On May 22, 2009, the Minister of Finance announced the launch of
the Canadian Life Insurers Assurance Facility (CLIAF), which is
intended to assist life insurance companies in accessing debt
markets on competitive terms by insuring their wholesale term
borrowing. The CLIAF is a component of Canada's implementation
of the G7 Plan of Action to stabilize financial markets and support
global economic growth.
Life insurance companies regulated by the Office of the
Superintendent of Financial Institutions are eligible to
participate in the CLIAF, as are, with the Minister's approval,
fraternal benefit societies and provincially regulated life
insurers. Instruments eligible to be guaranteed under the CLIAF
include newly-issued commercial paper, bearer notes and senior
unsecured bonds and notes in which the underlying debt has been
issued by a related entity. Other new senior unsecured marketable
wholesale instruments may be eligible subject to the Minister's
approval. Eligibility for the CLIAF requires a minimum issuance
size of $1 million for Canadian-denominated issuances and $10
million for foreign-denominated issuances. Further, instruments
must have a minimum term of three months from the date of issuance
and the guarantee will apply for a maximum of three years.
In order to have its debt instrument guaranteed under the CLIAF,
an eligible institution must:
submit a satisfactory application setting out the provisional
dollar value of the institution's overall issuance limit under
sign a participation agreement and an indemnity to the benefit
of the Government of Canada for any amounts paid under the CLIAF
submit an application for a certificate confirming that a
specified maximum value of a specific instrument will be guaranteed
under the CLIAF when issued.
The participation limit under the CLIAF is, at the eligible
institution's option, either 125% of the contractual maturities
of on-balance sheet wholesale debt instruments issued and maturing
during the six-month period beginning November 1, 2008, or 20% of
total cashable liabilities (calculated in accordance with
regulatory filings) in Canada as of the most recent quarter up to
and including December 31, 2008. Until the application is approved,
a company may seek guarantees for a total amount of up to 50% of
the limit sought.
Guarantee fees will depend on whether the eligible
institution's senior unsecured medium-term debt obligations
have satisfied a minimum credit rating. The minimum credit rating
is: "A low" from DBRS, "A3" from Moody's,
"A-" from Standard & Poor's or "A-"
from Fitch, taking the lower of the highest two ratings for the
eligible institution's debt. Senior unsecured medium-term debt
obligations satisfying the minimum credit rating will be assessed
an annual base fee of 110 basis points plus a 25 basis point
surcharge (which surcharge is temporarily waived), while debt not
meeting the minimum rating will be assessed a fee of 110 basis
points plus a 50 basis point surcharge (25 basis points of which
surcharge is temporarily waived). Guaranteed instruments issued in
foreign currencies will be subject to an additional annual 20 basis
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