Insurance Companies Act (S.C. 1991, c. 47)

Marginal note:Restriction on residential mortgages

• 469 (1) A company shall not make a loan in Canada on the security of residential property in Canada for the purpose of purchasing, renovating or improving that property, or refinance such a loan, if the amount of the loan, together with the amount then outstanding of any mortgage having an equal or prior claim against the property, would exceed 80 per cent of the value of the property at the time of the loan.

• Marginal note:Exception

  (2) Subsection (1) does not apply in respect of

  • (a) a loan made or guaranteed under the National Housing Act or any other Act of Parliament by or pursuant to which a different limit on the value of property on the security of which the company may make a loan is established;

  • (b) a loan if repayment of the amount of the loan that exceeds the maximum amount set out in subsection (1) is guaranteed or insured by a government agency or a private insurer approved by the Superintendent;

  • (c) the acquisition by the company from an entity of securities issued or guaranteed by the entity that are secured on any residential property, whether in favour of a trustee or otherwise, or the making of a loan by the company to the entity against the issue of such securities; or

  • (d) a loan secured by a mortgage where

    • (i) the mortgage is taken back by the company on a property disposed of by the company, including where the disposition is by way of a realization of a security interest, and

    • (ii) the mortgage secures payment of an amount payable to the company for the property.

Marginal note:Restriction on charges to borrowers

• 469.1 (1) Subject to any regulations made under subsection (2), a company that has obtained insurance or a guarantee against default on a loan made in Canada on the security of residential property shall not charge a borrower an amount for the insurance or guarantee that exceeds the actual cost to the company of the insurance or guarantee.

• Marginal note:Regulations

  (2) The Governor in Council may make regulations

  • (a) respecting the determination of the actual cost to a company for the purposes of subsection (1);

  • (b) respecting the circumstances in which a company is exempt from the application of subsection (1);

  • (c) respecting, in relation to insurance or a guarantee against default on a loan made by a company in Canada on the security of residential property,

    • (i) the arrangements into which the company, its representatives and its employees may or may not enter, and

    • (ii) the payments or benefits that the company, its representatives and its employees may or may not accept from an insurer or the insurer’s affiliates; and

  • (d) respecting any other matters necessary to carry out the purposes of subsection (1).

• Marginal note:Regulations — disclosure

  (3) The Governor in Council may make regulations respecting the disclosure by a company of information relating to insurance or a guarantee against default on a loan made by the company in Canada on the security of residential property, including regulations respecting

  • (a) the information that must be disclosed, including information relating to

    • (i) the person who benefits from the insurance or guarantee,

    • (ii) the arrangements between the company, its representatives or its employees and the insurer or the insurer’s affiliates, and

    • (iii) the payments and benefits that the company, its representatives and its employees accept from an insurer or the insurer’s affiliates;

  • (b) the time and place at which, the form and manner in which and the persons to whom information is to be disclosed; and

  • (c) the circumstances under which a company is not required to disclose information.

Marginal note:Policies re security interests

• 470 (1) The directors of a company shall establish and the company shall adhere to policies regarding the creation of security interests in property of the company to secure obligations of the company and the acquisition by the company of beneficial interests in property that is subject to security interests.

• Marginal note:Order to amend policies

  (2) The Superintendent may, by order, direct a company to amend its policies as specified in the order.

• Marginal note:Compliance

  (3) A company shall comply with an order made under subsection (2) within the time specified in the order.

Marginal note:Regulations and guidelines

470.1 The Governor in Council may make regulations and the Superintendent may make guidelines respecting the creation by a company of security interests in its property to secure obligations of the company and the acquisition by the company of beneficial interests in property that is subject to security interests.

Marginal note:Exception

470.2 Sections 470 and 470.1 do not apply in respect of a security interest created by a company to secure an obligation of the company to the Bank of Canada.

Marginal note:Restriction on receivers

471 A company shall not grant to a person the right to appoint a receiver or a receiver and manager of the property or business of the company.

Marginal note:Restriction on partnerships

• 472 (1) Except with the approval of the Superintendent, a company may not be a general partner in a limited partnership or a partner in a general partnership.

