The Property and Casualty Insurance Compensation Corp. is setting its sights on overhauling legislation that governs its core function — the winding up of insolvent companies — which hasn’t been reviewed for 100 years.
During PACICC’s annual general meeting in Toronto earlier this month, ceo Paul Kovacs said its three-year strategic plan includes participation in the federal government’s review of financial services legislation, which is due to be completed in March 2019.
And through it, PACICC will be pushing for updates for the outdated Winding- up and Restructuring Act.
PACICC is a p&c industry-funded, non-profit corporation that protects eligible policyholders from undue financial loss if a member insurer becomes insolvent.
Mr. Kovacs said it will be looking this year to strengthen its protection through continued co-operation with Canada’s various insurance regulators.
“The priority is to develop intervention guidelines with insurance regulators in Canada, maintaining clear and effective relationships between PACICC and regulators in the unlikely event of a member insolvency,” he said.
Through its pre-insolvency regulatory liaison committee, PACICC has already forged an agreement with Quebec’s Autorité des marchés financiers, said Lawrie Savage, PACICC board chair and president of Lawrie Savage and Associates.
That committee provides a forum for confidential consultations and information exchanges with Canada’s insurance regulators.
Mr. Kovacs said PACICC would seek a similar agreement with the Office of the Superintendent of Financial Institutions and with regulators in Alberta and B.C.
“If we were to achieve that, it would represent 90% of the PACICC membership,” Mr. Kovacs said.
“The protocols are expected to address the conditions required for regulators to exchange information with PACICC (and have) timely discussion about troubled insurers.”
The agreements would also provide a detailed outline of regulators’ interventions in the event of an insolvency, and will frame how PACICC and regulators can work together to manage risks.
PACICC will also continue its work with the Insurance Bureau of Canada on earthquake preparedness.
Mr. Savage said PACICC research has shown that the p&c industry has the capacity to respond to claims arising from a large earthquake, “but there is a need for a government backstop” to protect consumers from insurer defaults if a loss event is more than $30bn.
He noted that the federal financial services review will also provide a chance for the industry to promote a government backstop.