Why be so influenced by international trends when Canada already has strong regulation that proved its value during the 2008 financial crisis? Yvon Charest, president and CEO, Industrial Alliance, posed this question at the CEO Summit panel discussion at the Insurance and Investment Convention held in Montreal on Nov. 27.“What’s the idea of always looking elsewhere and saying, ‘We have to do the same thing as the others?’ he asked during the panel discussion entitled the CEO Summit: Key issues of 2014. This question was greeted by a round of applause from the audience of financial advisors. International trends such as the banning of embedded commissions on the investment side, discussions regarding the financial stability of insurers and new international accounting standards are influencing the Canadian industry. In particular, during the panel discussion Charest pointed to Canada’s implementation of the International Financial Reporting Standards. These international accounting standards are not well suited to products with longterm guarantees that have been a mainstay of the Canadian industry (see article here).
“We look at international trends, but from time to time I would like to see Canadians…say that ‘Our practices are good and we are going to influence international regulation.’”
When interest rates fell, Canada’s accounting standards were tough on insurers but the system worked, he added. “Why say, ‘They’re going in that direction internationally, so we better follow.’ As for me, I really want to tell everyone in Canada that if we have something good, why then always go and follow along with what the others are doing?” With respect to financial strength, during the 2008 financial crisis, Canada’s insurers stayed healthy and solvent unlike some companies in other jurisdictions and there is no need to be influenced by changing international regulations. “Canada’s insurers are in great health, the companies are well regulated and we have a strict regulatory regime and we had zero problems during the 2008 crisis.”
Fellow panelist Steven Ross, president and COO of La Capitale Financial Group’s Life and Health Insurance and Financial Services division, agreed with Yvon Charest that Canada has every right to be proud of its present regulatory system. “Yvon’s message this morning – his cry from the heart – is clear. It’s true, we have the right to be proud…Our industry is solid, it is highly regulated. In Canada we are a lap ahead (of other countries) and Canada came out of the financial crisis better than any other country or almost. ”
Charest added that he has taken his message to regulators both federally and provincially. He believes this message is getting through, especially in the case of accounting standards.
In 2010, he says, our regulators were not convinced that Canada should stick with its system. Then in October 2013, Julie Dickson of the Office of the Superintendent of Financial Institutions (OSFI), wrote a letter that was quite critical toward the international standard. “So, I think we’ve been heard.”
One small issue, he adds, is that Canada’s good performance during the financial crisis has given it a bigger role internationally, which may lead it to conform to international influences. For example, Canada, is quite active with the Financial Stability Board among other organizations. “Whenever there is something new internationally, it seems as if Canada wants to be a role model, or wants to be the first to say, ‘Yes we are doing it’. Sometimes we fall into this trap.”
In general, however, as in the case of the accounting standards, Charest says the Canadian industry is being heard by its regulators.
Panelist Denis Berthiaume, president and COO of Desjardins Insurance, agrees that the industry has made headway in raising awareness with regulatory and governmental authorities on the impact that the international accounting standards would have on the industry. “It would force us to withdraw certain products that offer long-term guarantees. Fundamentally, this touches the heart of our industry, it touches the heart of your practice,’’ he told the advisors in the audience. “While this may not appear to be a sexy subject, when we are fighting this…we are protecting our industry.”