The federal Department of Finance on Friday unveiled details of the Canadian Life Insurers Assurance Facility (CLIAF), which will provide insurance of up to three years on the wholesale term borrowing of federally regulated life insurance companies.

The purpose of the CLIAF, which was announced in the 2009 federal budget, is to ensure that Canadian life insurers have access to wholesale debt markets on competitive terms and that they continue to provide products and services to consumers and businesses.

“As part of the Government’s Extraordinary Financing Framework announced in Canada’s Economic Action Plan, this program will help Canada’s life insurance industry access wholesale debt markets,” said Finance Minister Jim Flaherty.

Eligible institutions include life insurance companies and holding companies, including non-operating companies acting as holding companies, incorporated, amalgamated or continued under the federal Insurance Companies Act and who are regulated by the Office of the Superintendent of Financial Institutions (OSFI). In addition, federally regulated fraternal benefit societies and provincially regulated life insurers and fraternal benefit societies may be eligible on the approval of the Minister of Finance.

It is up to each institution to decide whether or not to apply to participate in the program. Before debt instruments are guaranteed under the facility, applications from eligible institutions must be approved by the Minister of Finance. The department said it would accept applications until the end of this year.

Companies may not use funds derived from the guaranteed debt to increase their regulatory capital, the Finance Department noted. Funds may be used to repay debts of holding companies or non-operating life companies incurred before May 20, 2009.

The launch of the program comes roughly six months after a similar program, the Canadian Lenders Assurance Facility (CLAF), was launched for banks and other deposit-taking institutions. The facility introduced government insurance of up to three years for borrowings by banks, to ensure that Canadian financial institutions could continue lending to consumers, homebuyers and businesses in Canada.

IE