Diversifying Alberta’s insurance sector
The Insurance Amendment Act, 2022, would spur Alberta-grown insurance solutions for businesses and help modernize the financial services sector.
If passed, amendments to the Insurance Act will help facilitate easier access to reinsurance within Alberta. Reinsurance is insurance for insurance companies. Increasing its availability in Alberta should have a positive impact on the overall insurance supply in the provincial market. This will help ease shortage and high prices, and better position traditional insurers in serving Albertans and Alberta businesses.
The proposed legislation also puts finishing touches on insurance rules before Alberta welcomes captive insurers. If passed, the amendment to the recently introduced Captive Insurance Companies Act will facilitate smooth relocation of foreign captives into the province. This means Alberta businesses looking to bring their foreign captives home would be able to do so without interruption to captive insurance operations.
“Alberta is creating opportunities in every sector of our rapidly growing economy. To this end, we’re delivering a regulatory framework that will help generate more insurance activity right here in Alberta – leading to more opportunities for Albertans in sophisticated finance and insurance positions, and boosting the investment potential of our entire financial services sector.”Travis Toews, President of Treasury Board and Minister of Finance
The new section on ‘redomestication’ proposed for the Captive Insurance Companies Act provides instruction for the relocation process, outlines responsibilities for owners, specifies required documents that need to be filed with the superintendent of insurance and other similar procedural requirements relevant to the business operations and structure of a captive. The section will give legislative certainty for any business thinking about relocating an existing captive back to Alberta.
Additional amendments included in the Insurance Amendment Act, 2022, are administrative adjustments to ensure various provisions of the Insurance Act are current and aligned with other jurisdictions.
“We support Bill 16 as a means of increasing financing flexibility and access to risk capital for Alberta companies through the facilitation of reinsurance. Bill 16 will help clarify the process for bringing captive insurance companies and associated jobs back to Alberta. Lastly, the changes to unlicensed insurance taxes will make Alberta more competitive with other jurisdictions.”Mike Munoz, VP Tax & Treasury, Suncor Energy Inc.
“The combination of the Captive Insurance Companies Act and updates to the Insurance Act, will allow local businesses and not-for-profit organizations, alongside similar entities internationally, to access Alberta based reinsurance capacity that is needed, will be competitive globally, and will build a vibrant world class insurance/reinsurance industry in our province.”Jason Montemurro, chair of the volunteer reinsurance taskforce
Facilitating access to reinsurance and enabling alternative insurance options such as captives are part of government’s efforts to help increase insurance capacity in the province. The measures also support the modernization of Alberta’s financial services sector and work to diversify the province’s economy within a broader Alberta Recovery Plan.
- Captives provide insurance coverage only to the entities that create and own them.
- Captives can be set up by entities in any sector of the economy seeking alternative insurance coverage.
- About 175 Canadian-owned captives are located in foreign jurisdictions.
- Alberta’s Captive Insurance Companies Act was passed in December 2021. The legislation and accompanying regulation are expected to take effect in summer 2022.
- British Columbia is the only other Canadian jurisdiction that allows captive insurance. About 20 captives are located in the province.
- The reinsurance industry in Canada is very limited and comprises mostly foreign-based enterprises, with the majority conducting business in Canada through a branch.
- To do business in Canada, reinsurers may choose to be licensed (often referred to as “admitted”), or unlicensed.
- Admitted reinsurers are federally licensed and prudentially supervised by the federal Office of the Superintendent of Financial Institutions.
- If the Insurance Amendment Act, 2022, is passed, Alberta will be the first Canadian jurisdiction to allow licensed provincial insurance companies to focus solely on reinsurance business and use limited partnerships for boosting their capital needs.