This document is produced by the Superintendent, Solvency Autorité des marchés financiers. On-line version (pdf) ISBN:

Transcription

1 GUIDE FOR INSURER'S LICENCE AMENDMENT APPLICATION March 2008

2 This document is produced by the Superintendent, Solvency Autorité des marchés financiers. On-line version (pdf) ISBN: Autorité des marchés financiers

3 Table of Contents Page 1. Introduction 1 2. Regulatory Provisions 1 3. Application Assessment Criteria 2 4. Required Documents and Information 3 5. Fees Payable 5 6. Application Processing Times 5 Autorité des marchés financiers

4 1. Introduction The Autorité des marchés financiers (the AMF ) is the body mandated to administer the Act respecting insurance (R.S.Q. c. A-32) (the Insurance Act ), which governs insurance companies and associations that operate in Québec. Only the legal persons authorized for such purpose under the Act and holding licences issued by the AMF may pursue activities as insurers in Québec (s. 201). As part of the oversight process, AMF Right to Practice Control ("RPC") assesses licence amendment applications filed by insurers to determine compliance based on documents and information required under the Insurance Act and the Regulation respecting the application of the Act respecting insurance, R.S.Q. c. A-32, r.1 (the Insurance Regulation ) as set out in this guide. Amending a licence means adding or deleting one or more classes of insurance, which are established under the Insurance Regulation, with respect to a current licence. Where the application is determined to be compliant, RPC analyzes the application and submits its recommendations to the Superintendent, Solvency for approval of the licence amendment application. The licence, to which conditions and restrictions may be applied as necessary, is signed by the AMF President and CEO. Intended to assist the applicant, this guide details the assessment criteria as well as the information and documentation required in connection with a licence amendment application. It should be noted that the guide does not cover provisions pertaining to insurers that seek to add classes of insurance to their licences for the purpose of carrying on activities in insurance of persons and damage insurance in significant proportions or carrying on activities other than insurance. Additional information in this regard is available by contacting the AMF. This guide is provided for information only. The information it contains should not be construed as legal advice or a recommendation of the AMF on the application of any relevant laws and regulations to a given situation. For advice on a specific situation, applicants are urged to consult a lawyer or notary. 2. Regulatory Provisions 1 Depending on the applicant's business proposal, various regulatory provisions may apply. The regulatory provisions related to licence applications are contained primarily in Chapter I, Title IV of the Insurance Act (ss. 201 to 222) and in Chapter IV of the Insurance Regulation (ss. 31 to 34). Insurers seeking to conduct distribution activities are required to comply with the provisions of the Act respecting the distribution of financial products and services, R.S.Q. c. D-9.2. Moreover, specific requirements are imposed on insurers who wish to transact automobile insurance business in Québec. 1 The expression "regulatory provisions" refers to legislative and regulatory requirements. Autorité des marchés financiers Page 1

5 3. Application Assessment Criteria 3.1. Licence amendment applications for the purpose of adding a class of insurance are assessed on the basis of the following criteria: Context of application The AMF considers the applicant's reasons for filing an amendment application, its target markets and any external factors that could impact its ability to attain its objectives, as well as the relevance of the proposal to Québec's financial system Nature of proposed activities The AMF ensures that it has a clear understanding of the nature and features of the proposed activities, as they could carry different risk exposures, particularly as a result of specific product features, target markets and the methods proposed for product marketing and distribution Governance The AMF determines whether an insurer has the competencies required to manage any activity that differs from its current activities. As well, it ensures that the insurer will adopt the control policies, systems and mechanisms required for the sound and prudent management of risks arising from any new classes of insurance Financial position The AMF analyzes financial forecasts or projections and relevant assumptions pertaining to new classes of insurance for which an application has been filed. It assesses the impact that the latter will have on the insurer s profitability and financial position, particularly with respect to solvency and liquidity standards Licence amendment applications for the purpose of deleting a class of insurance are assessed on the basis of the following criteria: Context of application The AMF takes into account the merits of the application as well as its impact on the insurer s objectives and strategies Protection of insureds The AMF ensures that insurers discharge all of their obligations in respect of policies underwritten under classes of insurance to be deleted and reviews the manner in which outstanding policies will be surrendered. Autorité des marchés financiers Page 2

