By: Luke Jones, Published on February 24, 2017 02:57 PM, Last Update on February 28, 2017 01:25 PM
Economical Insurance announced its decision to demutualize in 2015. After gaining board and policyholder support, the company has been preparing for the process through 2016. Now the next phase is in progress after an Ontario court appointed two committees to negotiate the allocation of benefits from a demutualization.
The Waterloo, Ont.-based insurance provider made the announcement on Friday. Canada opened the door for P&C insurers to demutualize through regulations introduced in summer of 2015. However, no federally regulated insurer has demutualized under the new laws yet, but Economical quickly announced it would be the first.
Demutualization requires the government to approve the process. The Ontario Superior Court of Justice named two policyholder committees to oversee the transition. One if representative of mutual policyholders, while the other covers eligible non-mutual policyholders.
“The court appointed nine committee members to represent the eligible mutual policyholder class and six committee members to represent the eligible non-mutual policyholder class,” Economical stated. “These committees will negotiate the allocation of benefits from the demutualization of Economical.”
“In the coming months, Economical will prepare the conversion proposal that outlines how Economical will demutualize into a share company, including the allocation of financial benefits to be negotiated by the policyholder committees,” the firm stated in a release Friday. “Economical expects to submit the conversion proposal to the Office of the Superintendent of Financial Institutions (OSFI) before February 22, 2018, the one-year anniversary of the appointment of policyholder committees, as required by the demutualization regulations.”
“With OSFI approval, eligible mutual policyholders will then be able to vote to amend the company’s bylaws in a manner which would allow eligible non-mutual policyholders to vote on the conversion proposal itself,” Economical stated. “If that vote is successful, both eligible mutual and eligible non-mutual policyholders will vote together as a single class to approve the conversion proposal and to proceed with the demutualization. If the vote succeeds, Economical will send the conversion proposal to the Minister of Finance and, once the Minister approves it, Economical will be able to initiate an initial public offering.”