Life Insurance Return – Section III – Definitions

General

Definitions have been included in these instructions to assist insurers/societies with the preparation of their filings.

This section is not a complete set of insurance and insurance accounting definitions or interpretations. It is related specifically to the preparation of the LIFE Quarterly and Annual Return filings.

Other definitions are contained in the federal Insurance Companies Act and the various provincial and territorial insurance acts.

Additional sources of definitions include:

• A.M. Best Glossary of Insurance Terms
• Canadian Life and Health Insurance Association Inc.
• IRMI Risk and Insurance and Risk Management Terms

Definitions contained in this section take precedence, for the completion of the LIFE returns, over any definition of the same terms contained in non-legislative sources.

There may be jurisdictional differences in the interpretations of certain terms; please consult your primary regulator for technical interpretations.

Classes of Insurance Definitions

The classes of insurance are defined below for ease of reference; however, please refer to your primary regulator's legislation or regulations.

The classes of insurance are defined in the order they appear on the forms listed in the return.

Accident and sickness (A&S)
A&S means insurance

1. against loss resulting from bodily injury to, or the death of, a person caused by an accident;
2. under which an insurer undertakes to pay a sum or sums of money in the event of bodily injury to, or the death of, a person caused by an accident;
3. against loss resulting from the sickness or disability of a person not caused by an accident, but excludes loss resulting from the death of the person as a consequence of sickness;
4. under which an insurer undertakes to pay a sum or sums of money in the event of the sickness or disability of a person not caused by an accident; or
5. under which an insurer undertakes to pay insurance sum of money in respect of the health care, including dental care and preventative care, of a person.

Life
"life insurance"

1. means any insurance that is payable
   1. on death,
   2. on the happening of an event or contingency dependent on human life,
   3. at a fixed or determinable future time, or
   4. for a term dependent on human life, and
2. without restricting the generality of subclause (i), includes
   1. insurance under which an insurer, as part of a contract of life insurance, undertakes to pay an additional sum of insurance money in the event of the death by accident of the person whose life is insured,
   2. insurance under which an insurer, as part of a contract of life insurance, undertakes to pay insurance money or to provide other benefits in the event that the person whose life is insured becomes disabled as a result of bodily injury or disease, and
   3. an undertaking to provide an annuity, or what would be an annuity except that the periodic payments may be unequal in amount, for a term dependent solely or partly on the life of a person;

Other Definitions

AAR

Appointed Actuary's Report.

Accumulation Annuities (Deferred Annuities)

Annuity contracts that are in the phase of accumulating periodic annuity premium contribution deposits made by contract holders together with investment returns earned on the accumulation.

Act

Insurance Companies Act (ICA - Federal), Insurers Act, CQLR, c. A-32.1 or An Act Respecting Insurance or similar legislation in other provincial or territorial jurisdictions.

Affiliate

A person or entity directly or indirectly controlling, being controlled by, or under common control with another person or entity.

Ancillary Operations

Any function that can be considered to be providing support or service to the insurance or investment operations can be considered an ancillary operation.

Associate

An associate is an entity, including an unincorporated entity such as a partnership, over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture. "Significant influence" is defined in accordance with IFRS. For further detail on the definition of the term "associated", please refer to OSFI's LICAT Guideline.

Assume

To accept risk from a ceding company.

Assuris

Canadian Life & Health Insurance Compensation Corporation.

Beneficial Shareholder

The beneficial owner is the ultimate shareholder that controls the voting rights attached to the shares.

Canadian Branch

Canadian branch of a foreign life insurer/fraternal benefit society that is insuring in Canada the risks.

CFA

Canadian Fraternal Association.

Canadian Fraternal Benefit Societies

Federally and provincially incorporated fraternal benefit societies.

Canadian Life Insurers

Federally and provincially incorporated life insurers.

CARLI

Capital Adequacy Requirements Guideline – Insurance of persons (Quebec only).

Cede

Transfer of risk to assuming reinsurers / insurers.

CIA

Canadian Institute of Actuaries.

CLHIA

Canadian Life & Health Insurance Association.

Coinsurance

A method of reinsurance under which the assuming company receives a proportionate share of all of the risks and cash flows of the policy. (One typical exception may be the policy fee, which remains with the ceding company.) The reinsurer receives its share of the premiums and benefits, and sets up its share of the reserves. Typically, the reinsurer pays an allowance to the ceding company to represent the reinsurer's share of the acquisition and maintenance expenses.

Control

Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities, in accordance with the meaning of the term under IFRS.

CUSIP Number

CUSIP stands for Committee on Uniform Securities Identification Procedures. A CUSIP number identifies most securities, including: stocks of all registered U.S. and Canadian companies, and U.S. government and municipal bonds.

Deposits of Reinsurers

Deposits provided by unregistered reinsurers may also be used to reduce the capital otherwise required for unregistered reinsurance, provided that such deposits materially reduce the risk associated with the reinsurer's credit quality.

For additional information on how to complete page 75.070, refer to "Section IV - Detailed Instructions."

