On July 1, 2015, the regulations setting out the process for mutual property and casualty (or, P&C) companies to convert to share companies (demutualization) came into force. Two sets of regulations were created to govern the demutualization of: 1) P&C companies comprised of only mutual policyholders (Single Structure Conversions), and 2) P&C companies with both mutual and non-mutual policyholders (Dual Structure Conversions). The final regulations are the result of a public consultation process that was launched in 2011and led to the publication of draft regulations for public comment in February of this year. Please see our previously issued e-lert for additional background information.

Overall Changes From the Draft Regulations

Mutual and Non-mutual Policyholder Conversion Regulations

In response to comments received during the consultation period, the Department of Finance made the following adjustments to the final regulations for Dual Structure Conversions:

  1. The negotiated conversion proposal: policyholder committees for the two classes of policyholders will only negotiate the method of a) allocating the value of the company, and b) identifying additional persons or classes of persons to receive benefits. The committees will no longer negotiate the "conversion proposal" itself (e.g. post-conversion share structures/strategies of the company), as this responsibility will remain with the board.
  2. Technical and other adjustments:  
  3. the company must explicitly describe how it will assist policyholders to sell their shares on public markets within the first two years following demutualization;
  4. a court may limit the circumstances under which confidential information can be used or disclosed;
  5. clarification that at least three and not more than nine policyholders may be appointed to each policyholder committee;
  6. clarification regarding compensation provided to directors, officers and employees, as well as any contracts awarded to entities related to those individuals in connection with the demutualization process (also applies to Single Structure Conversions); and
  7. ownership restrictions were also revised to make it clear that the company can issue shares to eligible policyholders prior to the listing of its shares and the one year blackout period (also applies to Single Structure Conversions).

In addition, OSFI has indicated that it will issue transaction instructions in connection with the duties of actuaries pursuant to the regulations and the Department of Finance has noted that it will undertake, if required, a review to provide for a mechanism to manage litigation in regards to potential policyholder eligibility disputes.

Only Mutual Policyholder Conversion Regulations

The final regulations for Single Structure Conversions (a process arguably less contentious than Dual Structure Conversions) are virtually unchanged from the form proposed during the consultation period.


The final regulations for Dual Structure Conversions reframe the purpose of negotiations between policyholder groups to issues of allocating value and eligibility, as opposed to the conversion process itself. The conversion proposal, which contains among other things the mechanisms to effect the conversion, will be up to the board of directors to determine. Negotiations between the two policyholder groups will become more focused.

Following the release of the final regulations, Economical Mutual Insurance Company, one of Canada's largest P&C mutuals with over $5.2 billion in assets, announced that it expects to call a first vote of eligible mutual policyholders this fall, pending board approval.