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Regulated by the OSFI and Assuris (formerly CompCorp) Demutualization Hold illiquid long-term assets Individual life insurance Permanent life (endowment insurance), temporary life Group life insurance Annunities
Copyright 2011 Pearson Canada Inc. 12 - 1 Chapter 12 Nonbank Financial Institutions Copyright 2011 Pearson Canada Inc. 12 - 2 Life Insurance Companies • Regulated by the OSFI and Assuris (formerly CompCorp) • Demutualization • Hold illiquid long-term assets • Individual life insurance – Permanent life (endowment insurance), temporary life • Group life insurance • Annunities Copyright 2011 Pearson Canada Inc. 12 - 3 Property and Casualty Insurance • Regulated by OSFI and PACICC • Property Insurance covers loss of real property • Casualty insurance protects against legal liability exposure • Reinsurance Copyright 2011 Pearson Canada Inc. 12 - 4 Credit Insurance • Credit Default Swaps (CDS) – Seller is required to make a payment to the holder of the CDS if there is a credit event (i.e. bankruptcy) of the firm’s credit rating • Monoline Insurance – Supply credit insurance directly Copyright 2011 Pearson Canada Inc. 12 - 5 Relative Shares of OFSI-Regulated Financial Intermediary Assets Copyright 2011 Pearson Canada Inc. 12 - 6 The New Legislative Framework • Government passed legislation reforming regulatory framework. • Demutualized life and health insurance companies • Allowed access to Canadian payments and clearance systems • Does not allow mergers involving large banks and large demutualized life and health insurance companies. Copyright 2011 Pearson Canada Inc. 12 - 7 Insurance Management 1. Screening 2. Risk-based premiums 3. Restrictive provisions 4. Prevention of fraud 5. Cancellation of insurance 6. Deductibles 7. Coinsurance 8. Limits on amounts of insurance Copyright 2011 Pearson Canada Inc. 12 - 8 Pension Funds • Rapid growth: encouraged by tax policy • Bigger role in stock market • Problem of underfunding • Private plans (RPPs) • Public plans – A. Social Security – B. CPP and QPP Copyright 2011 Pearson Canada Inc. 12 - 9 Finance Companies • Minimal regulation by provinces • Rapid growth • Three types: – A. Sales finance companies – B. Consumer finance companies – C. Business finance companies Copyright 2011 Pearson Canada Inc. 12 - 10 Securities Market Operations • Investment Banking – Seasoned issues – Underwriters • Securities Brokers and Dealers – Brokerage firms • Organized Exchanges – specialist [...]... Money Market Mutual Funds • Hedge Funds Private Equity and Venture Capital Funds • Private Equity Fund • Venture Capital Funds – Capital buyout funds – Leveraged buyout (LBO) – Carried interest Government Financial Intermediation • Crown Finance Companies – CMHC provides funds to the mortgage market by borrowing from the federal government and the private sector • Government Sponsored Enterprises in the . Copyright 2011 Pearson Canada Inc. 12 - 1 Chapter 12 Nonbank Financial Institutions Copyright 2011 Pearson Canada Inc. 12 - 2 Life Insurance Companies. Pearson Canada Inc. 12 - 5 Relative Shares of OFSI-Regulated Financial Intermediary Assets Copyright 2011 Pearson Canada Inc. 12 - 6 The New Legislative