Saskatchewan legislation limits deposits into side accounts associated with life insurance contracts

Saskatchewan follows lead of provinces such as Alberta, New Brunswick, Nova Scotia

Saskatchewan legislation limits deposits into side accounts associated with life insurance contracts
New Saskatchewan legislation limits deposits into side accounts associated with life insurance contracts

Saskatchewan has introduced the Insurance Amendment Act, 2021, which limits deposits made into side accounts provided with life insurance contracts. The goal is to prevent people from taking advantage of such accounts, and to protect life insurance providers and their consumers.

“Life insurance providers are not banks and should not have to provide services like a bank,” said Gordon Wyant, Saskatchewan’s justice minister and attorney general, in a news release from the provincial government.

According to the news release, insurers are not being regulated for deposit-taking and could have their financial stability threatened if they are forced to accept unlimited deposits. In the event of the insurance company’s failure, its customers may not receive the coverage for which they have paid and on which they are relying.

The Insurance Act regulations set a limit on the amounts that side accounts associated with life insurance contracts can hold. The case of Mosten Investments LP v The Manufacturers Life Insurance Company (Manulife Financial), 2021 SKCA 36, involved the interpretation of the Saskatchewan Insurance (Licence Condition) Amendment Regulations, 2018, Sask Reg 75/2018, and of the universal life insurance policies issued or assumed by the respondent insurance companies.

The Court of Appeal for Saskatchewan ruled that the 2018 regulations, which apply to all licensed insurers in respect of all life insurance contracts that are not variable insurance contracts, prevent these life insurers from receiving or accepting for deposit funds or payments exceeding the amounts required to pay the life insurance premium for the eligible period under the contract, and exceeding the life insurance premium required to keep the contract in force until the period’s end in situations where the contract is not exempt from accrual taxation.

The Insurance Amendment Act, 2021 confirms and codifies the decision of the Saskatchewan Court of Appeal, said the news release. Saskatchewan, by imposing retrospective limits on side accounts in its insurance legislation, has followed the lead of provinces such as Alberta, New Brunswick and Nova Scotia.

The Insurance Act, which came into force in 2020, is a comprehensive legislation that covers the general form and content of insurance contracts; that regulates the activities of insurers, insurance agents, insurer’s representatives, managing general agents, third party administrators and adjusters; that includes enforcement provisions; and that confers governance powers to the superintendent of insurance to promote compliance.

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