Alberta’s move to enter the captive insurance market could have significant benefits for employers in the province.
On Dec. 2, 2021, the province’s proposed Bill 76, the Captive Insurance Companies Act, received royal assent, taking it one step closer to becoming law. If passed, the legislation will make Alberta the second province, after British Columbia, to offer captive insurance to employers.
“What’s driving the move in Alberta are challenges that exist in ensuring certain kinds of risks for Alberta companies, particularly those in the energy sector,” says Greg Hurst, managing director of Greg Hurst & Associates Ltd. “They’re having problems underwriting at reasonable costs and are looking for different ways of doing that. Alberta has essentially looked at B.C. and seen that they have this captive regime and the province is hoping that mirroring that legislative move will work for it as well.”
Recently, more and more global companies have recognized that captives can be used to underwrite employee benefits programs, with the idea gaining traction for the past 10 years, says Scott Sweatman, a partner at Dentons Canada. Long-term disability insurance is very expensive, which is where a captive arrangement can be beneficial, he points out. When companies form a captive to underwrite their own liabilities, all the built-in costs that come with big insurance companies — such as profit margins, satisfying shareholders, marketing and advertising — are stripped out, he adds.
Hurst has seen the value of B.C.’s captive legislation to underwrite employee benefits programs and he thinks the idea will pick up steam in Alberta, too. He suggests it may even spark interest in legislating captive insurance in other provinces as well.
“For a Toronto-based company to set up a captive over in B.C. or Alberta, it may find that — depending on what it wants to insure — it may not be the solution it was hoping for because Ontario’s legislation when it comes to insurance would have to recognize that captive regime in B.C. or Alberta and there’s probably still work to be done to enable that to happen.”