Alberta tables legislation to become 2nd Canadian province to allow captive insurance
The Alberta government is introducing legislation to allow another insurance option for businesses facing high rates.
It's called captive insurance and if passed, Alberta will join British Columbia as the only two provinces to allow captive insurance in Canada.
Finance Minister Travis Toews tabled the legislation Wednesday afternoon.
"With limited availability in the insurance market, it's very difficult for some companies to find adequate insurance at reasonable prices," he said.
"This is especially true for many of Alberta's energy companies, as global insurance capacity is on the decline. By allowing and enabling captives, we believe that it will help attract investment and growth in the financial services sector in the province and assist in diversifying our economy."
Captive insurance is an alternative to traditional market insurance which is wholly owned by those it insures. The province says it could lead to cheaper insurance rates, have potential tax benefits and allow for better risk management for businesses in several sectors.
Though companies in the energy sector have shown the most interest in the captive insurance options, Toews says it could also benefit businesses in sectors such as agriculture, forestry and manufacturing.
“Developing another option for insuring risks, including fire damage, will support our forestry job creators by allowing them more choices and flexibility to help keep their businesses running when unforeseen events occur," Jason Kripps, the president of the Alberta Forest Products Association, said in a news release.
Captive insurance companies set up in Alberta will have to be licensed and will have to show sufficient assets to cover risk, should it have to cover loss. Specific requirements have not been established in Alberta yet, though the plan is for those rules to be available by the spring of 2022.
Alberta-based captives will be able to insure a single entity, members of an association or a client with complex insurance needs, the province says.
SCHOOL BUS INSURANCE RATES UP
The new legislation to allow for captive insurance won't affect the increasing personal auto insurance rates being experienced in Alberta right now, Toews says. But he did point out skyrocketing school bus insurance rates may be mitigated by setting up a captive insurance company.
The Alberta School Bus Contractors' Association (ASBCA) has said insurance costs for some of the buses in the province are set to triple in price. ASBCA has been advocating for provincial help in dealing with the higher costs in order to keep buses on the roads without passing on price hikes to families.
"School boards are struggling with the high cost of premiums for facility insurance, and I expect that it would be useful for this Alberta School Boards Association to perhaps consider the merits of setting up a captive where that captive can then in fact offer insurance back to individuals, school boards and divisions," Toews said.
Specific regulations for Alberta-based captives are expected to be released next year.
The orginial version of this story indicated the announcement would be regarding auto insurance. The province confirms that is not the case.