Captive Insurance Companies Regulation

(no amdt) alberta regulation 100/2022 Captive Insurance Companies Act CAPTIVE INSURANCE COMPANIES REGULATION Table of Contents 1 Interpretation 2 Annual aggregate premiums of sophisticated insured 3 Minimum amount of base capital 4 Maintenance of adequate capital 5 Qualifications of auditor 6 Qualifications of actuary 7 Standards of financial reporting 8 Records 9 Term of licence 10 Terms, etc., of contract 11 Prohibited classes of insurance 12 Expiry 13 Coming into force Interpretation 1 (1) In this Regulation, (a) “Act” means the Captive Insurance Companies Act ; (b) “base capital” means for the purposes of the Act and this Regulation the capital that a captive insurance company must maintain at all times based on the captive insurance company’s size, inherent riskiness of its financial assets, volume and nature of insurance business transacted. (2) A captive insurance company undertaking a contract of insurance that is made in Alberta, whether the contract is original or renewed, is, for the purposes of the Act, undertaking insurance in Alberta. (3) A captive insurance company is, for the purposes of the Act, carrying on business in Alberta if the captive insurance company (a) undertakes or offers to undertake insurance in Alberta, (b) carries on market conduct activities in Alberta, (c) issues or delivers any policy of insurance or interim receipt in Alberta, (d) collects or receives or negotiates for or causes to be collected or received or negotiated for any premium for a contract of insurance in Alberta, (e) inspects any risk in Alberta, (f) adjusts any loss under a contract of insurance in Alberta, or (g) prosecutes or maintains in Alberta any action or proceeding in respect of a contract of insurance. Annual aggregate premiums of sophisticated insured 2 The amount of annual aggregate premiums of a sophisticated insured for the purposes of section 1(1)(o)(ii) of the Act is $500 000. Minimum amount of base capital 3 The minimum amount of base capital for the purposes of section 18(1)(a) of the Act is (a) $250 000 for a pure captive insurance company, and (b) $500 000 for an association captive insurance company or a sophisticated insured captive insurance company. Maintenance of adequate capital 4 (1) A captive insurance company maintains adequate capital if the amount of capital available to it on an ongoing basis is equal to or exceeds the minimum amount of capital required as calculated using the Minimum Capital Test form in the annual return form designated “Captive Insurance Company Return”, as established for captive insurance companies under section 67 of the Act. (2) The Minister shall ensure that a blank copy of the test form referred to in subsection (1) is contained in the annual return form designated “Captive Insurance Company Return” and the annual return form is published in such manner as is considered appropriate. Qualifications of auditor 5 (1) The individual who is the auditor of a captive insurance company must (a) be a member in good standing of an institute or association of accountants incorporated by or under an Act, and (b) have at least 5 years’ experience in performing audits of a financial institution. (2) The auditor of a captive insurance company and every partner in a firm that is the auditor of a captive insurance company must be independent of the captive insurance company. (3) For the purposes of subsection (2), (a) independence is a question of fact, and (b) a person is deemed not to be independent of a captive insurance company if that person (i) is a director, officer or employee of the company or of any affiliated entity of the company or is a business partner of any director, officer or employee of the company or of any affiliated entity of the company, (ii) beneficially owns or controls, directly or indirectly, a material interest in the shares of the company or of any affiliated entity of the company, or (iii) has been a liquidator, trustee in bankruptcy, receiver or receiver and manager of any affiliated entity of the company within the 2 years immediately preceding the person’s or person’s firm’s proposed appointment as auditor of the company. (4) No person is disqualified from acting as the auditor of a captive insurance company solely on the grounds that the person or, if the person is a firm, a partner of the firm is a policyholder in the company. Qualifications of actuary 6 An individual who is the actuary of a captive insurance company must be a Fellow in good standing of the Canadian Institute of Actuaries. Standards of financial reporting 7 (1) For the purposes of sections 7(4) and 8(4) of the Act, where a captive insurance company provides its or its subsidiaries’ audited financial statements to the Minister, policyholders, shareholders or the public, the company must ensure that the statements are prepared in accordance with the following: (a) Canadian generally accepted accounting principles, which are the accounting standards set out in the CPA Canada Handbook for publicly accountable enterprises, as published by the Chartered Professional Accountants of Canada from time to time; (b) Canadian generally accepted auditing standards, which are the auditing standards set out in the CPA Canada Handbook, as published by the Chartered Professional Accountants of Canada from time to time; (c) generally accepted actuarial practices described in the Standards of Practice of the Canadian Institute of Actuaries, as amended from time to time; (d) any modification of those principles, standards or practices established by the Minister or any additional requirements, principles, standards or practices established by the Minister. (2) The Regulations Act does not apply to the modifications or additional requirements, principles, standards or practices established under subsection (1)(d). Records 8 (1) Every captive insurance company must keep a copy of the following records at its principal place of business: (a) its organizational documents; (b) its licence and the particulars of any terms or conditions imposed on its licence; (c) the minutes