Industry comments on the revised draft Capital Market Stability ActRelease Date: 07/06/2016 Staff Reference: Frank Zinatelli; James Wood
July 6, 2016
To: The Cooperative Capital Markets Regulatory System
Revised Draft Capital Markets Stability Act
We are writing to provide comments on the Revised Draft Capital Markets Stability Act (“CMSA”) released for consultation on May 5, 2016.
The Canadian Life and Health Insurance Association (“CLHIA”) is a voluntary trade association that represents companies which together account for 99 per cent of Canada’s life and health insurance business. The industry, which provides employment to about 155,000 Canadians and has assets in Canada of over $721 billion, protects about 28 million Canadians through products such as life insurance, annuities, registered retirement savings plans, disability insurance and supplementary health plans. It pays benefits of almost $84 billion a year to Canadians and manages about two-thirds of Canada’s pension plans.
The CLHIA is supportive of the general direction of reducing systemic risk within the Canadian financial system. However, in the absence of clear examples of what products may represent systemic risk, it is difficult to comment with any degree of specificity on many of the concepts in the CMSA.
As compared to the first draft released in 2014, we have noted that some key improvements have been made to the CMSA. We agree with the shift away from entity-based regulation which would be duplicative and possibly result in uneven application of regulation. We support the direction of designating products as being systemically important and certain practices as systemically risky; however, more detail is required about the intended regulatory focus. Due to its very broad power to regulate systemic risk, products of life and health insurers may become subject to regulation under the CMSA, in addition to existing insurance regulation.