My name is Blair Campbell. I'm the general counsel and corporate secretary for Prince Edward Island Mutual Insurance Company. I come to you in this capacity, but I also sit on the executive committee of the Canadian Association of Mutual Insurance Companies.
I'm here today to address division 14 of part 6 of Bill C-31. It provides, in part, rules to enable the conversion of mutual insurance companies to capital stock companies, which is otherwise known as demutualization. I come to you to express grave concern over this decision and to explain the impact that these rules may have on our companies, and in particular on rural Canada.
Our company, Prince Edward Island Mutual Insurance Company, is one of 100 mutual insurance companies serving in the property and casualty insurance market in Canada. Our company, like many of our sister mutuals, was formed by farmers between 100 and 175 years ago out of need in the farming sector and for rural property owners to provide insurance that was not adequately serviced by stock companies. Mutuals are still relevant today in rural Canada. Most of our companies are based in small Canadian towns. We have boards that consist of local farmers and business people. We serve local residents, make decisions locally, and serve the needs of many rural Canadians.
Our companies were founded on principles of mutuality and sharing. They were not formed based on capitalistic principles or ideals of individual property rights. As mutualists, we believe the assets of a mutual insurance company are a common good. They are indivisible. The surplus of our companies has been built up as security for the policyholders over many generations. This surplus was not accumulated to become the property of a particular generation. Members of the company do not have any direct or even notional ownership rights in the assets of the company, as when they leave, there is no payment of a share in the company. The surplus is held for the policyholder's benefit while they are a mutual policyholder.
The best example of proper disposition of the surplus of a mutual is in Quebec with cooperatives. When they convert, the assets of the cooperative will stay in the cooperative federation or system. As well, in France, if we are looking for precedent, policyholders voting on a demutualization proposal must also vote on the disposition of the surplus, which must be to a continuing mutual company or companies, or charity.
A demutualization decision by the policyholders of the day will be made out of self-interest. It won't be made out of acknowledgement of the sacrifice or contribution of prior generations, or the interests of future generations that will be served by mutuals. If enabling laws are made, our companies will be at risk of conversion for the purpose of expansion of existing stock companies with predatory ambitions of growth. Mergers and acquisitions professionals will become skilled in lucrative practices, converting mutual companies to stock companies.
I would just give you the example of the life companies. When the rules were made, the life companies served 50% of the life insurance market—life companies are different from our property and casualty companies—but now they serve less than 5% of that market.
It may be impossible to monitor and defend against the predatory and greed-based motivation in the examples I've given you. We are at the precipice of a decision that may have the effect of gutting the mutual industry in Canada. This will have irreversible effects on our companies and the cost of insurance services provided to Canadians, especially rural Canadians.