6 4. Required Documents and Information 4.1 Adding classes of insurance: Insurers wishing to add a class of insurance to their licence must file the Application for Insurer s Licence prescribed by the Canadian Council of Insurance Regulators (CCIR), including Parts A, B, D and F, duly completed, sworn and submitted with the following: If the person mandated by the applicant to act as a representative in respect of its licence application with the AMF is not its chief representative in Québec, confirmation of the mandate by a person authorized for such purpose Comments from the insurer on the following: the reasons for adding the new classes of insurance; an analysis of target markets and competitors, showing both threats and opportunities and plans to address them; the reasons why the insurer believes it will be successful in underwriting the risks under the new classes set out in the application; any impact on commercial strategies Detailed description of the new classes of insurance being considered, stating the types of risks covered, the coverage limits, the types of policies it wishes to underwrite, as well as marketing and distribution methods and policyholder service Proposed insurance policies, endorsements and pricing (in French) Agreements pertaining to reinsurance ceded and terms (identify reinsurers) Impact of proposed activities on risk management policies, procedures and controls, in particular those related to: product design and pricing risk; underwriting risk; reinsurance ceded and terms Insurers wishing to transact automobile insurance business in Québec must provide a copy of their rate manual as well as a summary plan for implementing the Automobile Statistical Plan ("ASP") and the Fichier central des sinistres automobiles ("FCSA" or Automobile Claims Database), which must, in particular, set out the primary phases for completing certification and systems production. Autorité des marchés financiers Page 3

7 Given that the AMF exercises the power under section 177 of the Automobile Insurance Act, R.S.Q. c. A-25, all insurers licensed to underwrite automobile insurance in Québec are required to file statistical data and information according to the AMF s instructions regarding an insurer s automobile insurance experience in Québec as well as the automobile driving experience of the persons insured. Any insurer applying for authorization to underwrite automobile insurance in Québec must contact the Groupement des assureurs automobiles (GAA) in order to plan for implementing the ASP and FCSA systems. Lastly, the insurer must use the automobile insurance forms approved by the AMF pursuant to section 422 of the Insurance Act, which are available on the AMF website under the "Forms" tab Insurers wishing to sell guarantee insurance limited to surety insurance must furnish the proposed underwriting policy Annual report or audited financial statements that a foreign insurer is required to file with the authorities in its home jurisdiction Five-year financial forecasts or projections including an income statement, a balance sheet and a statement of retained earnings, using the statutory form provided for annual disclosure (P&C-1 or LIFE-1; P&C-2 or LIFE-2) Statement from an accountant relying on "assurance and related services guideline AuG-16 compilation of a financial forecast or projection" published by the Canadian Institute of Chartered Accountants ("CICA") in February 1993 relating to financial forecasts or projections prepared in accordance with the standards set out in Section 4250 of the CICA Handbook Description of key assumptions used to support the financial forecasts or projections, in particular data concerning the new classes of insurance Opinion of an actuary on the reasonableness of the financial forecasts or projections, including each of the assumptions used Clear demonstration by the insurer that it will be able to maintain, throughout the forecast period, sufficient cash flow and equity capital to ensure sound and prudent management In the case of a foreign insurer, the most recent inspection report issued by the authorities where the applicant was incorporated and the most recent inspection report of the Office of the Superintendent of Financial Institutions Canada. In the case of a federal insurer, the most recent inspection report of the Office of the Superintendent of Financial Institutions Canada. Autorité des marchés financiers Page 4

8 4.2 To delete classes of insurance: Insurers applying to delete one or more classes of insurance must file the "Application for Insurer's Licence" prescribed by the Canadian Council of Insurance Regulators ("CCIR"), including Parts A, B and D, duly completed, sworn and submitted with the following: 5. Fees Payable The insurer's reasons for deleting these classes of insurance and the impact of this decision on its strategies and objectives A letter signed by the insurer (Québec insurers) or by its chief representative in Québec (non-québec insurers) stating that the company has discharged, or provided for the discharge of, unearned premiums, unpaid claims and any outstanding liabilities in respect of the policies underwritten in Québec under the classes of insurance to be deleted, including a description of the manner in which it has obtained the surrender of the outstanding policies, or discharged, or provided for the discharge of, all of its liabilities under these policies. You will find at section 88 of the Regulation under the Act respecting insurance the fees for the issue of a licence amended to indicate the classes of insurance. Payment must be made by cheque or money order payable to Autorité des marchés financiers and dated the date of the application. Please note that these fees are not refundable. 6. Application Processing Times Examination of an insurer's licence amendment application takes an average of three months, once it has been determined that the application is compliant. An application is deemed compliant when all the documents needed to study the application are received. Delays may occur if additional information is required. The AMF may also contact the agency responsible for overseeing the applicant to verify certain information. For additional information, please contact the AMF: Autorité des marchés financiers Direction du contrôle du droit d'exercice Place de la Cité, tour Cominar 2640, boulevard Laurier, bureau 400 Québec (Québec) G1V 5C1 Telephone: , ext Toll-free: , ext Fax: Autorité des marchés financiers Page 5