Mr. Speaker, I thank the hon. member for his kind words. I could make the very identical commentary on the member's work in this place on a broad range of issues in representing his constituents and eastern Canada.
Banks, insurance companies, credit unions, CMHC and other institutions under the jurisdiction with respect to the financial institutions of Canada all have reserve requirements. This is the law. It is established so that there is coverage in the event that there are losses.
We could imagine an insurance company that simply sells insurance policies and collects the premiums and hopes that it is going to be able to keep the losses down so that it does not make a loss. When I was a chartered accountant with Price Waterhouse I had three insurance companies that I did the audits for, and in all the years that I was there, at least five or six years, there was not one year in which an insurance company made money on selling insurance. Where the insurance companies made their money was on the investment income on the investment portfolio that they were obligated to have to backstop the loans or the insurance policies and the risk on the policies.
That is the way it works. There has to be this guarantee. We can imagine what would happen if an insurance company had sold millions of dollars of general insurance and all of a sudden had an enormous claim that wiped it out. What about the protection for all the other policyholders?
The same has to do with housing. CMHC provides about $1.9 billion of mortgage insurance to Canadians every year. It is a tremendous amount of money and it requires a tremendous amount of reserve. The member is quite right about what is happening in the major urban centres, particularly in the west where the price of houses has gone through the roof because of the significant growth in economic activity. Mortgages being held by people are very substantial. Should something occur where that economic activity tapers off for one reason or another in a significant way, jobs would be lost, people would start selling houses, the value of houses would go down and people would find that they owed more on the mortgage than the house was worth and they would walk away from it. Who would take care of the mortgage?
These mechanics with regard to financial institutions and those who provide the security of Canadians in fact provide us with one of the most secure financial regimes of any country that I know of in terms of the major loss levels and for the extreme risk because of the reinsurance programs that are available.
The member is quite right. The reserves are there in accordance with the law to be sure that there is ample coverage and security for all Canadians, regardless of the financial services they are receiving.