As you are aware, the Financial Services Commission of Ontario (FSCO) is currently developing recommendations to present to the government for the adoption of a "prudent portfolio" model for investments, along with an appropriate updating of the corporate governance and related party rules for insurance companies. This approach would be consistent with that of other Canadian financial services regulators and is widely accepted and followed throughout the financial services sector. In Ontario, the aim is to harmonize, to the greatest extent possible, with the federal insurance legislation.
In anticipation of the prudent portfolio regime and as an interim measure, a recent Budget Bill included provisions to expand the investment powers of Ontario insurers. Specifically, amendments to subsection 433 (1) of the Insurance Act have added mutual and pooled funds to the list of permissible investments and removed income-related restrictions on preferred and common shares. These amendments refer to a guideline to be issued by the Superintendent with which insurers would need to comply when making such investments.
A draft of the guideline pursuant to this new provision was shared with insurers last October. The comments received were important to the development of the guideline. The final version of the guideline is attached in French and English for your reference. The guideline can also be accessed on FSCO's website at www.fsco.gov.on.ca, under "What's New" and "Publications"/ "Bulletins."
If you have any questions, please contact Anita Sastri, Senior Manager, Licensing and Compliance Division at (416) 590-7245.
Chief Executive Officer and
Superintendent of Financial Services (Acting)
February 28, 2002