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Ownership and organisational requirements

Ownership of (re)insurers 

Are there any restrictions on ownership of or investment in (re)insurers in your jurisdiction, including any limits on foreign ownership/investment?

The Insurance Companies Act imposes restrictions on the acquisition or increase of a significant interest in, or acquisition of de factocontrol of, a federally incorporated insurer. A person has a significant interest in a class of shares of a company if the aggregate of any shares of that class beneficially owned by the person and any shares of that class beneficially owned by entities controlled by the person exceeds 10% of all of the outstanding shares of that class of shares of the company. Restrictions are also imposed on the ability of the federal and provincial governments (or any agent or agency thereof), as well as a foreign government (or any agent or agency thereof), to hold shares in a federally incorporated (re)insurer.

The Competition Act imposes restrictions on mergers and acquisitions. The commissioner of competition, who heads the Competition Bureau, has the power to challenge any merger captured by the Competition Act up to one year after the merger has been substantially completed if the merger will or is likely to prevent or lessen competition substantially. The pre-merger notification provisions provide that parties to a merger transaction of a specified type and exceeding specified thresholds must, subject to certain exceptions, provide the commissioner of competition with advance notice and specified information with respect to such a transaction.

The Investment Canada Act imposes restrictions on a foreign entity looking to acquire control of an existing Canadian insurer or which wishes to establish a new Canadian insurance business. The Investment Canada Act generally applies to the establishment of a new Canadian business and the acquisition of control of existing Canadian businesses by non-Canadians. Frequently, non-Canadian investors are required only to file a notification. In some instances, pre-merger approval of the investment based on a ‘net-benefit to Canada’ test is required. The Investment Canada Act also provides for the review of foreign investments that may be injurious to national security.

What regulations, procedures and eligibility criteria govern the transfer of control of/acquisition of a stake in a (re)insurer?

The approval of the minister of finance is required for the acquisition or increase of a significant interest in, or acquisition of de factocontrol of, a federally incorporated (re)insurer. The Insurance Companies Act sets out certain factors that the minister of finance must take into account in determining whether to approve the transaction.

Mergers, including those involving (re)insurers, are subject to review by the commissioner of competition to determine whether the merger is likely to have anti-competitive effects. Part VIII (Sections 91 to 103) and Part IX of the Competition Act contain the merger review provisions. Part VIII is concerned with substantive merger review, including factors that are considered when assessing whether the merger will or is likely to prevent or lessen competition substantially. Part IX is concerned with merger notification. Under the pre-merger notification provisions, parties to a merger transaction of a specified type and exceeding specified thresholds must provide the commissioner with advance notice and specified information with respect to such transaction. The obligation to file a pre-merger notification is on the parties to the proposed transaction.

A foreign entity, subject to certain exceptions, must either file a notification or an application for review with the minister of innovation, science and economic development where it is looking to make an investment in Canada. Where pre-merger approval of the investment based on a ‘net-benefit to Canada’ test is required, the minister must be satisfied that such investment is likely to be of net benefit to Canada. The Investment Canada Act sets out factors that are to be taken into account, where relevant, when assessing net benefit to Canada.

Organisational requirements 

Must (re)insurers adopt a certain legal structure in order to operate? If no mandatory company organisation applies, what are the common structures used?

The most common legal structures adopted by (re)insurers are federally incorporated (re)insurance corporations under the Insurance Companies Act. Foreign (re)insurers can also opt to establish a Canadian branch rather than incorporating a separate entity. In some provinces, it is still possible to incorporate an insurance company under provincial legislation.

Whether a (re)insurer incorporates as an insurance company or establishes a Canadian branch, or incorporates as an insurance company under a provincial insurance statute, the (re)insurer cannot carry on business as both a property and casualty (re)insurer and a life (re)insurer.

Many corporate groups have adopted a holding company structure, whereby one or more (re)insurers are held by a single entity. In such cases, it is possible for a corporate group to hold (re)insurance companies carrying on business as both property and casualty (re)insurers and life (re)insurers.  

Do any particular corporate governance requirements apply to (re)insurers, including any eligibility criteria for directors and officers?

The Insurance Companies Act imposes certain governance requirements on federally incorporated (re)insurers, including with regard to:

  • meetings and voting of shareholders and policyholders;
  • proxies;
  • eligibility and election of directors;
  • meetings of the board;
  • bylaws;
  • committees of the board;
  • authority of directors and officers;
  • fundamental changes to the company;
  • auditors;
  • actuaries; and
  • ownership.

The expectations of the Office of the Superintendent of Financial Institutions (OSFI) with respect to corporate governance are set out in the Corporate Governance Guideline, which addresses the importance of sound corporate governance for (re)insurers and identifies three fundamental components of corporate governance: the role of the board of directors, risk governance and the role of the audit committee.

The Insurance Companies Act provides that a director cannot be a person who:

  • is less than 18 years of age;
  • is of unsound mind;
  • has the status of a bankrupt;
  • is an officer, director, employee or agent of the federal or a provincial government or an agent or agency of a foreign government;
  • is a minister of the federal or a provincial government;
  • is an agent or employee of a foreign government; or
  • is an insurance agent or broker of the company.

OSFI expects every (re)insurer and branch to have a written policy regarding the performance of assessments of the suitability and integrity of its ‘responsible persons’, which include directors, senior management and, in the case of a branch, the chief agent.

Operating requirements

Authorisation procedure 

Which (re)insurers must obtain authorisation from the regulator before operating on the market and what is the procedure for doing so?

