OSFI Announces Proposed Amendments to the Vested Asset Regime for Foreign Insurance Companies Operating in Canada on a Branch Basis
On March 29, 2021, the Office of the Superintendent of Financial Institutions (“OSFI”) announced three proposed amendments to the vested asset regime for foreign insurance companies with branch operations in Canada (“FIBs”).
Under the Insurance Companies Act, FIBs must hold a sufficient margin of assets in a trust account with a Canadian financial institution to ensure that they will be able to satisfy their obligations to their Canadian policyholders. The value of such assets held in trust is reported by the trustee to OSFI on a monthly basis. FIBs are required to use a Standard Form Trust Agreement (OSFI Form No. 541) to establish such trust accounts. The Standard Form Trust Agreement, and its accompanying terms and conditions listed in OSFI Form No. 542, establish the contractual basis for OSFI to obtain information about an FIB’s vested assets from the Canadian trustee of its trust account.
Schedule A to OSFI Form No. 542 sets out a list of preapproved assets that FIBs can vest in Canadian trust accounts without having to seek approval from OSFI. Currently, these assets consist of cash and guaranteed investment certificates held in Canadian dollars, bonds and debentures of Canadian governments and corporations and common or preferred shares of Canadian entities.
Under the first of the proposed amendments, OSFI proposes to expand the list of preapproved assets to include investment grade bonds and notes from the United States, equities and preferred shares of United States corporations listed on the S&P 500 Index or the Nasdaq Composite Index, as well as cash denominated in United States dollars. The expanded list reflects OSFI’s increased risk tolerance for such assets. OSFI expects that FIBs will only request approval to vest assets not included in the new proposed Schedule A in exceptional circumstances, which should decrease administrative burden.
Any request by an FIB to vest non-preapproved assets in trust accounts or to release any assets from its trust account must be submitted using OSFI Form 298 and approved by OSFI prior to completing the related transaction. OSFI’s second amendment proposes to revise the information required under OSFI Form 298 so that information can be collected more efficiently and effectively. In accordance with the expansion of permitted assets described above, the proposed form also allows for different currencies and adds a column for CAD exchange rate.
With respect to the third proposed amendment, Canadian trustees that hold vested assets in trust for FIBs are required to file a statement of assets and disclose the assets’ market values each month to OSFI. In an effort to streamline this process, OSFI plans to require all filings to be completed and submitted through OSFI’s Regulatory Reporting System (RRS). However, this proposal is still under development and will not be implemented until later in 2021.
In sum, OSFI has introduced three proposals to amend the vested asset regime for FIBs, including expanding the list of assets that can be vested in trust without preapproval from OSFI, amending the information requirements under OSFI Form 298, and introducing a standardized filing system for required monthly statements of trust assets. The proposed amendments are designed to (a) provide FIBs with greater flexibility in selecting assets for their trust accounts, (b) ease administrative burden and (c) allow OSFI to collect information in a more efficient manner. OSFI is soliciting comments on the proposals ahead of publishing its final amendments and implementation schedule in Spring 2021. Comments are invited until April 23, 2021.
by Darcy Ammerman, Carol Lyons and Courteney Rickert (Articling Student)
A Cautionary Note
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
© McMillan LLP 2021
Insights (5 Posts)
Fanning the Flames of Liability: The Ontario Court of Appeal Considers Product Liability Issues in Burr v. Tecumseh Products of Canada Limited
The decision of the Court of Appeal in Burr v. Tecumseh Products of Canada Limited, 2023 ONCA 135 provides a helpful overview of product liability law.
A Look at Some Key Findings by the Alberta Securities Commission in Re Bison Acquisition Corp.
On December 21, 2021, a panel of the Alberta Securities Commission issued its written decision providing its reasons for the oral ruling it made on July 12, 2021 regarding applications brought by Bison Acquisition Corp. and Brookfield Infrastructure Corporation Exchange Limited Partnership, as well as Inter Pipeline Ltd. and Pembina Pipeline Corporation.
Employer’s Disturbing Termination Conduct Results in $15,000 Moral Damages Award
Teljeur v Aurora Hotel Group 2023 ONSC 1324 provides example of post-termination conduct and bad faith damages.
Succeeding at Succession: Tips on Corporate Governance including How to Navigate Board Renewals and Elections
Stakeholders are demanding good corporate governance, which includes effective succession planning where a range of skills, experience, and backgrounds are highly valued and reflected. In collaboration with WATSON, a national multidisciplinary governance firm, join us in the morning on Wednesday, April 19, to discuss strategies and action plans that drive robust succession planning and strong corporate governance.
Adjudication under the Construction Act: Court Confirms Test to Apply for Judicial Review a “High Bar”
Adjudication under the Construction Act: Court Confirms Test to Apply for Judicial Review a “High Bar” Anatolia Tile & Stone Inc. v Flow-Rite Inc. 2023 ONSC 129.
Get updates delivered right to your inbox. You can unsubscribe at any time.