Order number 2025-01, issued by the Minister of Finance pertains to the regulation concerning the information to be provided to holders of individual variable insurance contracts relating to segregated funds. The regulation falls under the authority of the Insurers Act (chapter A-32.1) and addresses insurers authorized under this Act who have underwritten individual variable insurance contracts involving segregated funds.

According to the regulation, the Autorité des marchés financiers (AMF) has the power to set standards for insurers regarding their commercial and management practices, with the Minister of Finance approving any regulations put forward by the AMF.

The regulation mandates that insurers provide annual statements to contract holders, detailing specific information about the segregated funds allocated to each insurance contract. These statements must be delivered within four months of the fiscal year-end of the relevant segregated funds. The content of these statements should be clear, accurate, and easy to understand, ensuring that no confusion arises from the presentation of the data.

Failure to comply with this requirement could result in administrative penalties, with amounts set at $250 for individuals and $1,000 for other entities. However, there are exemptions from certain reporting requirements, such as when it is difficult or impossible for the insurer to provide specific data related to the contract. This may occur if the insurer has made significant changes to its data infrastructure or if contracts were acquired through mergers or asset acquisitions. In such cases, the insurer must provide a notice in the annual statement explaining the missing information and the reasons behind its absence.

An individual variable insurance contract involving segregated funds is a type of life insurance policy where the value of the insurance benefit (or annuity) fluctuates based on the performance of investments held in segregated funds. These funds are separate from the insurer’s general assets and are typically made up of a portfolio of stocks, bonds, or other financial instruments.

In this type of contract, the policyholder’s premiums are invested in these segregated funds, and the value of their policy depends on how well the investments perform. The policyholder can typically choose which funds to invest in, allowing for a degree of control over the potential returns. Segregated funds are similar to mutual funds in that they pool the money of multiple investors, but they are structured and managed by insurance companies.

What makes these contracts “variable” is that the insurer’s liabilities—meaning the amount the insurer owes to the policyholder—can vary based on the market value of the segregated funds. The policyholder’s benefits might increase or decrease depending on how the investments in the fund perform.

Quebec (2025-01) January 25, 2025