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Deposits unlimited in a universal font : Manulife, rn, and BMO win

by

Andrea Lubeck

18 March 2019 11:30

Last Friday, the Court of Queen’s Bench of Saskatchewan has given reason to Manulife financial Corporation, iA financial Group and BMO life insurance Company in a dispute involving the face of the companies Mosten Investment, Ituna Investment and Atwater Investment, using insurance policies, universal as a contract of deposit to make deposits unlimited.

The three companies had sued the insurers in Saskatoon, stating that the sub-accounts to match the fonts there were no deposit limit greater than the size of the investment.

The companies of hedge funds have acquired life insurance contracts universal to make deposits unlimited. The contract allowed you to receive a payment annualized guaranteed return of at least 4,00 % with liquidity of one month. They alleged that the police promised them the bonus of 0.85% on each anniversary of the policy.

Justice Brian J. Scherman concluded that the wording and purpose of the agreement is “incompatible” with the position of the companies of hedge funds, revealed iA by way of a press release. He added that the insurance contracts may not be used for the sole purpose of getting a return.

The insurers satisfied

In his statement following the decision of the Court of Queen’s Bench of Saskatchewan, Manulife has indicated that they have ” always had confidence that we would win the case in this dispute, and that there would be no significant impact on the activities of the Company “.

“[The decision] is consistent with our position that this case was legally unfounded and absurd in commercial terms, and that customers who subscribe a contract for universal life insurance, as well as the insurers who issue these contracts have never had the intention to use these as a contract of deposit or securities, ” says Manulife.

“iA financial Group has always maintained that the position of Ituna was legally unfounded, and that the contracts of life insurance were never intended to be used as deposit accounts and for purposes not related to life insurance,” says the insurer.

At the time of publication, BMO had not responded to the request for comments of the Journal of the insurance.

CLHIA applauds the decision

L’Association canadienne des compagnies d’assurances de personnes (CLHIA) also welcomed the decision of the judge Scherman. She stressed that the decision was taken “in the public interest” and that it ” reinforces the deep division between the banking and insurance sectors “.

“This important decision endorses unequivocally that insurers, their customers and regulatory agencies already know : the purpose of an insurance contract is to protect the life of the insured and their family. The objective of the insurance contracts is not to provide an investment opportunity with unlimited unrelated to the insurance coverage, ” says Stephen Frank, president and chief executive officer of the CPOMA.

The association also said to have taken place ” because the position taken by the plaintiffs was contrary to the nature and function of the product, to the fundamental concepts of insurance law and the regulatory system in canada “. It happens that it would intervene in cases that raise significant legal issues for the insurance industry in canada people.

Of the serious potential financial problems

This is a report of the business of short-selling Muddy Waters, published last October, which had lifted the veil on the litigation involving Manulife and Mosten. It alleged that the conclusion of the trial could ” harm significantly its revenues, its capital, its credit rating, its business and its solvency, according to a sworn declaration of one of [the] expert [Manulife] “.

L’Association canadienne des compagnies d’assurances de personnes (CLHIA) also believes that such clauses could have caused ” significant financial damage to insurers “.

Regulatory change

Last October, the Saskatchewan government had also amended its regulations to establish a limit on the amount of premiums that a life insurer may accept as deposit in certain life insurance policies and in the related accounts.

Insurers interviewed by the financial analysts

Manulife and iA financial Group have mentioned the dispute during a conference call held on the occasion of the disclosure of the financial results for the third quarter of 2018. Read an account of their statement and questions of financial analysts Monday in FlashFinance.ca.

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