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

Marginal note:Services

• 528 (1) A company may enter into a transaction with a related party of the company if the transaction

  • (a) subject to subsection (2), consists of a written contract for the purchase by the company of services used in the ordinary course of business;

  • (b) subject to subsection (4), involves the provision of services normally offered to the public by the company in the ordinary course of business;

  • (c) consists of a written contract with a financial institution or an entity in which the company is permitted to have a substantial investment pursuant to section 495 that is a related party of the company

    • (i) for the networking of any services provided by the company or the financial institution or entity, or

    • (ii) for the referral of any person by the company to the financial institution or entity, or for the referral of any person by the financial institution or entity to the company;

  • (d) consists of a written contract for such pension or benefit plans or their management or administration as are incidental to directorships or to the employment of officers or employees of the company or its subsidiaries; or

  • (e) involves the provision by the company of management, advisory, accounting, information processing or other services in relation to any business of the related party.

• Marginal note:Restriction

  (2) Where a company has entered into a contract pursuant to paragraph (1)(a) and the contract, when taken together with all other such contracts entered into by the company, results in all or substantially all of the management functions of the company being exercised by persons who are not employees of the company, the Superintendent may, by order, if the Superintendent considers that result to be inappropriate, require the company, within such time as may be specified in the order, to take all steps necessary to ensure that management functions that are integral to the carrying on of business by the company are exercised by employees of the company to the extent specified in the order.

• Marginal note:Exception

  (3) Despite subsection 521(2), a company is deemed not to have indirectly entered into a transaction in respect of which this Part applies if the transaction is entered into by an entity that is controlled by the company and the business of which is limited to the activity referred to in paragraph 495(2)(c) and the transaction is on terms and conditions at least as favourable to the company as market terms and conditions, as defined in subsection 534(2).

• Marginal note:Services

  (4) The provision of services, for the purposes of paragraph (1)(b), does not include the making of loans or guarantees.

Marginal note:Transactions with holding companies

• 528.1 (1) Subject to subsection (2) and sections 528.2 and 528.3, if a widely held insurance holding company or a widely held bank holding company has a significant interest in any class of shares of a company, the company may enter into any transaction with the holding company or with any other related party of the company that is an entity in which the holding company has a substantial investment.

• Marginal note:Policies and procedures

  (2) The company shall adhere to policies and procedures established under subsection 204(3) when entering into the transaction.

Marginal note:Restriction

• 528.2 (1) If a company enters into a transaction with a related party of the company with whom the company may enter into transactions under subsection 528.1(1) and that is not a federal financial institution, the company shall not directly or indirectly make, take an assignment of or otherwise acquire a loan to the related party, make an acceptance, endorsement or other guarantee on behalf of the related party or make an investment in the securities of the related party if, immediately following the transaction, the aggregate financial exposure, as that expression is defined by the regulations, of the company would exceed

  • (a) in respect of all transactions of the company with the related party, the prescribed percentage of the company’s regulatory capital or, if no percentage is prescribed, five per cent of the company’s regulatory capital; or

  • (b) in respect of all transactions of the company with such related parties of the company, the prescribed percentage of the company’s regulatory capital or, if no percentage is prescribed, ten per cent of the company’s regulatory capital.

• Marginal note:Order

  (2) If the Superintendent is of the opinion that it is necessary for the protection of the interests of the policyholders and creditors of a company, the Superintendent may, by order,

  • (a) reduce the limit in paragraph (1)(a) or (b) that would otherwise apply to the company; and

  • (b) impose limits on transactions by the company with related parties with whom the company may enter into transactions under subsection 528.1(1) that are federal financial institutions.

• Marginal note:Order

  (3) The Superintendent may, by order, increase the limit in paragraph (1)(a) or (b) that would otherwise apply to a company on transactions by the company with related parties that are financial institutions that are regulated in a manner acceptable to the Superintendent.

Marginal note:Assets transactions

• 528.3 (1) Despite subsection 527(3), a company shall not, without the approval of the Superintendent and its conduct review committee, directly or indirectly acquire assets from a related party of the company with whom the company may enter into transactions under subsection 528.1(1) that is not a federal financial institution, or directly or indirectly transfer assets to such a related party if

  A + B > C

  where

  A

  is the value of the assets;

  B

  is the total value of all assets that the company directly or indirectly acquired from, or directly or indirectly transferred to, that related party in the 12 months ending immediately before the acquisition or transfer, other than assets acquired by or transferred to the company under transactions permitted by section 522; and

  C

  is five per cent, or the percentage that may be prescribed, of the total value of the assets of the company, as shown in the last annual statement of the company prepared before the acquisition or transfer.

• Marginal note:Exception

  (2) The prohibition in subsection (1) does not apply in respect of assets purchased or otherwise acquired under subsection 527(1), assets sold under subsection 527(2) or any other assets that may be prescribed.

• Marginal note:Exception

  (3) The approval of the Superintendent under this section is not required if

  • (a) the company acquires or transfers assets under a transaction that is approved by the Minister or the Superintendent under subsection 254(2) or (2.01);

  • (b) the company or its subsidiary acquires shares of, or ownership interests in, an entity for which the approval of the Minister under Part VII or subsection 495(7) is required or the approval of the Superintendent under subsection 495(8) is required.

• Marginal note:Value of assets

  (4) For the purposes of “A” in subsection (1), the value of the assets is

  • (a) in the case of assets that are acquired, the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which will be included in the annual statement of the company after the acquisition, the fair market value of the assets; and

  • (b) in the case of assets that are transferred, the book value of the assets as stated in the last annual statement of the company prepared before the transfer or, if the assets are shares of, or ownership interests in, an entity the assets of which were included in the last annual statement of the company before the transfer, the value of the assets as stated in the annual statement.

