Special Committee on Cooperatives Committee on July 10th, 2012
Evidence of meeting #3 for Special Committee on Cooperatives in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cooperatives.
A recording is available from Parliament.
On the agenda
MPs speaking
Also speaking
- Claude Carrière Associate Deputy Minister, Agriculture and Agri-Food Canada
- John Connell Associate Assistant Deputy Minister, Strategic Policy Sector, Department of Industry
- Jeremy Rudin Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance
- Denyse Guy Executive Director, Canadian Co-operative Association
- Marion Wrobel Vice-President, Policy and Operations, Canadian Bankers Association
- Stephen Fitzpatrick Vice-President, Corporate Services and Chief Financial Officer, Credit Union Central of Canada
- Nicholas Gazzard Executive Director, National Office, Co-operative Housing Federation of Canada
- Frank Lowery Senior Vice-President, Senior Counsel and Secretary, The Co-operators Group
- John Taylor President, Ontario Mutual Insurance Association
- Michael Barrett Chief Operations Officer, Gay Lea Foods Cooperative Ltd.
- Bob Friesen Farmers of North America
1:30 p.m.
Senior Vice-President, Senior Counsel and Secretary, The Co-operators Group
I'm not sure I can answer that question specifically. To the best of my knowledge, there has not been.
Mr. Taylor can comment on this, but my understanding of the Ontario mutuals is that they are probably the best capitalized of most insurance companies. They have a dollar of capital for every dollar of premium, and as you know, the statutory requirement is one to three.
I would suspect that a company might go out of business—and I can't talk about the history—but generally we are like any other insurance company. We are required to be reserved like any other insurance company, and like any other insurance company, I suppose there is a possibility of failure. But to the best of my knowledge, in my history that has not happened.
Mr. Taylor might be able to comment on that.
1:30 p.m.
President, Ontario Mutual Insurance Association
There has never been an insolvency that has left any policyholder short of claims or unearned premiums among the Ontario mutuals.
We actually have a unique guarantee fund that's been established in Ontario. The capital of the mutuals collectively stand behind the insolvency of any one mutual, so each mutual does not stand on its own, from an insolvency standpoint. We essentially guarantee solvency as a group, and that is through the Fire Mutual Guarantee Fund, which was established in the mid-seventies
1:30 p.m.
Conservative
Cheryl Gallant Renfrew—Nipissing—Pembroke, ON
In terms of rating the liabilities you are covering, is there a rating agency? How are the risks assessed? I'm not talking about within your company. How are they assessed from the outside to legitimize the risk value?
1:30 p.m.
Senior Vice-President, Senior Counsel and Secretary, The Co-operators Group
I'll speak for The Co-operators first.
We're an insurance company like any other insurance company, so we're subject to all of the same rules and prudential regulation as others are subject to. As you likely know, for federally regulated insurance companies, we have requirements with respect to actuarial assessment of our liabilities. We have requirements with respect to peer-to-peer reviews that are done; that means someone outside does a review of our actuarial liabilities. We also have a pretty stringent system of DCAT testing.
As a federally regulated insurance company, we're like any other insurance company. We're assessed in exactly the same manner. We don't have some special break whereby we can assess risks differently. We assess exactly the same as others do in the marketplace.
1:35 p.m.
Conservative
1:35 p.m.
President, Ontario Mutual Insurance Association
Yes. We're provincially examined, through FSCO. We have a financial examination committee that reports to FSCO directly, and essentially our risk assessment, our solvency assessment, is done based on the standards that have been in place over the years.
We don't require independent actuarial assessment necessarily, but we do publish audited statements and have full examination.
1:35 p.m.
Conservative
Cheryl Gallant Renfrew—Nipissing—Pembroke, ON
In terms of investment instruments, how is the reporting done to rating agencies so they can determine the legitimacy or value of an investment instrument?
1:35 p.m.
Senior Vice-President, Senior Counsel and Secretary, The Co-operators Group
Are you speaking about purchasing shares in us or are you speaking about the investments we hold?
July 10th, 2012 / 1:35 p.m.
Conservative
Cheryl Gallant Renfrew—Nipissing—Pembroke, ON
I mean the investments that you hold, specifically going back to the situation that did not necessarily involve The Co-operators or the mutuals. We had the asset-based corporate paper issue in which the ratings agencies did not give the proper ratings to these risk vehicles; in fact, they were believed to be no-risk vehicles by many.
So we know what the banks or the investment companies are required to do. What is the process for The Co-operators and the mutuals? Do they use the same ratings agencies, or is there a different reporting agency to which you're responsible?
1:35 p.m.
Senior Vice-President, Senior Counsel and Secretary, The Co-operators Group
In the case of The Co-operators, our structure as a cooperative—because it's at the holding company level—doesn't relate to the prudential regulations. So we're subject to the same prudential regulation as any other insurance company, on exactly the same basis, with no difference.
With respect to rating agencies, I'm sure you know how the process works. The rating agency comes in and meets with senior management, the CFO and that sort of thing. They go over the books and the financial statements of the company, and they get disclosure from management, including with respect to any investments they make. Federally regulated insurance companies are required to have a prudent investment policy, so we have to manage our funds as a prudent person would. That's all regulated and observed by OSFI. All of that is provided to the rating agencies, and then they go off and work their wonders, I suppose.
I think the issue of rating agencies and whether or not they should be regulated is a separate question.
1:35 p.m.
Conservative
The Chair Blake Richards
Thank you very much, Ms. Gallant. Your time has expired.
Mr. Marston, the floor is yours for five minutes.
1:35 p.m.
NDP
Wayne Marston Hamilton East—Stoney Creek, ON
Thank you, Mr. Chair.
Mr. Lowery, I was listening to your testimony back and forth with our Liberal friend here, and you were talking about the letter your organization sent. Do you feel that you and your organization have been censored?
1:35 p.m.
Senior Vice-President, Senior Counsel and Secretary, The Co-operators Group
I don't really want to get into the politics of the current Parliament.
1:35 p.m.
NDP
Wayne Marston Hamilton East—Stoney Creek, ON
I wasn't asking you to get into the politics. I asked for your genuine—
1:35 p.m.
Senior Vice-President, Senior Counsel and Secretary, The Co-operators Group
We sent it in. I've expressed my view as to what should happen with it. I think it's at the discretion of the chair to deal with it.