Canadian Life Settlement Market sep 11

Thank you for joining us!Thursday, September 22nd 2011

12:40PM – 1:00PM

Where is Canada?

Canada (vs USA)

• Population - 30 million (300 million)• Head of state - Queen (President)• Federal leader - Prime Minister ( President)• Capital - Ottawa, Ontario (Washington DC)• Currency - Canadian $ (US $)• High (1 C$ = $1.10 US) - Low (1 C$ = $0.65 US)• Interest rates – similar to US yield curve• Current economy – better than US

Banks /Capital Markets

• Bank of Canada sets interest rates (Fed)• Securities regulators – Provincial ( SEC )• Ottawa trying to establish Federal Regulator• Stock Exchanges – TSX, CNSX ( NYSE, NASDAQ)• 5 large national domestic banks – now own

insurers and stock brokerages• Not allowed to sell insurance in branches

Life Insurance market• 4 large publicly-traded Canadian life insurers • Manulife bought John Hancock• Most demutualized several years ago• Lot of consolidation and exit of foreign insurers • Industry association CLHIA (ACLI)• Agents association CAIFA now Advocis (NAIFA)• Solvency Regulator Federal OSFI (state)• Market Conduct Regulator – Provincial (NAIC)

Ontario• Sec. 115 of Ontario Insurance Act• Illegal to traffic except by a life insurer and its

authorized agent or to solicit for business• Does it apply to US life policies?• FST decision in USI case – NO• Is it legal for Ontario policyholder to approach

entities outside Ontario?• FSCO letter - YES

Ontario

• Is a life settlement a security?• OSC Rule 44 – depends on nature of transaction• Fractionalization would make it a security• Does OSC have the right to examine the books?• 2003 USI court decision - YES• What is the definition of a security?• See 2007 OSC decision in USI case

Ontario investors

• Implications of OSC decision• To sell to general public – prospectus• List on Exchange – RRSP & RESP eligible• Allows liquidity and quarterly reporting• USI tried with AIDS portfolio on TSX Venture• MaxLife Fund set up as a Wyoming corp and went

public on the OTC BB as MXFD

Ontario investors

• Look for Institutional Investors• Ontario Teachers Pension - > $100 m. • Market it as an Alternative Investment class• To use OM need an exemption• Find an Exempt Market Dealer• Look for HNW (accredited) investors• Life Partner approach

Ontario policies• Set up non-profit or government viatical corp.• OHIP is the government health plan• Ontario owns LCBO and casinos• Ontario Feasibility Study started in 1994 under NDP

and completed in 1997 under Conservatives• Canadian Life Line set up in Nova Scotia in 1995• Legal opinion for former Ont. Insurance Superintd.• Certificate of Lending from NS Super. Of Loans • Canadian Life Line Private Bill Pr. 39 in 1996

Ontario policies• Schedule G of Red Tape Reduction Act 2000• Sec. 115 repealed SUBJECT to FSCO regulations• July 01 draft FSCO regulations sent to stakeholders• Based on US regs and only applied to viaticals• Aim to protect policyholders & investors• Exemptions for banks and credit unions• Opposing responses from LISA and CLHIA• Next Ontario election – October 2011

Quebec • French speaking (Anglos can opt for English)• Language police – website must also be in French• Napoleonic Civil Code vs English Common Law• NO trafficking restrictions – but secondary market

never got off the ground – different mentality• Medical records could be in French• Many snowbirds go to Florida, may own US policies• http://www.prosperitylifeinc.com/ (for lives >82)

Maritimes• Nova Scotia, New Brunswick, PEI, Newfoundland• NS and NB – NO trafficking restrictions• NB – bilingual , allows captive insurers• NS - all directors can be NON resident• NS - allows Unlimited Liability Corporations

Nova Scotia

• NSSC considers sale of life policy a securities transaction and buyer must be licensed and have a resident office in Nova Scotia

• Looking at setting up an informal matching service to connect buyers with sellers

• Could be used for US life settlements

Alberta investors• Focused Money in Calgary created a Limited

Partnership and offered private investors a 10% interest rate PAID monthly

• Minimum investment - $5K ; raised $46 m.• RRSP and RESP eligible• Recently stopped paying and received TEMPORARY

Cease & Desist from ASC and website shut down• More details on ASC website

Alberta policies• Has insurance trafficking restriction• Most “American” of Canadian provinces• Consumers Insurance Company set up in 1999

through a Private Act with specific intent of purchasing Canadian policies

• Superintendent questioned by MLAs (see Hansard)• 2 year window to raise $2 m. for insurance license • New Insurance Act removes need for Private Act• $5 m. minimum capital requirement

British Columbia• Magna LS Mutual Fund – almost 3 years• 2010 Vancouver Olympics• Has insurance trafficking restriction• Works closely with Alberta• Encourages captive insurers – low minimum

capital requirement for longevity hedge• Has closed down some viatical schemes (see

BCSC website for details)

Rest of Canada

• Manitoba - Winnipeg

• Saskatchewan – Regina, Saskatoon

• Yukon – Whitehorse

• Nunavut – Iqulait

• Northwest Territories - Yellowknife

Links

• http://www.bankofcanada.ca/en/graphs/currencies.html#us

• http://www.bankofcanada.ca/en/rates/index.html#indicators

• www.clhia.ca

• www.advocis.ca

Links

• www.linkedin.com/in/DanielKahan• For My Profile and other Presentations• For Ontario Feasibility Study• For Canadian Life Line Private Bill• For Consumers Insurance Company • For USI and Focused Money court decisions• For Magna LS Mutual Fund latest returns

Links• Canadian Centre for Elder Law - 2006• 3. Study Paper on Viatical Settlements• In 1999, Blakeman sponsored the Consumers Insurance

Company Act, a private bill designed to create a new insurance company, in compliance with the law that new insurance companies could only be created by acts of the legislature.[9] However, the bill faced some opposition from Blakeman's Liberal colleagues, including Linda Sloan, Hugh MacDonald, and Gary Dickson, who expressed concern that the bill might be a step towards privatized medicine.[9][10] The bill passed.[11] . (from Wikepedia)

Trafficking in life insurance policies prohibited• CanLII - Insurance Act, R.S.O. 1990, c. I.8 • Trafficking in life insurance policies prohibited• 115. Any person, other than an insurer or its duly authorized agent, who

advertises or holds himself, herself or itself out as a purchaser of life insurance policies or of benefits thereunder, or who traffics or trades in life insurance policies for the purpose of procuring the sale, surrender, transfer, assignment, pledge or hypothecation thereof to himself, herself or itself or any other person, is guilty of an offence. R.S.O. 1990, c. I.8, s. 115.

• Note: On a day to be named by proclamation of the Lieutenant Governor, section 115 is repealed by the Statutes of Ontario, 2000, chapter 26, Schedule G, subsection 1 (1) and the following substituted:

• Trafficking in life insurance policies prohibited• 115. Any person who advertises or holds himself, herself or itself out as a

purchaser of life insurance policies or of benefits thereunder, or who traffics or trades in life insurance policies for the purpose of procuring the sale, surrender, transfer, assignment, pledge or hypothecation thereof to himself, herself or itself or any other person, is guilty of an offence.

• See: 2000, c. 26, Sched. G, ss. 1 (1), 2.