair, Corporate Insurance Group
  • Lang Michener LLP
  • Toronto, Canada

16
Some 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)

17
Some 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

18
Provincial 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

19
Insurance Companies Act
  • Introduced 1992 amended 1997, 2002, 2007
  • Corporate provisions modeled on CBCA which was
    influenced by Delaware
  • Substantial regulatory and regulation making
    discretion

20
2007 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

21
Risk 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

22
Risk 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

23
Risk 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

24
Risk 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

25
Risk 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

26
Case Study 1 Old Regime
  • 100 indemnity reinsurance
  • 100 novation
  • Branch withdrawal
  • Anticipated maintenance saving10 million

27
Case Study 1 Recent
  • A Assumption Reinsurance
  • B 100 Indemnity Reinsurance (with assets in
    trust)
  • Branch withdrawal

28
Run-off BusinessA Canadian Perspective
  • Wrap-up and Questions

29
Misconceptions About Run-off in Canada
  • Getting in and out of the market
  • Timeframes for exit
  • Leave business as is less trouble

30
Canadian Run-off Business Outside of Canada
  • Canadian risks hidden in foreign portfolios

31
Run-off Business in Canada
  • Opportunities you never knew you had
  • Opportunities we know we have

32
Questions???
  • 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
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