• Meaning of general partnership

  (2) For the purposes of subsection (1), general partnership means any partnership other than a limited partnership.

Restrictions Specific to Life Companies

Marginal note:General restriction

• 473 (1) A life company shall not, and shall not permit its prescribed subsidiaries to, enter into any debt obligation, within the meaning assigned to that expression by the regulations, or issue any share, other than a common share, if as a result the aggregate of the total debt obligations of the company, determined in the prescribed manner, and the stated capital of the company would exceed the prescribed percentage of the total assets of the company.

• Marginal note:Exception

  (2) A life company need not include in the aggregate amount calculated for the purposes of subsection (1) the value of any debt obligation or the stated capital of any shares if the value of the debt obligation or the stated capital of the shares is included as part of the regulatory capital of the company.

Marginal note:Restriction on guarantees

• 474 (1) A life company shall not guarantee on behalf of any person the payment or repayment of any sum of money unless

  • (a) the sum of money is a fixed sum of money with or without interest thereon; and

  • (b) the person on whose behalf the company has undertaken to guarantee the payment or repayment has an unqualified obligation to reimburse the company for the full amount of the payment or repayment to be guaranteed.

• Marginal note:Exception

  (2) Paragraph (1)(a) does not apply where the person on whose behalf the company has undertaken to guarantee a payment or repayment is a subsidiary of the company.

• (3) [Repealed, 1997, c. 15, s. 254]

• Marginal note:Regulations

  (4) The Governor in Council may make regulations imposing terms and conditions in respect of guarantees permitted by this section.

Marginal note:Restriction on leasing

475 A life company shall not engage in Canada in any personal property leasing activity in which a financial leasing entity, within the meaning of subsection 490(1), is not permitted to engage.

Restrictions Specific to Property and Casualty Companies and Marine Companies

Marginal note:General restriction

• 476 (1) A property and casualty company, or a marine company, shall not, and shall not permit its prescribed subsidiaries to, enter into any debt obligation, within the meaning assigned to that expression by the regulations, or issue any share, other than a common share, if as a result the aggregate of the total debt obligations of the company, determined in the prescribed manner, and the stated capital of the company would exceed the prescribed percentage of the total assets of the company.

• Marginal note:Exception

  (2) A property and casualty company, or a marine company, need not include in the aggregate amount calculated for the purposes of subsection (1) the value of any debt obligation if the value of the debt obligation is included as part of the regulatory capital of the company.

Marginal note:Restriction on guarantees

• 477 (1) A property and casualty company, or a marine company, shall not guarantee on behalf of any person the payment or repayment of any sum of money unless the person on whose behalf the company has undertaken to guarantee the payment or repayment is a subsidiary of the company and has an unqualified obligation to reimburse the company for the full amount of the payment or repayment to be guaranteed.

• Marginal note:Saving

  (2) Subsection (1) does not prevent a property and casualty company, or a marine company, from insuring a risk falling within a class of insurance that is specified in the order of the Superintendent approving the commencement and carrying on of business by the company.

Marginal note:Restriction on leasing

478 A property and casualty company, or a marine company, shall not engage in Canada in any financial leasing of personal property.

Borrowing Costs

Definition of cost of borrowing

479 For the purposes of this section and sections 479.1 to 487, cost of borrowing means, in respect of a loan or an advance on the security or against the cash surrender value of a policy made by a company,

• (a) the interest or discount applicable to the loan or advance;

• (b) any amount charged in connection with the loan or advance that is payable by the borrower to the company; and

• (c) any charge prescribed to be included in the cost of borrowing.

For those purposes, however, cost of borrowing does not include any charge prescribed to be excluded from the cost of borrowing.

Marginal note:Rebate of borrowing costs

• 479.1 (1) Where a company makes a loan in respect of which the disclosure requirements of section 480 apply and the loan is not secured by a mortgage on real property and is required to be repaid either on a fixed future date or by instalments, the company shall, if there is a prepayment of the loan, rebate to the borrower a portion of the charges included in the cost of borrowing in respect of the loan.