Before carrying on the business of insurance, the following orders from the Office of the Superintendent of Financial Institutions (OSFI) must be obtained:

  • in the case of federally regulated (re)insurers, an order to commence and carry on business; and
  • in the case of a foreign branch, an order approving the insuring in Canada of risks.

In order to distribute insurance products in a province or territory, a (re)insurer or foreign branch must obtain an insurer’s licence from the applicable provincial or territorial regulator. The Canadian Council of Insurance Regulators has developed a standardised application form which is used by each regulator. While the application requirements across Canada are largely the same, some additional requirements must be met, depending on the jurisdiction. 

Financial requirements 

What are the minimum capital and solvency requirements for (re)insurers operating in your jurisdiction?

To incorporate a federally regulated (re)insurer, the applicant must have paid-in capital of at least C$5 million or more as required by the minister of finance. For newly incorporated federally regulated (re)insurers, OSFI generally expects the internal Minimum Capital Test target ratio (for property and casualty (re)insurers) or the Minimum Continuing Capital Surplus Requirements target ratio, which as of January 2018 will be replaced by the Life Insurance Capital Adequacy Test (for life (re)insurers), to be at least 300%.

To establish a Canadian branch, the applicant must have:

  • consolidated assets of at least C$1 billion in the case of a life (re)insurer or C$200 million in the case of a property and casualty (re)insurer; and
  • a capital and surplus of between 5% and 10% of liabilities in the case of a life (re)insurer or at least 20% of assets in the case of a property and casualty (re)insurer.

For newly established branches, OSFI generally expects the internal Branch Adequacy of Assets Test target ratio (for property and casualty (re)insurers) or the Test of Adequacy of Assets in Canada and Margin Requirements target ratio (for life (re)insurers) to be at least 300%.

Do any other financial requirements apply?

Following incorporation or the establishment of a branch, federally regulated (re)insurers must continue to meet minimum capital and solvency requirements (see Guideline E-19 Own Risk and Solvency Assessment) and file returns with OSFI, including property and casualty/life quarterly and annual returns, external auditor’s reports and reports of the appointed actuary.

Personnel qualifications 

Are personnel of (re)insurers subject to any professional qualification requirements?

Each federally regulated insurer must appoint an actuary and notify the superintendent of financial institutions, in writing, of the appointment. The appointed actuary must be a fellow of the Canadian Institute of Actuaries. There are no professional qualification requirements for officers or directors of an insurer, or for the chief agent in the case of a branch.

Business plan 

What rules and requirements govern the business plans of (re)insurers?

In order to incorporate an insurer or establish a branch under the Insurance Companies Act, as part of the application to OSFI, the applicant must include a minimum three-year business plan for the proposed company or branch, which must include:

  • reasons why the applicant will be successful (and the overall strategy for achieving that success);
  • a detailed description of each line of business to be conducted by the applicant;
  • financial projections; and
  • a detailed description of all projected reinsurance arrangements.

As part of the application for a provincial insurer’s licence, the provinces of Alberta, British Columbia, Manitoba, Nova Scotia, Ontario, Quebec and Saskatchewan require the applicant to submit a business plan. The business plan must include:

  • the financial statements of the applicant;
  • a five-year financial forecast that discloses underwriting information by class of business and by jurisdiction; and
  • a narrative presenting the (re)insurer’s business case for licensing in the jurisdiction.

Risk management 

What risk management systems and procedures must (re)insurers adopt?

OSFI expects federally regulated (re)insurers to develop a risk appetite framework that is enterprise-wide and tailored to their domestic and international business activities and operations. All operational, financial and corporate policies, practices and procedures of the (re)insurer should support the risk appetite framework. The (re)insurer should have a senior officer who is responsible for the oversight of all relevant risks across the company (ie, a chief risk officer or equivalent).

OSFI expects operational risk management to be fully integrated into the company’s risk appetite framework and to support the overall corporate governance structure of the insurer. OSFI expects effective accountability for operational risk management by using a ‘three lines of defence’ structure.

OSFI expects federally regulated (re)insurers to establish and maintain an effective enterprise-wide regulatory compliance management framework. With respect to reinsurers in particular, effective reinsurance practices and procedures must be in place.

Reporting and disclosure 

What ongoing regulatory reporting and disclosure requirements apply to (re)insurers?

There are a number of regulatory reporting and disclosure requirements with which federally regulated (re)insurers must comply. Depending on the jurisdictions within which the insurance company or branch operates, it will be required to submit various financial and corporate reports (including reports of the auditor and actuary) on a quarterly and annual basis. These requirements vary depending on whether the insurer is a company or a branch, and whether it is engaged in a property and casualty or life insurance business. 

Other requirements 

Do any other operating requirements apply in your jurisdiction?

In many provinces and territories insurers must renew their licence to carry on business in the jurisdiction. Where a renewal is required, the frequency of the renewal depends on the jurisdiction, but in many cases it is annual. In some provinces, (re)insurance companies and branches are required to register as extra-provincial corporations. Typically, these registrations must be renewed on an annual basis.


What are the consequences of non-compliance with the operating requirements applicable to (re)insurers?

(Re)insurance companies and foreign branches that fail to comply with operating requirements under federal or provincial legislation could find themselves guilty of an offence, punishable by fine or imprisonment, or subject to an administrative monetary penalty. Under the Insurance Companies Act and most provincial and territorial insurance statutes, any officer, director or agent of the insurance company or branch who directed, authorised, assented to, acquiesced in or participated in the commission of the offence is a party to and guilty of the offence and liable to punishment for the offence.

Failure to file required financial and corporate information with OSFI could result in a monetary penalty under the Late and Erroneous Filing Penalty Framework. 

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