Unlicensed insurance

Overview

To clarify the requirements of the Insurance Act (the Act) with respect to the disclosure and reporting of unlicensed insurance, the Alberta Superintendent of Insurance (the Superintendent) issued Interpretation Bulletin 07-2022 – Unlicensed Insurance in June 2022.

Pursuant to sections 61 and 63 of the 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.

Disclosure, reporting, penalties and payment

Disclosure, reporting and payment of charges for unlicensed insurance can be made:

• directly to the Superintendent; or
• through a Licensed Special Broker.

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 or receives any policy, interim receipt or insuring document issued by or on behalf of the insurer, whichever occurs first. The Superintendent does not have the authority to extend the prescribed period during which an insured must notify the Superintendent.

A regulatory charge is calculated based on the amount of premium and is to be paid to the Government of Alberta by the insured. The amount of the charge is equal to 10% (reduced from 50% effective May 31, 2022) of the premiums paid for the unlicensed insurance that covers a risk in Alberta. Where the policy covers risks in other locations in addition to Alberta, we accept a reasonable allocation of premiums.

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 case, before the insurance is effected, a special broker is required to obtain declinations confirming that the insurance is not available from an insurer licensed in Alberta.

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 paid by the special broker based on the amount of premium paid or payable by the insured. The amount of the tax is the amount payable if the premiums had been received by a licensed insurer:

• 3% of the premium paid with respect to life and accident and sickness insurance
• 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.

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 penalty equal to 10% (reduced from 50% effective May 31, 2022) of the charge or tax unpaid is owed in addition to the original charge or tax.

For full details, see Interpretation Bulletin 07-2022 – Unlicensed Insurance (June 6, 2022).

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Connect with Prudential Supervision, Office of the Alberta Superintendent of Insurance

Hours: 8:15 am to 4:30 pm (open Monday to Friday, closed statutory holidays)
Phone: 780-643-2237
Toll free: 310-0000 before the phone number (in Alberta)
Fax: 780-420-0752
Email: [email protected]

Address

Alberta Superintendent of Insurance
Alberta Treasury Board and Finance
Financial Sector Regulation and Policy
402 Terrace Building
9515 107 Street
Edmonton, Alberta  T5K 2C3