• Marginal note:Exception

  (2) The charges to be rebated do not include the interest or discount applicable to the loan.

• Marginal note:Regulations

  (3) The Governor in Council may make regulations governing the rebate of charges under subsection (1). The rebate shall be made in accordance with those regulations.

Marginal note:Disclosing borrowing costs — loans

• 480 (1) A company shall not make a loan to a natural person that is repayable in Canada unless the cost of borrowing, as calculated and expressed in accordance with section 481, and other prescribed information have been disclosed by the company to the borrower at the prescribed time and place and in the prescribed form and manner.

• Marginal note:Non-application

  (2) Subsection (1) does not apply in respect of a loan that is of a prescribed class of loans.

Marginal note:Calculating borrowing costs

481 The cost of borrowing shall be calculated, in the prescribed manner, on the basis that all obligations of the borrower are duly fulfilled and shall be expressed as a rate per annum and, in prescribed circumstances, as an amount in dollars and cents.

Marginal note:Additional disclosure

• 482 (1) Where a company makes a loan in respect of which the disclosure requirements of section 480 are applicable and the loan is required to be repaid either on a fixed future date or by instalments, the company shall disclose to the borrower, in accordance with the regulations,

  • (a) whether the borrower has the right to repay the amount borrowed before the maturity of the loan and, if applicable,

    • (i) any terms and conditions relating to that right, including the particulars of the circumstances in which the borrower may exercise that right, and

    • (ii) whether, in the event that the borrower exercises the right, any portion of the cost of borrowing is to be rebated, the manner in which any such rebate is to be calculated or, if a charge or penalty will be imposed on the borrower, the manner in which the charge or penalty is to be calculated;

  • (b) in the event that an amount borrowed is not repaid at maturity or, if applicable, an instalment is not paid on the day the instalment is due to be paid, particulars of the charges or penalties to be paid by the borrower because of the failure to repay or pay in accordance with the contract governing the loan;

  • (c) at the prescribed time and place and in the prescribed form and manner, any prescribed changes respecting the cost of borrowing or the loan agreement;

  • (d) particulars of any other rights and obligations of the borrower; and

  • (e) any other prescribed information, at the prescribed time and place and in the prescribed form and manner.

• Marginal note:Disclosure in credit card applications

  (1.1) A company shall, in accordance with the regulations, at the prescribed time and place and in the prescribed form and manner, provide prescribed information in any application forms or related documents that it prepares for the issuance of credit, payment or charge cards and provide prescribed information to any person applying to it for a credit, payment or charge card.

• Marginal note:Disclosure re credit cards

  (2) Where a company issues or has issued a credit, payment or charge card to a natural person, the company shall, in addition to disclosing the costs of borrowing in respect of any loan obtained through the use of the card, disclose to the person, in accordance with the regulations,

  • (a) any charges or penalties described in paragraph (1)(b);

  • (b) particulars of the person’s rights and obligations;

  • (c) any charges for which the person becomes responsible by accepting or using the card;

  • (d) at the prescribed time and place and in the prescribed form and manner, any prescribed changes respecting the cost of borrowing or the loan agreement; and

  • (e) any other prescribed information, at the prescribed time and place and in the prescribed form and manner.

• Marginal note:Additional disclosure re other loans

  (3) Where a company enters into or has entered into an arrangement, including a line of credit, for the making of a loan in respect of which the disclosure requirements of section 480 apply and the loan is not a loan in respect of which subsection (1) or (2) applies, the company shall, in addition to disclosing the costs of borrowing, disclose to the person to whom the loan is made, in accordance with the regulations,

  • (a) any charges or penalties described in paragraph (1)(b);

  • (b) particulars of the person’s rights and obligations;

  • (c) any charges for which the person is responsible under the arrangement;

  • (d) at the prescribed time and place and in the prescribed form and manner, any prescribed changes respecting the cost of borrowing under the arrangement; and

  • (e) any other prescribed information, at the prescribed time and place and in the prescribed form and manner.