On June 30, 2011, the Honourable Jim Flaherty, Minister of Finance, launched public consultations to develop a framework to allow federally-regulated property and casualty (“P&C”) mutual insurance companies to convert to share companies (“Demutualization”). To help guide the consultations, the Government of Canada issued a paper entitled Consultation on a Demutualization Framework for Federal Property & Casualty Insurance Companies (CLICK HERE to read the full text).

All submissions must be made by July 31, 2011.


The Insurance Companies Act (Canada) (“Act”) permits the Demutualization of life and P&C insurance companies. The Act requires the terms and conditions of Demutualization to be set-out in regulations. While Demutualization regulations were adopted for life mutual insurance companies in 1999, similar regulations were never adopted for P&C mutual insurance companies. In response to the recent interest of some P&C mutual insurance companies to Demutualize, the Government of Canada announced in the federal budget tabled on June 6, 2011 its plan to introduce a framework to allow federally-regulated P&C mutual insurance companies to Demutualize. As such, the Department of Finance wishes to consult the public in regards to the development of a Demutualization framework for P&C mutual insurance companies.


Specifically, public comments on the following questions are being sought:

  1. What should be the policy objectives for the Demutualization of P&C mutual insurance companies?
  2. Are the policy objectives in place for the Demutualization of life mutual insurance companies appropriate in the P&C context?
  3. What should be the process for allowing a P&C mutual insurance company to Demutualize? Who should have the right to vote on Demutualization? Who should receive the benefits of Demutualization?
  4. What should be considered in ensuring that policyholders are treated fairly and equitably, including for determining the value of the company and apportioning the benefits of Demutualization?
  5. What impacts could Demutualization have on the P&C sector?
  6. Would the impacts of Demutualization on the P&C sector need to be addressed? If so, how?
  7. What implications does a small and declining voting policyholder base have for the effective governance of a P&C mutual insurance company?
  8. How can P&C mutual insurance companies with a dual policyholder structure ensure the continuance of effective governance structures?
  9. Should measures be taken to increase the number of voting policyholders? If so, what should those measures consist of?


The announced demutualization of Economical Mutual Insurance Company has triggered the need for the enactment of a demutualization regulation for P&C insurance companies. Presumably, this new demutualization regulation for P&C insurance companies will be similar to the current demutualization regulations for life insurance companies but will be designed to reflect the issues unique to the P&C sector.

The significant policy issue with respect to P&C demutualizations will be determining ownership rights and the distribution of surplus. Unlike Canadian mutual life insurance companies that were broadly owned by their mutual policyholders prior to demutualization, Canadian mutual P&C insurance companies tend to be owned by a very small number of their voting policyholders. As a result, most policyholders would not be eligible to participate in the demutualization, while a small number of voting policyholders would receive very large payments. It will be interesting to see whether the Office of the Superintendent of Financial Institutions - Canada decides to try to deal with this issue in the forthcoming demutualization regulations for P&C insurance companies.


Submissions must be forwarded to the Department of Finance by July 31, 2011. Submissions may be forwarded in the following manner:




Jane Pearse

Financial Sector Policy Branch

Department of Finance

L’Esplanade Laurier

15th Floor, East Tower

140 O’Connor Street

Ottawa, Canada K1A 0G5

To add to the transparency of the consultation process, the Department of Finance will post submissions on its website, with the consent of the submitting party.