Saskatchewan hands life insurance companies a reprieve from crafty investors
Published: November 1, 2018
CATEGORY: Life Insurance
Insurance companies have praised new life insurance regulations introduced by the Saskatchewan government. The provincial government says its revised insurance rules limit the amount of premiums a life insurer can receive or accept for deposit in life insurance policies from side accounts.
Saskatchewan officials introduced the regulatory amendments on Monday. Life insurance policies will no longer be able to be used as investment tools, under the new legislation.
Manulife and iA Financial, two of the largest life insurance providers in Canada, have welcomed the revised regulations:
“Given the new Saskatchewan regulations, Manulife and the other life insurers involved in similar matters plan to make submissions to the court, asking it to dismiss the claims that life insurers can be compelled to accept unlimited premium payments,” Manulife said in a company statement.
In a press release, iA Financial agreed and added it has worked under these guidelines in previous cases:
“These new regulations are consistent with the position taken by iA Financial Group throughout the Ituna litigation and with the position taken by other insurers involved in similar litigation,” iA Financial said in its own release. “iA Financial Group has always maintained that this litigation was unfounded and that life insurance contracts were never intended to be used as deposit accounts or for purposes that are unrelated to life insurance.”
Litigation was brought by investors seeking to take advantage of life insurance policies. In Saskatchewan last month, investors told a court that limits on how much they can deposit into side accounts should not be in place.
The decision comes after the life insurers faced litigation from investors looking to take advantage of the side accounts. Manulife was in danger of losing “billions of dollars in losses” if the investors had prevailed and won. While the company has now been proved correct, its shares dropped to a record yearly low in the wake of the investor report.
Saskatchewan’s government disagreed with the assessment of institutional investors and made amendments favoring life insurance firms. As a result, Manulife has rebounded with a stock price increase of 4% this week.