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

Marginal note:Exemption by order

• 532 (1) A company may enter into a transaction with a related party of the company if the Superintendent, by order, has exempted the transaction from the provisions of section 521.

• Marginal note:Conditions for order

  (2) The Superintendent shall not make an order referred to in subsection (1) unless the Superintendent is satisfied that the decision of the company to enter into the transaction has not been and is not likely to be influenced in any significant way by a related party of the company and does not involve in any significant way the interests of a related party of the company.

Marginal note:Prescribed transactions

533 A company may enter into a transaction with a related party of the company if the transaction is a prescribed transaction or one of a class of prescribed transactions.

Restrictions on Permitted Transactions

Marginal note:Market terms and conditions

• 534 (1) Except as provided in subsections 529(4) to (6), any transaction entered into with a related party of the company shall be on terms and conditions that are at least as favourable to the company as market terms and conditions.

• Meaning of market terms and conditions

  (2) For the purposes of subsection (1), market terms and conditions means

  • (a) in respect of a service or a loan facility offered to the public by the company in the ordinary course of business, terms and conditions that are no more or less favourable than those offered to the public by the company in the ordinary course of business; and

  • (b) in respect of any other transaction,

    • (i) terms and conditions, including those relating to price, rent or interest rate, that might reasonably be expected to apply in a similar transaction in an open market under conditions requisite to a fair transaction between parties who are at arm’s length and who are acting prudently, knowledgeably and willingly, or

    • (ii) if the transaction is one that would not reasonably be expected to occur in an open market between parties who are at arm’s length, terms and conditions, including those relating to price, rent or interest rate, that would reasonably be expected to provide the company with fair value, having regard to all the circumstances of the transaction, and that would be consistent with the parties to the transaction acting prudently, knowledgeably and willingly.

535 and 536 [Repealed, 1997, c. 15, s. 283]

Disclosure

Marginal note:Company obligation

• 537 (1) Where, in respect of any proposed transaction permitted by this Part, other than those referred to in section 522, a company has reason to believe that the other party to the transaction is a related party of the company, the company shall take all reasonable steps to obtain from the other party full disclosure, in writing, of any interest or relationship, direct or indirect, that would make the other party a related party of the company.

• Marginal note:Reliance on information

  (2) A company and any person who is a director or an officer, employee or agent of the company may rely on any information contained in any disclosure received by the company pursuant to subsection (1) or any information otherwise acquired in respect of any matter that might be the subject of such a disclosure and no action lies against the company or any such person for anything done or omitted in good faith in reliance on any such information.

Marginal note:Notice to Superintendent

538 If a company has entered into a transaction that the company is prohibited by this Part from entering into, or a company has entered into a transaction for which approval is required under subsection 530(1) without having obtained the approval, the company shall, on becoming aware of that fact, notify the Superintendent without delay.

Remedial Actions

Marginal note:Order to void contract or to grant other remedy

• 539 (1) If a company enters into a transaction that it is prohibited from entering into by this Part, the company or the Superintendent may apply to a court for an order setting aside the transaction or for any other appropriate remedy, including an order directing that the related party of the company involved in the transaction account to the company for any profit or gain realized or that any director or senior officer of the company who authorized the transaction compensate the company for any loss or damage incurred by the company.

• Marginal note:Time limit

  (2) An application under subsection (1) in respect of a particular transaction may only be made within the period of three months following the day the notice referred to in section 538 in respect of the transaction is given to the Superintendent or, if no such notice is given, the day the Superintendent becomes aware of the transaction.

• Marginal note:Certificate

  (3) For the purposes of subsection (2), a document purporting to have been issued by the Superintendent, certifying the day on which the Superintendent became aware of the transaction, shall, in the absence of evidence to the contrary, be received in evidence as conclusive proof of that fact without proof of the signature or of the official character of the person appearing to have signed the document and without further proof.

PART XIIFraternal Benefit Societies

Interpretation

Marginal note:Definitions

• 540 (1) In this Part,

  by-law

  by-law includes the incorporating instrument of a society; (règlement administratif)

  permitted entity

  permitted entity means an entity in which a society is permitted to acquire a substantial investment under section 554; (entité admissible)

  subordinate branch

  subordinate branch means a division of a society as described in the by-laws of the society; (succursale secondaire)

  supreme governing body

  supreme governing body means a board of directors or any other group within a society having ultimate authority for managing the business and affairs of the society. (conseil supérieur de direction)

• Marginal note:Members of a society’s group

  (2) For the purpose of section 554, a member of a society’s group is any of the following:

  • (a) a subsidiary of the society;

  • (b) an entity in which the society has a substantial investment; or

  • (c) a prescribed entity in relation to the society.

• Marginal note:Words of Part IX

  (3) Words and expressions that are defined for the purposes of Part IX and referred to in this Part, other than “permitted entity”, have, for the purposes of this Part, the meanings assigned to them by that Part with any modifications that the circumstances require.

Powers

Marginal note:Granting of sickness benefits by subordinate branch

541 No by-law of a society shall empower or purport to empower any subordinate branch of the society to grant sickness benefits to any member of the branch unless the by-law makes adequate provision to secure on an actuarial basis the solvency of the sick benefit fund of the branch.

