New proposed Alberta bill would allow in-house insurance for businesses

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Businesses would have the ability to insure themselves by creating their own in-house insurance companies under a proposed new Alberta bill.

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Bill 76, the Captive Insurance Companies Act, would allow the option of “captive insurance” in Alberta, a model that provides businesses and associations with an alternative to using traditional commercial insurance that may be too expensive or not satisfying. your needs.

If the bill passes, Alberta would become the second Canadian province to offer this type of insurance after BC, which has had similar legislation since 1988. Overseas captive insurance options also exist in places like Vermont, Delaware, Bermuda and Barbados.

In a press conference before the bill was introduced in the legislature on Wednesday, Finance Minister Travis Toews said that major industries, including energy, agriculture, forestry and manufacturing, have faced difficulties. to find insurance in today’s market.

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“With limited availability in the insurance market, it is very difficult for some companies to find suitable insurance at reasonable prices. This is especially true for many of Alberta’s energy companies, as global insurance capacity is declining. This is affecting their ability to create jobs and invest in projects across the province, “said Toews.

“And these prices in some cases are discharged to consumers. Our legislation will allow any business entity seeking alternative insurance coverage to establish a captive (insurance company) right here in Alberta. This means that Alberta companies or any Canadian company that can benefit from alternative insurance options will no longer have to look abroad. “

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Specific details of what Alberta’s captive insurance model will look like won’t be known until regulations are completed, which isn’t expected until spring 2022, Toews said.

In BC, he said, the college of veterinarians, for example, has a subsidiary called BC Veterinary Captive Insurance Company that provides insurance to its members.

Toews pointed to school boards as an industry that could take advantage of the new type of insurance in Alberta.

“Right now in the news, and we are certainly experiencing it in Alberta, school boards are struggling with the high cost of premiums for facilities insurance,” he said.

“And I hope it is helpful for the Alberta School Boards Association to perhaps consider the merits of establishing a captive where that captive could, in fact, offer insurance to individual school boards and divisions.”

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Since entities using captive insurance are essentially self-insured, they need to raise a substantial amount of capital to hold in reserve to pay claims. They also tend to have a smaller group of people who pay for the insurance compared to conventional insurance companies.

When asked if it was a risky proposition to allow projects like pipelines to be covered by a small group of people, Toews denied that the legislation would increase the chances that the government would have to intervene in the event of a catastrophe.

“That is where our regulatory framework will be very important. Again, there will be adequate and sufficient capitalization requirements, solvency benchmarks that these captives must meet, ”he said.

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“And again, we will look to other jurisdictions for examples and historical data sets to establish those regulations. But I am not concerned that we will create additional financial risk for Alberta taxpayers or the Government of Alberta. “

In a separate press conference Wednesday, NDP finance critic Shannon Phillips expressed concern that regulations setting out important details were being written behind closed doors.

“It’s interesting that UCP talks about a concierge service for the larger sectors, but what about Albertans who are just trying to get to and from work? Or small businesses that pay more in insurance than rent? Or the folks in Northeast Calgary who have waited more than a year for compensation after last year’s hailstorm? she said.

– With files from Anna Junker