Ottawa-based insurance company Union of Canada Life Insurance has been ordered by the Ontario Superior Court of Justice to wind up its operations, after it was determined that the company had insufficient capital to ensure its long-term viability.
The company, which services approximately 22,000 policies, sought court protection under the Winding-up and Restructuring Act on Thursday. It marks the first time an insurance company has failed in Canada since 1994, when Confederation Life Insurance Company collapsed.
The failure is the result of “unique challenges, business risks and insufficient capital”, according to Assuris, the not-for-profit organization that protects Canadian policyholders in the event their life insurance company fails.
“Union of Canada Life was faced with unique challenges that caused the company to seek court protection,” said Gordon Dunning, president and CEO of Assuris. “Our analysis indicates this company had extremely high strategic, market and operational risks and insufficient capital to ensure the long-term viability of the company in a low interest rate environment.”
All Union of Canada Life policyholders are protected by Assuris. The organization will work with Grant Thornton Limited, which has been appointed as liquidator, to transfer the policies to a solvent company. Policies will continue and benefits will be paid during the transition period, and it is anticipated that the policyholders will suffer no loss of benefits.
“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,” said Michael Creber, the Grant Thornton partner in charge of the liquidation. “In the interim, operations of Union of Canada Life will continue from its head office in Ottawa.”
Union of Canada Life, founded in 1863, offers life and accident insurance, annuities, RRSPs and mortgages. It has four branches, and operates in Ontario, Quebec, New Brunswick and Prince Edward Island, with most of its business concentrated in Quebec.
The regional concentration of the business and its niche product offering created challenges for the small company, according to Josée Rheault, vice president, external relations at Assuris.
“[Union of Canada] only had a certain selection of products that were very targeted,” she said.
Low interest rates and widespread market volatility have presented a challenging environment for many insurance companies in recent years. However, Assuris emphasizes that the challenges and risks facing Union of Canada Life were unique, and its failure doesn’t reflect broader weakness in the industry.
“[It] had some very specific and unique challenges,” said Rheault. “Life insurance is a very strong industry. It’s well regulated, well capitalized. We really see this as a one-off because of very specific circumstances to that company.”
The Financial Services Commission of Ontario has been closely monitoring Union of Canada Life, and has kept Assuris fully informed of all developments, Dunning added.
All policyholders will be receiving letters directly from the liquidator on how their respective benefits are protected. Other parties affected by the liquidation order will also be receiving a separate letter. In the interim, policyholders are advised to continue paying their premiums as usual in order to ensure there is no interruption in their insurance coverage.