The Office of the Superintendent of Financial Institutions has issued a new regulatory and legislative advisory on the insurance of risks in Canada.

The advisory provides guidance on determining whether a foreign entity is considered to be insuring risks in Canada, and states how OSFI will apply these criteria to various business models.

OSFI notes that the Insurance Companies Act provides that a foreign entity shall not insure a risk in Canada unless it is authorized by order of the superintendent. However, it says that the ICA does not provide guidance on what constitutes insuring in Canada. And, a review of case law indicates that courts have not interpreted the concept either, although they have interpreted analogous concepts.

It says that the location where operations are carried out and where contracts are made is generally important in determining the location of a business. The jurisdiction with which a contract has its closest and most substantial connection is key to determining the “proper law”, unless the contract contains a governing law provision, it notes. “A combination of certain indicia underlying both of these tests is relevant to the interpretation of the concept of ‘insuring in Canada a risk’,” it finds.