Thank you, Mr. Chairman. Thanks also for your invitation to speak to the committee on the topic of demutualization for federally regulated property and casualty insurance companies, or P and C companies, as we will refer to them for short.
In my remarks I will begin by providing the committee with a bit of history on the government's actions with regard to demutualization in general, and then describe our most recent activities that are relevant to the P and C sector.
Demutualization, as many of you will know, is a process by which a company that is governed in the first instance by its mutual policyholders decides to convert into a company that's going to be governed by its shareholders, so a joint stock company essentially. Since the 1990s, the federal legislation that governs insurance companies has contemplated the demutualization of insurance companies in general, both life companies, and P and C companies.
In particular, the Insurance Companies Act authorizes the Minister of Finance to approve a demutualization, provided that such demutualization takes place in accordance with the relevant regulations, and these regulations set the terms and conditions that govern an acceptable demutualization.
In the late 1990s with the legislation in place, the government announced its intention to develop a demutualization regime that would enable mutual life insurance companies to convert to joint stock companies, if they wished to do so. In anticipation of that new regime, what were at the time Canada's four large mutual life insurance companies—Clarica Life, which was then called Mutual Life, Manulife, Sun Life, and Canada Life—all announced intentions to develop demutualization plans. All of those companies acted on those plans, and in addition we saw the demutualization of Unity Life.
Let's talk about recent actions.
In the last year or so, we have seen for the first time an interest in P&C companies demutualizing.
In response, Budget 2011 announced that it would develop a demutualization framework that would provide, for companies that choose to demutualize, an orderly and transparent process and ensure that policyholders are treated fairly and equitably.
Budget 2011 also strengthened the demutualization provisions of the Insurance Companies Act to prevent companies from indirectly demutualizing.
The development of a demutualization framework is a careful exercise that must be aligned with the long-term best interests of the financial system, including the interests of the P&C insurance sector.
Because a company can only demutualize once, it is important to get the framework right in the first instance. The framework must also be workable for all P&C companies that may wish to demutualize in the future.
On June 30, 2011, the government launched public consultations on the Department of Finance’s website, together with a press release. The consultations closed on July 31, 2011. Over 80 submissions were received. A summary of the submissions has been posted on the Department of Finance’s website.
That concludes my opening remarks.
I understand, Mr. Chairman, that we'll open the floor to questions after everyone has spoken. Is that right?