On Feb. 2, Union of Canada Life was put into liquidation by the Ontario Superior Court of Justice This is the first time since 1994 that Assuris, the non-profit corporation that protects Canadian policyholders in the event of life insurance company bankruptcy, has been required to step in to cover an insurer that has been placed under court protection.
This insurer had 22,000 policies in force in Canada, and most of these were in Quebec. It was particularly active selling accidental death insurance in the primary and secondary school market.
The accounting firm Grant Thornton will act as liquidator in this case. According to Grant Thornton, the insurer “faced unique challenges, business risks and insufficient capital to ensure long-term viability, which caused it ultimately to seek court protection.”
“We will be focused on arranging the transfer of the policies to another life insurance company expeditiously in order to ensure the policyholders continue to be served seamlessly. In the interim, operations of Union of Canada Life will continue from its head office in Ottawa,” said Michael Creber, the Grant Thornton partner in charge of the liquidation.
The liquidator says that it will work closely with Assuris. “In general, during the transition period, policies will continue and benefits will be paid. It is also anticipated that the policyholders will suffer no loss of benefits.”
“However, if full recovery of policyholders’ benefits is not achieved in the transfer process, Assuris is committed to providing its protection to all policyholders,” said Gordon Dunning, president and CEO of Assuris.
All policyholders will receive a letter directly from the liquidator that will explain how their benefits are protected. Other parties affected by the liquidation order will also receive a separate letter. In the meantime, the insured parties must continue to pay their premiums as usual to avoid any interruption in their life insurance coverage.
Grant Thornton has also stipulated that insurers, brokers and agents are prohibited from soliciting or transferring a policy issued by the bankrupt insurer. “Given that your clients’ interests are protected by Assuris and a transfer of the existing policies will be arranged, it is clearly not in your clients’ interest that such solicitation or transfers be made,” says the accounting firm.
The similarity of its name to that of Union of Canada Life has prompted Canada Life, the Great-West Lifeco subsidiary, to issue a memo to its sales force to explain what to say if a client has confused the two companies. Advisors can tell such clients that Canada Life has no ties to the failed insurer. The memo adds that any questions concerning Union of Canada Life should be directed to Assuris.