GISCO failure a test case for PACICC

The failure last year of Quebec insurer GISCO put the Property and Casualty Insurance Compensation Corporation (PACICC) pre-fund system to the test, and now new changes are in the works. At the corporation’s recent annual general meeting, president and CEO Alex Kennedy notes that the existing provisions for the fund were “not as flexible as we had thought”, and only allowed for using the fund when members had been levied the maximum annual amount and more money is needed to pay out claims following an insolvency. PACICC had originally intended the fund to act as a “bridging arrangement”, so that claims and unearned premiums can be paid out quickly, prior to assessing member companies for payment.

In the GISCO case, while the pre-fund was used for initial payouts to policyholders, when the limits of the provision were discovered companies were immediately charged a levy. PACICC now plans to change the provisions to reflect the intended use of the fund, but that change will have to be approved by each of the provincial regulators.

The GISCO failure was also the first use of PACICC’s model wind-up order, which allows quicker assignment of claims to the corporation, and thus faster payment of claims. This was also the first insolvency where a pre-selected adjuster was used, in this case Crawford Adjusters Canada.

Kennedy also updated members on PACICC’s agreement with CompCorp to take over liabilities for p&c companies carrying accident and sickness coverage. CompCorp will cover those companies who sell only a&s coverage. CompCorp is expected to approve the agreement at its June annual meeting, including the transfer of $400,000 to PACICC.