Thank you for allowing the Canadian Association of Mutual Insurance Companies to appear before this committee.
CAMIC represents 92 property and casualty mutual insurers in Canada, and as most Canadian-owned insurers are mutuals, CAMIC represents the majority of Canadian-owned insurers in Canada. In 2005 our member companies had approximately four million policyholders, employed in excess of 10,000 managers, employees, and agents, and underwrote 12% of the Canadian market.
We are owned by our policyholders. Each member is allowed to exercise one vote, even if the member has more than one insurance policy with the insurance company. The companies have a strong balance sheet and are involved in the development of their communities. As most of these companies were established by farmers, today they are still located in rural and semi-rural areas.
Over the long term, mutual insurance companies act as non-profit organizations. Profits are returned to members in many forms.
The federal government is also owned by the people it serves. It is elected under the one-person, one-vote principle and it provides its services at cost. Surpluses, if any, should be returned to the people it serves.
In your invitation to appear before this committee, you asked that a number of issues related to Canada's place in a competitive world be addressed. As made evident in your invitation's backgrounder, most government services impacting on the competitiveness of our nation fall under provincial responsibility.
CAMIC supports the notion that there is currently a vertical fiscal imbalance between the federal, provincial and municipal governments and that this imbalance does not serve the taxpayer well. The federal government currently raises money for which it has no use under the responsibilities provided for in the Canadian Constitution, while most provincial and municipal governments have too few resources to meet their own responsibilities.
My association commends the federal government for having initiated the process of rectifying the fiscal imbalance. CAMIC hopes that this review will lead to provincial and municipal governments raising most of their funds directly from their constituents and being accountable only to their constituents for the way they spend that money.
The Canadian population deserves and expects all levels of government to generate their revenue equitably and to spend responsibly. In this respect, CAMIC applauds the 2005 federal budget decision to hire additional Revenue Canada employees to monitor offshore investments by Canadian individuals and corporations in tax haven countries. According to a March 2005 report by Statistics Canada, offshore investments in tax haven countries, in particular those made by Canadian financial institutions, have grown substantially in the last decade.
The Canadian insurance industry has its own challenges. It needs to operate under a taxation regime that is conducive to fair competition. The federal financial services legislation is now in the process of being reviewed, and CAMIC commends the federal government for its recently announced intention not to change the insurance retailing powers afforded to the banking sector. Clearly, the additional insurance retailing powers sought by banks would create an unlevel playing field in which banks would be able to effectively eliminate the competition, just as they did in the mutual funds, securities, and trust industries.
The general insurance industry also needs tax changes to operate more efficiently and more fairly. Foreign-owned insurance companies doing business in Canada often benefit from taxation provisions in other countries that allow them to set aside, free from tax, reserves to meet their obligations in cases of large catastrophes.
The Canadian companies, on their side, in order to have the same treatment, set aside money or set up companies outside of Canada to benefit from tax haven countries. Mutual insurance companies do not do so. We hope the federal government will look at the possibility of setting up a tax-free reserve in Canada, similar to those in Europe and Japan, and similar to the U.S. system, the goal of which is provide compensation in the event of a catastrophe.
Thank you.