Feds offer guarantee on insurer debt

The federal government has rolled out a new program to provide insurance on the wholesale term borrowing of federally regulated life insurance companies.

The Canadian Life Insurers Assurance Facility (CLIAF) is meant to ensure that Canadian life insurers have access to debt markets on competitive terms.

“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,” says Finance Minister Jim Flaherty.

The guarantees offered under the program can be accessed by all federally regulated life insurers and their holding companies. Fraternal benefits societies and provincially regulated insurers may apply for approval.

Within any group of related entities, only a single eligible entity may participate, unless an exception is granted.

Funds derived from guaranteed issues may not be used to increase the regulatory capital of any related operating company.

The guarantee will apply to the payment of principal and interest on eligible instruments issued by institutions. The guarantee is unconditional and irrevocable, and would apply to the first three years of the debt issue’s term.

The Bank of Canada will act as the administrative agent for the government on this program and be responsible for daily operational activities. The program is slated to end on Dec. 31, 2009, but the ministry of finance retains the option to cancel the facility earlier with 30 days’ notice.

(05/22/09)

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.