Evidence of meeting #59 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was change.
A recording is available from Parliament.
Liberal
Scott Brison Liberal Kings—Hants, NS
I see.
Are there any implications or impacts of these changes to the treasury in terms of tax revenue or government revenue as a result of these changes? Was there a risk of tax leakage as a result of some of those vehicles?
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
Not that I'm aware of.
Liberal
Scott Brison Liberal Kings—Hants, NS
There was no issue as a result of them.
Where was the pressure? What interest groups were most interested in making these changes? Where did that come from? There's always some group or organization. Where did this emanate from?
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
This was more about ensuring there was clarity about the division between banking products and life insurance products.
Liberal
Scott Brison Liberal Kings—Hants, NS
Okay.
What would differentiate a life annuity and a life-annuity-like product?
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
The banks were interested in offering a product with many of the characteristics of a life insurance product but that didn't cross what was then the legal line. So it was deemed to be inconsistent with the spirit of the legislation, and this clarifies where the line is in the legislation.
Liberal
Scott Brison Liberal Kings—Hants, NS
In the U.S., from a financial regulatory perspective, what's the treatment of life-annuity-like products?
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
I can't answer that in detail, but I know that in the United States they don't have the same distinction. They don't have the same prohibition that banks cannot be offering insurance products.
Liberal
Scott Brison Liberal Kings—Hants, NS
Okay. That's helpful in terms of understanding this.
So there would have been pressure, I suspect, from the insurance industry in Canada to make this sort of change?
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
I can't tell you that I had pressure from the insurance industry.
Liberal
Scott Brison Liberal Kings—Hants, NS
You've got to understand I am kind of a simple country fellow, and I still don't understand the difference between a life-annuity-like product and a life annuity.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
The life annuities are very explicitly an insurance product offered by insurance companies. The life-annuity-like products are products that were being offered by banks that were based on the death of the purchaser but didn't carry all of the characteristics of an annuity product, such that they would be captured by the existing legislation. So they skated close to the edge.
Liberal
Scott Brison Liberal Kings—Hants, NS
Did they become commercially.... I don't want to say successful, but was there a fair amount of penetration in the market for these products? Was this a fairly significant issue?
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
No, I don't believe so.
Liberal
Scott Brison Liberal Kings—Hants, NS
For how long did these life-annuity-like products exist in the marketplace?
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
I believe it was for about a year.
Liberal
Scott Brison Liberal Kings—Hants, NS
For about a year, but they weren't that commercially viable.
So how would it work if I wanted to buy a life-annuity-like product? I think it's important.
Conservative
Liberal
Liberal
Scott Brison Liberal Kings—Hants, NS
Maybe one of my Conservative colleagues could ask a granular question on this specific—
Conservative
The Chair Conservative James Rajotte
Well, I'm going to ask a question.
What this is, essentially, is banks are not allowed to sell life insurance products, and they know that. What they have been doing is creating products that are in the grey area of being a life insurance product. So that's why they're life-annuity-like products. And what we're doing as a government, as Ms. Pearse has said, is making it really clear that it is not appropriate. The letter and the spirit of the law is the division between banks and insurance companies with respect to these products.
Is that correct?
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
That's very well said.
