On December 16, 2011, Minister of Finance Jim Flaherty announced
that the government of Canada will soon introduce legislation to
prevent banks from offering financial products that produce the
same results as life annuities offered by insurers. In Canada, life
annuities are treated as insurance products and, under existing
legislation, banks are prohibited from undertaking the business of
insurance except for limited (essentially credit-related)
authorized types of insurance. Life insurers in Canada are, on the
other hand, authorized to issue life annuities, in respect of which
they must maintain appropriate levels of long-term capital and
In recent years, some Canadian banks had introduced products
that performed in ways similar to life annuities. As the minister
of finance remarked, these bank annuity-like products are not
subject to the same regulatory standards as life annuities sold by
insurance companies. In order to further separate the businesses of
banking and insurance, Mr. Flaherty will introduce legislative
amendments early in 2012 to prohibit banks from offering such
annuity-like products. It is expected, however, that the
legislative amendments will grandfather existing products, subject
to certain conditions.
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