Our Financial Services team reviews this year's most significant insurance regulatory changes, and provides insights to help you make sense of what's coming in 2024.
Fair Treatment of Customers
A significant focus of provincial regulators in 2023 concerned insurers' treatment of customers and the related management of incentives conduct.
- The Canadian Council of Insurance Regulators (CCIR)/Canadian Insurance Services Regulatory Organizations (CISRO) Incentive Management Guideline was adopted in varying forms by provincial regulators in Alberta, New Brunswick and Nova Scotia in 2023. In Quebec, the Autorité des Marchés Financiers (AMF) introduced its own related Incentive Management Guideline in 2023. The CCIR/CISRO Guideline builds on the CCIR/CISRO 2018 Guidance on Conduct of Insurance Business and Fair Treatment of Customers, which was also the basis for British Columbia's new Insurer Code of Market Conduct. Insurers operating in British Columbia are expected to comply with the new Code by April 1, 2024.
- Quebec also focused on the fair treatment of customers. Amendments were tabled to the Insurers Act (Quebec) to require life insurers to take positive actions to obtain information enabling them to know whether a sum is payable under an individual life insurance contract and, for a period of three years, inform the beneficiaries when they have not claimed the sum. The insurer must also support the beneficiaries in justifying their claim. Bill 30 also introduced some exceptions to the licensing of claims adjusters in specific circumstances. For more details about these developments and other changes in Quebec see our bulletin, "Bill 30: Government of Québec Introduces an Omnibus Bill Affecting the Insurance Sector."
- Amendments were made to the regulations adopted under An Act respecting the distribution of financial products and services (Quebec) to change the approach regarding 'outside occupations' conducted by representatives. The new requirements came into force on December 2, 2023. The AMF published a draft regulation on November 2, 2023, governing the increase of the disclosure requirements for the key elements of segregated funds for comments. Please see our previous bulletin, "Draft Regulations under the Insurers Act Respecting Disclosure Requirements for Segregated Funds" for more information.
Major Focus on Non-Financial Risks
Digital innovation and Canada's widespread wildfires in 2023 continued to underscore the impact of non-financial risks on insurance operations and resiliency. The federal government responded with legislative changes, the Office of the Superintendent of Financial Institutions (OSFI) issued several new guidelines that are applicable to both banks and insurance companies, and provincial regulators also issued several new guidelines.
- The Insurance Companies Act and related statutes were amended in June 2023 to give the Minister of Finance specific powers concerning foreign interference, including the ability to direct OSFI to take control of federally regulated financial institutions (FRFIs) or to require shareholders to sell their shares. OSFI's mandate was also expanded. In order to facilitate an annual report to the Minister, OSFI will now require insurance companies to have protections in place to counter threats to their integrity or security, including foreign interference. A final version of its new draft Integrity and Security Guideline is expected in January 2024. Insurance companies are expected to have several related policy and procedures updated in early 2024.
- OSFI has proposed substantial revisions to its Guideline E-21: Operational Resilience and Operational Risk Management. More details are included in our bulletin, "OSFI Releases Two Draft Guidelines Addressing Non-Financial Risks". The four-month public consultation is open until February 5, 2024.
- Ontario's Financial Services Regulatory Authority released its IT Risk Management Guidelinewhich is effective April 1, 2024. There is specific guidance for non-Ontario incorporated insurers, and agencies and adjusting firms, and specific guidance for Ontario incorporated insurers. For federally regulated insurers, it largely duplicates OSFI's new Guideline B:13 – Technology and Cyber Risk Management, which comes into effect on January 1, 2024.
- OSFI made significant changes in the updated Guideline B-10: Third Party Risk Management. Details can be found in our bulletin, "OSFI Released New B-10 Guideline on Third-Party Risk Management". The changes come into effect in May 2024.
- OSFI has set out its expectations on climate risk in its Guideline B-15: Climate Risk Management, which was finalized in April 2023. It takes effect fiscal year-end 2024 for internationally active insurers, and fiscal year-end 2025 for all other insurance companies. A Climate Risk Forum was launched in June 2023 by OSFI, in partnership with the Bank of Canada and the Canada Deposit Insurance Corporation, to support consultations on climate risk measurement and reporting.
- To support risk impact assessment for these multiple non-financial risks, updates are proposed for OSFI's Guideline E-23: Model Risk Management. The consultation closes on March 22, 2024.
- In Spring 2023, OSFI launched a new draft Culture and Behaviour Risk Guideline, as detailed in our bulletin, "OSFI Consultation on Culture and Behaviour Risk". It is expected to support multiple other federal guidelines once finalized.
- On November 30, 2023 and December 7, 2023 respectively, the AMF published for consultation its draft Climate Risk Management Guideline and the draft regulation respecting the management and reporting of information security incidents by certain financial institutions and by credit assessment agents.
Licensing Changes
Several provinces introduced changes to their licensing frameworks.
- New licensing requirements became effective in New Brunswick in early 2023, requiring corporate intermediaries (e.g., agencies, brokerages, adjusting firms and managing general agents (MGAs)) to be licensed. New Brunswick also introduced a restricted licensing regime for incidental sellers of insurance.
- Consultations continued in 2023 in British Columbia on its restricted licensing regime, which is expected to be similar to the regimes in Alberta, Saskatchewan, Manitoba and New Brunswick.
- The Yukon did a "soft launch" of its new licensing regime for insurance agencies over the summer. More information is expected in 2024, although all agencies that were represented by insurance agents were automatically licensed.
Looking Ahead
Next year will continue to be busy for insurance regulatory developments. As outlined, many new or updated OSFI guidelines are expected to take effect in 2024. OSFI has also announced a renewal of its Supervisory Framework, which is its first comprehensive update in 25 years, and more information is expected in early 2024. We are also expecting numerous developments from provincial regulators.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
