Act
Modernizing Board Size Requirements for Mutual Insurance Companies
Regulation Number(s):
n/a
Instrument Type:
Act
Bill or Act:
Corporations Act, R.S.O. 1990, c. C. 38
Summary of Proposal:
Provincially incorporated mutual insurance companies are currently required to have Board of Directors complements of exactly 6, 9, 12, or 15 directors, with directors who serve terms of three years each. Stakeholders have requested to make the requirements for the number of directors for boards of Ontario mutual insurers more flexible and modern, as requiring boards to either increase or decrease in size by multiples of three creates unnecessary issues and inflexibility.
As such, the Ministry of Finance is seeking feedback on the potential impact of proposed amendments to the Corporations Act, as part of the government's Spring 2023 Red Tape Reduction Package, that remove requirements to constitute Ontario mutual insurers' boards in multiples of three, and rather implement a requirement that mutual insurers have a board ranging from a minimum of 6 directors to a maximum of 15 directors (inclusive), with mutual insurers free to appoint any number of directors within this range.
As such, the Ministry of Finance is seeking feedback on the potential impact of proposed amendments to the Corporations Act, as part of the government's Spring 2023 Red Tape Reduction Package, that remove requirements to constitute Ontario mutual insurers' boards in multiples of three, and rather implement a requirement that mutual insurers have a board ranging from a minimum of 6 directors to a maximum of 15 directors (inclusive), with mutual insurers free to appoint any number of directors within this range.
Analysis of Regulatory Impact:
These amendments to the Corporations Act would support both cost savings and improved board governance for mutual insurers as they could determine the appropriate number of board members based on their business needs, within the specified range, rather than the rules currently in the Act. These amendments also align with the government's priority to reduce unnecessary administrative and regulatory burden for businesses.
These amendments are expected to allow some mutual insurers to achieve cost savings. Preliminary estimates indicated annual savings for the mutual insurance sector could range between $50,000 - $100,000. Analysis by the Ministry of Finance has determined an estimated net annual savings of around $86,900 (in 2023 dollars), or $868,700 over a 10-year horizon (factoring in inflation and a standard discount rate), from reduced compliance and administrative costs.
The changes may also benefit rural Ontarians, Ontarians with lower incomes, and any small business that receives property and casualty insurance through an Ontario mutual insurer, as these changes would reduce administrative/compliance costs for mutual insurers, which could translate to lower premiums for policyholders.
These amendments are expected to allow some mutual insurers to achieve cost savings. Preliminary estimates indicated annual savings for the mutual insurance sector could range between $50,000 - $100,000. Analysis by the Ministry of Finance has determined an estimated net annual savings of around $86,900 (in 2023 dollars), or $868,700 over a 10-year horizon (factoring in inflation and a standard discount rate), from reduced compliance and administrative costs.
The changes may also benefit rural Ontarians, Ontarians with lower incomes, and any small business that receives property and casualty insurance through an Ontario mutual insurer, as these changes would reduce administrative/compliance costs for mutual insurers, which could translate to lower premiums for policyholders.
Further Information:
Regulatory Impact Analysis – Modernizing Board Size Requirements for Mutual Insurance Companies
(Download Adobe Reader)
Proposal Number:
23-MOF007
Posting Date:
April 3, 2023
Comments Due Date:
May 19, 2023
Contact Address:
Ontario Ministry of Finance
95 Grosvenor Street, 4th Floor
Toronto, ON M7A 1Y8
95 Grosvenor Street, 4th Floor
Toronto, ON M7A 1Y8