Why Collaboration Is Key in Resolving Insurer Failures?
When an insurer reaches the point of resolution1 , after all recovery options have been exhausted, the situation is usually urgent and stressful. This pressure can strain cooperation and collaboration among stakeholders, even when those relationships are strong and well-established in normal times. Decisions must be made quickly, and success often depends on who can be contacted and how well different parties can work together. However, the common goal of all stakeholders in a resolution is to resolve the insurer in an orderly way, minimizing long-term costs and maintaining public confidence in the strength of the insurance industry.
One example comes from the liquidation of Confederation Life in 1994. A strong, cooperative relationship between the Canadian liquidator and the U.S. rehabilitator allowed both sides to move forward efficiently. This collaboration helped them reach a settlement and avoid drawn-out litigation, which could have delayed the process and harmed results for policyholders.
Unlike banks, life and health insurers are usually more local in nature. Their products are tailored to the laws and characteristics of the jurisdictions where they operate, and they are regulated locally as well. This applies both to large international insurers with operations across borders and to smaller insurers operating only in certain provinces or territories in Canada.
Because of this, the resolution of insurers often follows a Multiple Point of Entry (MPE) approach: each entity or regional subgroup within an insurer group is resolved separately by its local authority. The authorities then coordinate with each other to maintain overall stability while respecting local responsibilities. In both the preparation phase (“peacetime”) and in the actual implementation of an MPE resolution strategy, coordination and cooperation among stakeholders are essential for success.
For international insurers, there is an additional challenge: there is no established global legal framework for cross-border insolvency in the financial services sector. Without such a framework, cooperation and coordination between countries become even more critical to ensure a smooth and effective resolution.
Who’s Involved When an Insurer Fails?
The illustration below shows six categories of stakeholders, both in Canada and abroad, who may be directly or indirectly involved in the resolution planning process, or in the actual resolution of a life and health insurer. Each group plays a specific role, from regulators, industry guarantees schemes and advisors to policyholders and the general public, and effective coordination among them is essential for a successful outcome.
Regulators and Government
Prudential supervisors, resolution authorities, other regulators, and government entities overseeing insurers, setting rules, and stepping in during a crisis to protect financial stability.
Advisors
Accounting, actuarial, legal, financial, and restructuring experts offering independent technical and professional support to insurers, regulators, and protection schemes.
Industry Guarantee Schemes
Guarantee schemes, such as Assuris for life and health insurers in Canada, providing a safety net and ensuring continuity if a financial institution fails.
Standard-Setters and Coordinators
International organizations such as the IAIS, FSB, BIS, and EIOPA2 developing common standards, promoting cross-border cooperation, and guiding countries in resolution approaches.
Assuris Member Companies
Canadian life and health insurers, responsible for preparing recovery actions and cooperating with authorities on resolution planning and during financial stress.
General Public and Other Stakeholders
Policyholders, financial advisors, governments, politicians, media, market analysts and other stakeholders who require clear information during a crisis.
How Assuris Builds Preparedness With Stakeholders
Assuris actively engages with all the stakeholders mentioned earlier, using “peacetime” to strengthen crisis readiness. The aim is not only to maintain two-way communication but also to build real cooperation and test practical tools and practices before a crisis occurs. This preparation ensures that if a failure does happen, everyone is ready to act effectively.
- Information Sharing with Regulators
Assuris has signed information-sharing agreements with several regulators and is working to expand these agreements further. These agreements provide a secure framework for exchanging information while protecting confidentiality, both during normal operations and in times of resolution. In the event of a failure, regulators such as OSFI (opens in new tab) and AMF (opens in new tab) follow published Guidelines to Intervention for life insurers, which outline roles and responsibilities, including those of Assuris. Assuris collaborates with regulators to regularly review and update these guidelines. - Testing Readiness with Stakeholders
Assuris communicates openly about its tools and practices. It regularly tests and updates its funding readiness, operational preparedness, and policyholder guarantee limits by organizing tabletop exercises and simulations with stakeholders. These exercises validate preparedness and identify areas for improvement. - Building Relationships and Sharing Expertise
Assuris experts continuously participate in one-on-one discussions, networking events, and industry forums to strengthen relationships with stakeholders and keep dialogue active.
On the international stage, Assuris plays a proactive role in enhancing preparedness for cross-border insurer failures:
- Leadership in International Forum of Insurance Guarantee Schemes (IFIGS)
As an active member of the International Forum of Insurance Guarantee Schemes (IFIGS) (opens in new tab), Assuris leads a dedicated working group on resolution planning. This group brings together jurisdictions from around the world to share knowledge, develop best practices, and promote consistent approaches to resolution planning and cross-border cooperation. - Direct Engagement with Foreign Authorities
Assuris works directly with foreign regulators and authorities to understand their roles, processes, and anticipated actions in a resolution. This helps identify and reduce risks to cross-border coordination, particularly for internationally active Canadian life and health insurers. - Contribution to Crisis Management Groups (CMGs)
Looking ahead, Assuris will play an important role in international Crisis Management Groups, which unite regulators and protection schemes across countries. These groups improve preparedness by sharing information, clarifying responsibilities, and reviewing recovery and resolution plans in advance.
In the end, the success of resolution depends on aligning the efforts of all stakeholders while respecting their local responsibilities. By fostering cooperation in peacetime, Assuris helps ensure that when a crisis arises, Canada’s life and health insurance policyholders remain protected and confident in the system.
1 For additional context on the concept of resolution, please refer to “Resolution for Insurers: Assuris’ Commitment to Stability and Protection Beyond Financial Viability”.