Direct Written

Pertaining to policies/certificates issued by insurers/societies.

Disability Annuity

An annuity contract whereby an insurer promises to make periodic payments to an injured (disabled) party to whom a large settlement has been awarded as part of a bodily injury claim settlement. It does not include disability coverage under an individual or group accident and health insurance contract.

Foreign Life Insurers

Life insurers domiciled outside Canada and federally registered to transact life insurance, annuities and accident and sickness business on a Canadian branch basis in Canada.

Foreign Fraternal Benefit Societies

Fraternal Benefit Societies domiciled outside Canada and federally registered to transact life insurance, annuities and accident and sickness business on a Canadian branch basis in Canada.

Index linked products

Please refer to the LICAT/CARLI Guideline.

GMWB/GMBB

Guaranteed Minimum Withdrawal Benefit/Guaranteed Minimum Benefit Base

Joint Venture

A contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control.

Letters of Credit

Regulators may recognize approved letters of credit as security maintained in Canada for purposes of reducing the capital otherwise required for unregistered reinsurance.

Refer to "Section V - Jurisdictional Requirements" for more information. Please also refer to "Section IV - Detailed Instructions" for assistance in completing page 75.070 and to obtain additional guidance with respect to letters of credit.

LICAT/LIMAT

Life Insurance Capital Adequacy Test/Life Insurance Margin Test (Federal only).

Management Fees

Management fees means fees paid to a person(s) or an institution who has the power or responsibility to direct the affairs of the Segregated Funds and whose duties include the management of the investment portfolio of the Segregated Fund(s) and the provision of investment advice in connection therewith.

Modified Coinsurance

Reinsurance that differs from coinsurance only in that the reserves are transferred back to the ceding company while the risk remains with the reinsurer; the ceding company is required to pay interest to replace that which would have been earned by the reinsurer if it had held the assets corresponding to the reserves in its own investment portfolio. Commonly known as Mod-co. (See also Coinsurance.)

Mortgage Loans

• Hotels ‑ Include hotels, motels, lodges and resorts.

• Industrial ‑ Mortgages on real property consisting of buildings that are used primarily for industrial purposes including manufacturing and warehouses.

• Multiple Residential ‑ Include all other residential properties under "multiple".

• Office Mortgage -Mortgages on real property consisting of buildings that are used primarily as offices.

• Other ‑ Include all other types of real estate including vacant land.

• Retail Stores - Mortgages on real property consisting of buildings that are used primarily as retail stores including shopping plazas

• Residential ‑ A residential mortgage is one that is secured by residential property. Residential property is defined as real property consisting of buildings that are used, or are to be used, to the extent of the majority of the floor space thereof, as one or more private dwellings. Note that the definition of residential mortgages differs from that applicable to the LICAT/CARLI calculations.

• Single Residential Property ‑ A single residential property is a dwelling having no wall in common with another dwelling and designed for occupancy by a single family. Note that the definition of residential mortgages differs from that applicable to the LICAT/CARLI calculations.

OECD Member

Refers to the member countries in the Organization for Economic Co-operation and Development.

Payout Annuities

Annuity contracts that are in the periodic payout phase.

Premium

• Gross
  Direct Written + Assumed business.

• Net
  Direct Written + Assumed – Ceded business.

Registered and Unregistered Reinsurance:

The terms "registered" and "unregistered", are relevant in determining whether credit can be taken for reinsurance placed by federally regulated insurers/ societies and provincially incorporated insurers/societies, respectively.

Refer to the LICAT Guideline for further clarification.

Provincially Incorporated Insurers:

Registered insurers in a particular jurisdiction are insurers that are licensed in that jurisdiction. Certain regulators will also accept (re)insurers not licensed in their jurisdiction, but incorporated and licensed in another jurisdiction, as registered.

Please verify with your primary regulator.

Unregistered insurers are insurers not licensed by one or more provincial regulators, and are not federally registered.

Reinsurance:

The transfer of some or all of an insurance risk to another insurer. The company transferring the risk is called the "ceding company"; the company receiving the risk is called the "assuming company" or "reinsurer."

Reinsure

To transfer significant insurance risk from one insurer/society to another insurer/society.

Regulator

The federal or provincial agency that is responsible for the control and regulation of the insurer/society under its jurisdiction. The Primary Regulator is the Regulator in the jurisdiction under which the insurer/society: (a) obtained its order to carry on business; or (b) was incorporated.

Stop Loss

Cedant is reimbursed costs in excess of a specified amount (attachment point) up to a defined maximum.

Subsidiary

In accordance with IFRS, a subsidiary is an entity, including an unincorporated entity such as a partnership, that is controlled by another entity (known as the parent).

Unregistered reinsurer

See definition under Registered and Unregistered Reinsurance.

VIE

Variable Interest Entities.

Yearly Renewable Term insurance (YRT)

Proportional on either excess or quota share basis; reinsurer charges a YRT premium rate that reflects the yearly cost of insurance.