• Marginal note:Total value of all assets

  (5) For the purposes of subsection (1), the total value of all assets that the company or any of its subsidiaries has acquired during the period of twelve months referred to in subsection (1) is the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which immediately after the acquisition were included in the annual statement of the company, the fair market value of the assets of the entity at the date of the acquisition.

• Marginal note:Total value of all assets

  (6) For the purposes of subsection (1), the total value of all assets that the company or any of its subsidiaries has transferred during the period of twelve months referred to in subsection (1) is the book value of the assets as stated in the last annual statement of the company prepared before the transfer or, if the assets are shares of, or ownership interests in, an entity the assets of which were included in the last annual statement of the company before the transfer, the value of the assets of the entity as stated in the annual statement.

Marginal note:Directors and officers and their interests

• 529 (1) Subject to subsection (2) and sections 530 and 531, a company may enter into any transaction with a related party of the company if the related party is

  • (a) a natural person who is a related party of the company only because the person is

    • (i) a director or senior officer of the company or of an entity that controls the company, or

    • (ii) the spouse or common-law partner, or a child who is less than eighteen years of age, of a director or senior officer of the company or of an entity that controls the company; or

  • (b) an entity that is a related party of the company only because the entity is controlled by

    • (i) a director or senior officer of the company or of an entity that controls the company, or

    • (ii) the spouse or common-law partner, or a child who is less than eighteen years of age, of a director or senior officer referred to in subparagraph (i).

• Marginal note:Loans to full-time officers

  (2) A company may, with respect to a related party of the company referred to in subsection (1) who is a full-time senior officer of the company, make, take an assignment of or otherwise acquire a loan to the related party only if the aggregate principal amount of all outstanding loans to the related party that are held by the company and its subsidiaries, together with the principal amount of the proposed loan, does not exceed the greater of twice the annual salary of the related party and $100,000.

• Marginal note:Exception

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

  • (a) loans referred to in paragraph 525(b), and

  • (b) margin loans referred to in section 531,

  and the amount of any such loans to a related party of a company shall not be included in determining, for the purposes of subsection (2), the aggregate principal amount of all outstanding loans made by the company to the related party.

• Marginal note:Preferred terms — loan to senior officer

  (4) Notwithstanding section 534, a company may make a loan, other than a margin loan, to a senior officer of the company on terms and conditions more favourable to the officer than market terms and conditions, as defined in subsection 534(2), if the terms and conditions of the loan have been approved by the conduct review committee of the company.

• Marginal note:Preferred terms — loan to spouse or common-law partner

  (5) Notwithstanding section 534, a company may make a loan referred to in paragraph 525(b) to the spouse or common-law partner of a senior officer of the company on terms and conditions more favourable than market terms and conditions, as defined in subsection 534(2), if the terms and conditions of the loan have been approved by the conduct review committee of the company.

• Marginal note:Preferred terms — other financial services

  (6) Notwithstanding section 534, a company may offer financial services, other than loans or guarantees, to a senior officer of the company, or to the spouse or common-law partner, or a child who is less than eighteen years of age, of a senior officer of the company, on terms and conditions more favourable than market terms and conditions, as defined in subsection 534(2), if

  • (a) the financial services are offered by the company to employees of the company on those favourable terms and conditions; and

  • (b) the conduct review committee of the company has approved the practice of making those financial services available on those favourable terms and conditions to senior officers of the company or to the spouses or common-law partners, or the children under eighteen years of age, of senior officers of the company.

Marginal note:Board approval required

• 530 (1) Except with the concurrence of at least two thirds of the directors present at a meeting of the board of directors of the company, a company shall not, with respect to a related party of the company referred to in subsection 529(1),

  • (a) make, take an assignment of or otherwise acquire a loan to the related party, including a margin loan referred to in section 531,

  • (b) make a guarantee on behalf of the related party, or

  • (c) make an investment in the securities of the related party

  if, immediately following the transaction, the aggregate of

  • (d) the principal amount of all outstanding loans to the related party that are held by the company and its subsidiaries, other than

    • (i) loans referred to in paragraph 525(b), and

    • (ii) if the related party is a full-time senior officer of the company, loans to the related party that are permitted by subsection 529(2),

  • (e) the sum of all outstanding amounts guaranteed by the company and its subsidiaries on behalf of the related party, and

  • (f) where the related party is an entity, the book value of all investments by the company and its subsidiaries in the securities of the entity

  would exceed 2 per cent of the regulatory capital of the company.

• Marginal note:Limit on transactions with directors, officers and their interests

  (2) A company shall not, with respect to a related party of the company referred to in subsection 529(1),

  • (a) make, take an assignment of or otherwise acquire a loan to the related party, including a margin loan referred to in section 531,

  • (b) make a guarantee on behalf of the related party, or

  • (c) make an investment in the securities of the related party

  if, immediately following the transaction, the aggregate of

  • (d) the principal amount of all outstanding loans to all related parties of the company referred to in subsection 529(1) that are held by the company and its subsidiaries, other than

    • (i) loans referred to in section 525, and

    • (ii) loans permitted by subsection 529(2),

  • (e) the sum of all outstanding amounts guaranteed by the company and its subsidiaries on behalf of all related parties of the company referred to in subsection 529(1), and

  • (f) the book value of all investments by the company and its subsidiaries in the securities of all entities that are related parties of the company referred to in subsection 529(1)

  would exceed 50 per cent of the regulatory capital of the company.

• Marginal note:Exclusion of de minimis transactions

  (3) Loans, guarantees and investments that are referred to in section 522 shall not be included in calculating the aggregate of loans, guarantees and investments referred to in subsections (1) and (2).

Marginal note:Margin loans

531 The Superintendent may establish terms and conditions with respect to the making by a company of margin loans to a director or senior officer of the company.