of meetings and resolutions of participating policyholders or shareholders; (d) the minutes of meetings and resolutions of the directors and any committee of the directors; (e) the name, address and date of appointment of the auditor; (f) the directors register (i) containing the name and address, including any mailing address, and a statement of citizenship of all persons who are or have been directors, the date on which each became a director, the terms of the appointments and the dates on which they ceased to be directors, (ii) containing a list of the bodies corporate of which each director is an officer or director and the firms of which each director is a member, (iii) containing the names of the directors who are also officers or employees of the company or any of its affiliated entities and a list of the positions they occupy in the company or any of its affiliated entities, and (iv) containing the name of each committee on which each director serves; (g) a central securities register set up and maintained in accordance with section 49 of the Business Corporations Act ; (h) a copy of the current financial statements of the company and each of its subsidiaries; (i) a copy of the company’s investment procedures and policies; (j) adequate accounting records (i) that will enable the Minister to determine the company’s financial position and whether it is in compliance with the Act and the regulations, (ii) that set out the company’s investments, (iii) with accounts, in the form and manner determined by the Minister, in respect of participating policies that are separate from accounts maintained in respect of other policies, and (iv) that set out the amount owing to the company by each customer of or claimant under a policy issued by it, and the nature of its liabilities to the customer or claimant. (2) Every captive insurance company must keep at its principal place of business any information or data relating to the preparation and maintenance of the records referred to in subsection (1). (3) All records required to be prepared, maintained and kept under subsections (1) and (2) may be in a bound or loose‑leaf form or in a photographic film form, or may be entered or recorded by any system of mechanical or electronic data processing or any other information storage device that is capable of reproducing any required information in legible written form within a reasonable time. (4) A captive insurance company shall take reasonable precautions to (a) prevent loss or destruction of, (b) prevent falsification of entries in, and (c) facilitate detection and correction of inaccuracies in the records required by this section to be prepared, maintained and stored. (5) A captive insurance company may keep all or any of the records referred to in subsection (1) or (2) at a place outside Alberta only if (a) the records are available for examination, in accordance with sections 42 to 46 of the Act, by means of a computer terminal or other technology at a place in Alberta determined by the Minister, and (b) the company provides technical assistance to facilitate an examination referred to in clause (a). (6) A captive insurance company that is permitted to keep records at a place outside Alberta under subsection (5) must pay the reasonable transportation and living expenses of any examiner authorized by the Minister to travel to that place to examine those records, and the costs may be recovered from the company by the Minister in an action for debt. Term of licence 9 A licence issued or renewed pursuant to Part 2, Division 1 of the Act expires on December 31 of the year in which it is issued or renewed. Terms, etc., of contract 10 (1) All the terms and conditions of a contract must be set out in full in the policy or in writing securely attached to the policy when it is issued, and unless so set out, no term of the contract or condition, stipulation, warranty or proviso modifying or impairing its effect is valid or admissible in evidence to the prejudice of the insured or a person to whom insurance money is payable under the contract. (2) Subsection (1) does not apply to an alteration or modification of the contract agreed on in writing by the insurer and the insured after the policy is issued. (3) Every policy must contain the following: (a) the name of the insurer; (b) the name of the insured; (c) the name of the person to whom the insurance money is payable; (d) the amount or the method of determining the amount of the premium for the insurance; (e) the subject‑matter of the insurance; (f) the indemnity for which the insurer may become liable; (g) the event on the happening of which the liability is to accrue; (h) the date the insurance takes effect; (i) the date the insurance terminates or the method by which that date is established. (4) The terms and conditions of a contract must be consistent with any guidelines and interpretation bulletins issued by the Superintendent under section 60 of the Act. (5) Every contract of insurance must contain a dispute resolution provision applicable to disputes (a) between 2 or more persons insured under the contract of insurance, and (b) between a captive insurance company and any or all persons insured under the contract of insurance. (6) No insurer shall make a contract that is inconsistent with the Act or this Regulation. (7) An action or omission of an insurer resulting in imperfect compliance with the Act or this Regulation does not render a contract invalid insofar as it benefits an insured. (8) A contravention by an insurer of subsection (6) is an offence. Prohibited classes of insurance 11 Pursuant to section 26(2) of the Act, no captive insurance company may be licensed to undertake the class of surety insurance. Expiry 12 For the purpose of ensuring that this Regulation is reviewed for ongoing relevancy and necessity, with the option that it may be repassed in its present or an amended form following a review, this Regulation expires on January 31, 2027. Coming into force 13 This Regulation comes into force on the coming into force of section 82 of the Captive Insurance Companies Act .