Regulation (June 01, 2010)

B.C. INSURANCE REGULATOR WARNS COMPANIES ABOUT INTEREST RATE RISK

British Columbia’s insurance regulator is warning property and casualty insurers about interest rate risk in the existing volatile financial markets, and the potential affects on insurers’ assets and liabilities.

Financial Institutions Commission (FICOM) has issued a bulletin advising insurers to review the potential impact to investment assets from interest rate risk.

“For example, P&C insurers may be exposed to interest rate risk from interest rate fluctuations and the potential decline in asset values (e. g. fixed income securities), forcing regulatory capital to be destabilized,” the bulletin says.

FICOM recommends, among other things, that insurers consider including interest rate risk as a plausible adverse scenario to their next dynamic capital adequacy test, with an interest rate shock of no less than 300 basis points.

NEW BRUNSWICK ISSUES DISCUSSION PAPER ON CREDIT SCORE BAN

New Brunswick’s superintendent of insurance has issued a discussion paper on credit scoring, in which the regulator says the use of credit scoring for underwriting auto insurance should be banned, but it is willing to discuss the appropriateness of applying the same measures to residential property insurance.

New Brunswick has introduced Bill 43, which creates new statutory prohibitions against using underwriting or rating factors related to credit that are identified in the legislation. The factors are related to a person’s income and indebtedness.

“At this time, New Brunswick…believes that the use of credit history, credit rating, credit score or credit-based insurance score for rating purposes for residential property should be prohibited, but is prepared to review proposals from industry on rating mechanisms that provide consumers with true discounts.”

CANADA TO BAN BANKS FROM SELLING “UNAUTHORIZED” INSURANCE ON THEIR WEB SITES

Canada is formally proposing new legislation that would prohibit banks from promoting “non-authorized insurance from all banking Web pages.”

This includes banning the display of online links to Web pages that promote non-authorized insurance.

The proposed regime would allow the “corporate Web page of a bank, where no financial products are promoted, to display links to insurance subsidiaries dealing in non-authorized insurance,” Finance Minister Jim Flaherty wrote in letters to the Canadian Bankers Association and the Insurance Brokers Association of Canada (IBAC).

Flaherty’s letter further describes “authorized” insurance as insurance “generally related to credit and travel.”

Steve Masnyk, IBAC’s manager of public affairs, says the proposed regulations address the issue of banks selling insurance on their Web sites completely.

“This is a win for consumers because it extends the protection that they have in branches to their Web transactions,” he told Canadian Underwriter.

SASKATCHEWAN REGULATES THE SALE OF INCIDENTAL INSURANCE

chewan has passed a new set of regulations targeting the sale of incidental insurance by unlicensed insurance agents.

The Saskatchewan Insurance Act Amendment Regulations 2010 specify types of business entities allowed to sell insurance through unlicensed employees, and the types of insurance they are allowed to sell.

The regulations come into effect on Sept. 1, 2010. A complete list of the types of businesses allowed to sell insurance through unlicensed employees can be viewed at http://www.sfsc.gov.sk.ca/financial/whatsnew.shtml.