Marginal note:Society’s business

• 542 (1) Except as otherwise permitted by this Act, a society shall not carry on a business that does not relate to the business of the insuring of risks in respect of its members or the spouses, common-law partners or children of its members.

• Marginal note:Additional activities

  (2) A society may

  • (a) with the consent of the Minister, engage in activities that are reasonably ancillary to the society’s insurance business;

  • (b) engage in fraternal, benevolent or religious activities;

  • (c) hold, manage and otherwise deal with real property;

  • (d) act as an agent for a person, or enter into any other arrangement with a person, in respect of the provision of a service by

    • (i) a financial institution that is primarily engaged in an insurance business, or

    • (ii) a body corporate in which a society is permitted by section 554 to have a substantial investment; and

  • (e) refer persons to a financial institution or body corporate described in paragraph (d).

• Marginal note:By-law required

  (3) A society shall not carry on the business of insuring risks unless it is authorized to do so by a by-law of the society passed on the recommendation of the society’s actuary and approved by the Superintendent.

• Marginal note:Classes of insurance

  (4) A society shall not insure a risk that is not within a class of insurance that is specified in the order of the Superintendent approving the commencement and carrying on of business by the society. The classes that may be specified in that order are the class of life insurance, the class of accident and sickness insurance or both of those classes.

• Marginal note:Restriction on leasing

  (5) A society shall not engage in Canada in any financial leasing of personal property.

Marginal note:Separate accounts

542.01 A society shall maintain a separate account in respect of each class of insurance in which it is authorized to insure risks.

Marginal note:Actuary’s certificate

542.02 A society’s actuary shall certify whether the society’s rates of benefit are reasonable, and whether the amounts of insurance to be issued by the society are reasonable, having regard to

• (a) the conditions and circumstances for the issuance of policies by the society;

• (b) the sufficiency of the rates of contribution to provide for those benefits and those amounts of insurance; and

• (c) the reasonableness of the loan values, cash values and other equities that may be provided under the policies.

Marginal note:Segregated fund restriction

• 542.03 (1) Only a society that is authorized to insure risks within the class of life insurance may

  • (a) issue policies where the liabilities of the society in respect of the policies vary in amount depending on the market value of a fund consisting of a specified group of assets; or

  • (b) accept or retain, on the direction of a policyholder or beneficiary, policy dividends or bonuses or policy proceeds that are payable on the surrender or maturity of the policy or on the death of the person whose life is insured, where the liabilities of the society in respect of the amounts accepted or retained vary in amount depending on the market value of a fund consisting of a specified group of assets.

• Marginal note:Segregated funds required

  (2) A society that issues policies described in paragraph (1)(a) or accepts or retains amounts described in paragraph (1)(b) shall

  • (a) maintain separate accounts in respect of those policies or amounts; and

  • (b) establish and maintain one or more funds consisting of assets that are segregated from the other assets of the society and that are specified as the assets on the market value of which the liabilities of the society in respect of those policies or amounts depend.

• Marginal note:Creation and maintenance of segregated funds

  (3) For the purpose of establishing or maintaining a segregated fund required by subsection (2), a society may, subject to the regulations, transfer an amount to the separate account maintained in respect of the segregated fund.

• Marginal note:Transfers from segregated funds

  (4) A society may return the current value of an amount transferred under subsection (3) to the account from which the amount was transferred.

• Marginal note:Claims against segregated funds

  (5) A claim against a segregated fund maintained under subsection (2) under a policy, or for an amount in respect of which the fund is maintained, has priority over any other claim against the assets of that fund, including the claims referred to in section 161 of the Winding-up and Restructuring Act, except to the extent that the payment of that other claim is secured by a security interest in or on a specific, identifiable asset of the segregated fund.

• Marginal note:Where fund can satisfy claim

  (6) The liability of a society under a policy or for an amount in respect of which a segregated fund is maintained under subsection (2) does not, except to the extent that the assets of the fund are insufficient to satisfy a claim for any minimum amount that the society agrees to pay under the policy or in respect of the amount, give rise to a claim against any assets of the society, other than the assets of that fund.

• Marginal note:Where fund cannot satisfy claim

  (7) To the extent that the assets of the fund are insufficient to satisfy the liability of a society under a policy or for an amount in respect of which a segregated fund is maintained under subsection (2), that liability gives rise to a claim against the assets of the society, other than the assets of that fund, and that claim has the priority referred to in subsection 161(2) of the Winding-up and Restructuring Act.

Marginal note:Regulations

• 542.04 (1) The Governor in Council may make regulations limiting the extent to which a society may cause itself to be reinsured against risks undertaken under its policies.

• Marginal note:Regulation may delegate to Superintendent

  (2) A regulation made under subsection (1) may provide that the Superintendent may, by order, determine the matters or exercise the discretion that the regulation specifies.

Marginal note:Restriction on issuance of annuities and endowment insurance

542.05 A society may issue annuities or policies of endowment insurance only if it is authorized to insure risks within the class of life insurance.

Marginal note:Residential mortgages restriction

• 542.06 (1) A society shall not make a loan in Canada on the security of residential property in Canada for the purpose of purchasing, renovating or improving the property, 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 under which a different limit on the value of property on the security of which the society 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 private insurer approved by the Superintendent;

  • (c) the acquisition by the society 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 society to the entity against the issue of those securities; or

  • (d) a loan secured by a mortgage where

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

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