Actuarial Notes

Insurance Companies Act

By Parliament of Canada · Government of Canada · 2017 · S.C. 1991, c. 47

Study guide: Exam 6C

The federal Insurance Companies Act (S.C. 1991, c. 47), "an Act respecting insurance companies and fraternal benefit societies", as of 12 December 2017. Assented to on 13 December 1991, it is arranged in twenty Parts and a schedule of classes of insurance, running from incorporation, capital structure and corporate governance — including the company's auditor and actuary — through business powers, investments, capital adequacy, self-dealing, fraternal benefit societies and foreign and provincial companies, to supervision by the Superintendent, insurance holding companies, administration and sanctions.

On the syllabus

  • Exam 6C — objective C5; Chapter 47, sections 165(1), 165(2), 203, 331(1), 331(2), 331(4), 346, 357–370, 464, 465, 476–478, 517, 581, 625–632, 641, 664, 665, 667(1), 667(2) and 674, updated to 12 December 2017; in the study kit.

Part I Interpretation and Application

Part II Status and Powers

Part III Incorporation, Continuance and Discontinuance

Part IV Organization and Commencement

Part V Capital Structure

Part VI Corporate Governance

  • Division I Shareholders and Policyholders
  • Division I.1 Proxies
  • Division I.2 Restrictions on Voting
  • Division II Directors and Officers
    • s. 165(1): the directors shall manage or supervise the management of the business and affairs of the company.
    • s. 165(2): among their specific duties, the directors establish an audit committee and a conduct review committee, procedures to resolve conflicts of interest, procedures for disclosure to customers and for complaints, and investment and lending policies; a former-Act company's directors appoint the actuary.
    • s. 203: the audit committee has at least three directors, a majority not affiliated with the company and none its officers or employees; it reviews the annual statement before the directors approve it, meets the auditor, and meets the actuary to discuss the parts of the annual statement and annual return the actuary prepared.
  • Division III Fundamental Changes
  • Division IV Head Office and Corporate Records
  • Division V Securities Registers
  • Division VI Corporate Name and Seal
  • Division VII [Repealed, 1997, c. 15, s. 230]
  • Division VIII Insiders
  • Division IX Prospectus
  • Division IX.1 Going-private Transactions and Squeeze-out Transactions
  • Division X Compulsory Acquisitions
  • Division XI Trust Indentures
  • Division XII Financial Statements
    • s. 331(1): at every annual meeting the directors place before shareholders and policyholders a comparative annual financial statement, the auditor's report, the actuary's report and a description of the roles of the actuary and the auditor in preparing and auditing the annual statement.
    • s. 331(2), (4): the annual statement presents fairly the company's financial position and results, prepared under generally accepted accounting principles (the CPA Canada Handbook) except as the Superintendent specifies.
  • Division XIII Auditors
    • s. 346: the auditor examines as necessary to report on the annual statement, under generally accepted auditing standards, and may use the actuary's valuation of the actuarial and other policy liabilities (Actuary and Auditor Relationship).
  • Division XIV Actuaries
    • ss. 357–364: the company notifies the Superintendent of the actuary's appointment; the CEO or COO may hold the position only with the Superintendent's written authorization, and the CFO only with an audit-committee statement and that authorization; the directors may revoke the appointment; a departing actuary gives the directors and the Superintendent a written statement of reasons, which a successor must request.
    • s. 365: the actuary values the actuarial and other policy liabilities at the end of the financial year, in accordance with generally accepted actuarial practice with the Superintendent's changes and directions.
    • ss. 366–368: the actuary has access to records and explanations, reports to shareholders and policyholders at least 21 days before the annual meeting on whether the annual statement presents fairly the results of the valuation, and meets the directors or the audit committee at least once a year on the financial position and, where directed, the expected future financial condition.
    • s. 369: the actuary reports in writing to the CEO and CFO any matter with material adverse effects on the financial condition that requires rectification, copies the directors, and sends the report to the Superintendent if suitable action is not taken (Duty to Report).
    • s. 370: statements and reports of the actuary have qualified privilege, and a good-faith statement under s. 363 or 369 attracts no civil liability.
  • Division XV Remedial Actions
  • Division XVI Liquidation and Dissolution

Part VII Ownership

Part VIII Business and Powers

  • s. 464 (Participating Policies): the directors may declare a dividend, bonus or other benefit on participating policies under the policy set by s. 165(2)(e), after considering the actuary's written report on its fairness to participating policyholders, and may not declare one where the company is, or would be, in contravention of the capital and liquidity requirements of s. 515.
  • s. 465 (Reinsurance): the Governor in Council may make regulations limiting the extent to which a company may cause itself to be reinsured.
  • ss. 476–478 (Restrictions Specific to Property and Casualty Companies and Marine Companies): a company may not enter into a debt obligation or issue a non-common share if its total debt obligations and stated capital would then exceed a prescribed percentage of its total assets; guarantees are allowed only for a subsidiary with an unqualified obligation to reimburse; and financial leasing of personal property in Canada is prohibited.

Part IX Investments

Part X Adequacy of Capital and Liquidity and Assets

  • s. 517: where the Superintendent's appraisal of an asset varies materially from the company's value, the Superintendent sends written notice of the appropriate value to the company, its auditor, its actuary and its audit committee.

Part XI Self-dealing

Part XII Fraternal Benefit Societies

Part XIII Foreign Companies

  • s. 581: before making an order approving the insuring of risks in Canada by a foreign entity, the Superintendent must be satisfied that it has vested in trust assets of at least five million dollars (or a greater specified amount), appointed an actuary and an auditor, and established its chief agency.
  • ss. 625–632 (Actuaries): the actuary of a foreign company is subject to parallel rules on vacancies and statements of reasons, access to information, valuation of the policy liabilities of the insurance business in Canada, a meeting with the chief agent at least once a year to report on its financial position, reports of material adverse matters to the chief agent, the directors and — if not rectified — the Superintendent, and qualified privilege.
  • s. 641 (Auditors): the auditor of a foreign company examines as necessary to report on its annual return under s. 665(2), and may use the actuary's valuation.

Part XIV Provincial Companies

Part XV Regulation of Companies, Societies, Foreign Companies and Provincial Companies — Superintendent

  • s. 664 (Returns): companies, societies, foreign companies and provincial companies give the Superintendent the information it requires, when and in the form it requires.
  • s. 665: each prepares an annual return of its condition and affairs at the end of each financial year — a foreign company for its insurance business in Canada — under the accounting principles of s. 331(4).
  • s. 667(1)–(2): the liabilities in the annual return include as a reserve the value of the actuarial and other policy liabilities determined under s. 365 or 629, and the actuary's report on that reserve is filed with the return.
  • s. 674: the Superintendent examines each company at least once a calendar year (or, where circumstances warrant, less often but at least every three years) for compliance and sound financial condition, reports to the Minister, and may require information from its directors, officers, auditor and actuary.

Part XVI Regulation of Companies and Foreign Companies — Commissioner

Part XVII Insurance Holding Companies

Part XVIII Administration

Part XIX Sanctions

Part XX Documents in Electronic or Other Form

Schedule Classes of Insurance

Related readings

  • OSFI AA — Guideline E-15, whose first section summarizes the actuary's responsibilities as the Act describes them

Sources