Alberta’s captive insurance option gets another boost

New Alberta legislation allowing captive insurance companies to set up and domicile in the province has started to bear fruit.

Insurance and reinsurance broker BMS is launching BMS Captive Insurance Services. The Alberta-based division will provide strategic advisory services and captive insurance management to Alberta-based captive insurance and reinsurance companies.

Formation of captive reinsurance companies and supporting businesses is made possible by two recent pieces of legislation developed as part of former Alberta premier Jason Kenney’s ‘fair deal’ push that aimed to improve the province’s economy, which included strengthening its financial services sector.

The Captive Insurance Companies Act, formerly Bill 76, made Alberta the second Canadian province where captive insurance companies can domicile (British Columbia has hosted them for the past 25 years).

And the Insurance Amendment Act to Alberta’s existing Insurance Act allows insurance companies licensed in the province to focus solely on reinsurance and enter into limited partnerships to raise capital. It also amends the Captive Insurance Companies Act to add provisions to permit re-shoring of foreign captives domiciled outside Canada to Alberta.

The laws took effect July 1, 2022.

Pending regulatory approvals, BMS’s new division will work to launch BMS Canada’s Alternative Risk Financing business planning. The new division will strictly adhere to ring-fence principles.

“With the amendments to the Insurance Act and the passing of the Captive Insurance Companies Act, Alberta is rapidly establishing its position as a vibrant and welcoming hub for insurance activity,” said Ian Matheson, non-executive chairman of BMS Canada.

Matheson was a member of an Alberta economic development taskforce that, beyond the legislative initiatives, worked up plans to position Alberta as an insurance, reinsurance, retrocession and risk-securitization centre. The plan is for captives to be a major conduit.

Captive insurance services planned by BMS include insurance company management, strategic and advisory services, governance and compliance audits, analytical and capital impact analysis, and transfer pricing validation.

In addition to enthusiasm about boosting the prospects for financial services businesses, comments made during readings of Bill 76 in Alberta’s legislative assembly noted that oil and gas companies, which have struggled with insurance coverage, will be a major beneficiary of the new laws.

“Some very large employers, including oil and gas companies, are having a really hard time getting insurance in Alberta right now for large-scale projects,” Sarah Hoffman, a legislative assembly member from Edmonton-Glenora, said earlier this year. ”We want to ensure that large projects that employ many, many people have the ability to move forward in a safe way where workers and communities and the environment are all protected.”

Making use of captives will help oil sands companies to effectively self-insure, said Javier Pardo, senior vice president for the complex risk solutions group at NFP in Canada.

He noted Alberta’s new laws encourage commercial, third-party reinsurance entities to write new business in Alberta that can be structured as reinsurance behind a captive. And that helps reduce the energy companies’ need to self-insure and can potentially replace lost capacity.

“We’ve been encouraging investment in reinsurance capacity. A lot of that just means that you’re fundamentally self-insuring the risk,” Pardo said.

In July, NFP announced it would establish and administer a new entity, NFP Captive Management (Alberta) Corp., to augment its Complex Risk Solutions Group.

Feature image by iStock.com/francisblack