The Insurance Reference Case

jc2018

Hi,

I'm a bit confused by the ruling.

It says that the federal govt enacted the federal insurance act requiring all insurance companies, except those incorporated by a province and operating solely within the province of incorporation to obtain a license from the federal govt before operation.

The ruling says that this is ultra-vires and that this would mean that this means that federally incorporated insurers or provincially incorporated insurers with permission from other provinces can operate in more than one province.
But doesn't this mean the same thing as what the fed ins act proposed? fed ins act wanted federally incorporated insurers to get license from fed and provincially incorporated insurers to get license from provincial govt. no?

graham

The way I read it is that the act would have required a federal license for an insurer operating in more than 1 province. Since the act was ruled ultra vires, insurers operating in more than 1 province can get either a federal or provincial license. (The difference is that if you have a federal license, you don't have to ask a province's permission to expand into that province. But if you only have a provincial license, then you do have to ask the other province's permission.)

The rules are different for foreign insurers, however. The federal government can require a federal license for a foreign insurer even if they are operating only in 1 province.

wilsonchan18

Hi,

May I know what the difference is between "Capacity" with "Right"?
Cause when reading the capacity, I can only recall how much premium I can write w.r.t. the my capital holding.

Thanks and Cheers,
Wilson

graham

Another way of saying it is this:

• A provincial insurer is capable of operating in another province but they don't automatically have the right to do so. They need permission from the other province.

A non-insurance example of the use of the term capacity might be:

• If you have a car, you have the capacity to travel from Canada to the United States but you do not have the right unless you have a passport.

In other words, capacity means you are capable of doing a certain thing whereas right means you are legally permitted to do it.

wilsonchan18

Thanks Graham!