Information regarding Unlicensed Insurance

Overview

To clarify the requirements of the Insurance Act with respect to the disclosure and reporting of unlicensed insurance, the Superintendent of Insurance has issued Interpretation Bulletin 02-2017 – Unlicensed Insurance.


Disclosure

Pursuant to sections 61 and 63 of the Insurance Act (“Act”), an unlicensed insurer may enter into a contract of insurance insuring a risk in Alberta if a disclosure of the unlicensed insurance is made by the insured to the Superintendent of Insurance ("Superintendent").

Disclosure and reporting of unlicensed insurance can be made through either:

The Superintendent requires the disclosure of unlicensed insurance be made online. Click here for the website.

Disclosure - Insurance Placed Directly with the Unlicensed Insurer

Section 61 of the Act applies to a contract of insurance placed directly by an insured with an unlicensed insurance company without the participation of a licensed special broker. In this circumstance, the purchase of unlicensed insurance by an insured must be disclosed to the Superintendent by the insured no later than 30 days after the insured signs the contract of insurance. A regulatory charge is calculated based on the amount of premium and is to be paid to the Government Alberta by the insured. The amount of the charge is equal to 50% of the premiums paid for the unlicensed insurance that covers a risk in Alberta. We will accept a reasonable allocation of premiums, where the policy covers risks in other locations in addition to Alberta. At the request of the insured, the Superintendent may consider a reduction in the charge to an amount not less than 10 percent of the premium paid if the insured can provide evidence that at least five insurers licensed in Alberta have declined to provide coverage, commonly referred to as “declinations”, at the time of purchase.

Disclosure - Insurance Placed Through a Special Broker

Section 63 of the Act applies to a contract of insurance placed with an unlicensed insurance company by way of a licensed special broker. In this circumstance, the purchase of unlicensed insurance must be disclosed to the Superintendent by the special broker no later than the 10th day of the month following the effective date of the insurance. A tax is to be paid based on the amount of premium paid or payable by the insured. The amount of the tax is the amount that would be payable if the premiums had been received by a licensed insurer and are currently what a licensed insurer would pay, 3% of the premium paid with respect to life and accident and sickness insurance and 4% for all other classes of insurance. Pursuant to section 72 of the Act, the tax is to be paid by the special broker, on behalf of its insured client, to the Government of Alberta.

A special broker is required to obtain declinations confirming that the insurance could not be obtained from an insurer licensed in Alberta before the insurance is effected.

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Penalties

Under both sections 61 and 72 of the Act, if the regulatory charge or tax is not paid within 30 days from the time it becomes payable, a sum equal to 50% of the charge or tax unpaid becomes a penalty amount in addition to the original charge or tax.

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Voluntary Disclosure

Under the Act, the President of Treasury Board and the Minister of Finance (“Minister”), and the Superintendent do not have the discretion to waive a regulatory charge or tax owing. Also, neither the Minister nor the Superintendent have the discretion to extend the prescribed period during which an insured or a special broker must notify the Superintendent and pay the charge or tax.

The Superintendent, through delegation by the Minister, does not have the legislative authority to establish a voluntary disclosure program that would waive or reduce the charges, taxes, or penalties. Further, there is no appeal process available to an insured or a special broker to apply for relief or reduction in the amounts payable.

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Forms

See the Forms page for forms related to Unlicensed Insurance.

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Questions

If you have any questions regarding the disclosure of unlicensed insurance, please email tbf.unlicensedinsurance@gov.ab.ca.

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Page last updated:  October 17, 2017