Insurance represents almost 2 per cent of Canada’s gross domestic product (GDP), yet there is little public policy discussion regarding the viability of the companies that insure Canadians or about the policyholder protection and resolution regime that underpins the provision of these services. As new products and technology develop, and as the complexity of multinational insurance enterprises increases, new risks pose challenges for Canada’s oversight and policyholder protection regimes. This article provides an overview of the insolvency regime for insurers in Canada, focusing primarily on the federal regime as the exemplar of how Canadian regulators and the insurance industry have built mechanisms for early intervention. It examines the causes of financial distress and the kinds of asset values that may be identified and preserved during insolvency. It explores the regulatory capital requirements imposed on insurers with the goal of safety and soundness of the system. It then examines policyholder protection and insolvency resolution strategies, including the early intervention system, aimed at keeping companies afloat or enabling them to exit the market with as little disruption as possible. It analyses how Canada’s supervisory and resolution system measures up against international standards, and looks at aspects of the system that need improvement and suggests priorities for legislative reform, including clear assignment of responsibility for resolution, treatment of derivatives and provisions to facilitate cross-border proceedings. The article also highlights new complex challenges facing Canadian insurers in terms of solvency risk, including accounting standards changes, climate change risk and cybersecurity
