TO: MEMBERS OF THE FACILITY ASSOCIATION AGM DRAFT Minutes.pdfFrancois Faucher TD Meloche Monnex Group . James Russell Aviva Canada Inc. Robert Wesseling The Sovereign General Insurance

TO: MEMBERS OF THE FACILITY ASSOCIATION ATTENTION: CHIEF EXECUTIVE OFFICER BULLETIN NO.: F10 - 033 DATE: MAY 17, 2010 SUBJECT: DRAFT MINUTES OF THE ANNUAL GENERAL MEETING Please find attached, for your information, the draft minutes, Chairman’s remarks and President’s remarks from the Facility Association Annual General Meeting held April 8, 2010. David J. Simpson, M.B.A., FCIP President & CEO Attach.

Minutes of the Facility Association Annual General Meeting – April 8, 2010 Page 1 of 3

Facility Association

DRAFT MINUTES OF THE ANNUAL GENERAL MEETING HELD AT THE DELTA CHELSEA HOTEL

TORONTO, ONTARIO ON APRIL 8TH, 2010 1. The President read the notice of meeting dated March 4, 2010 (Bulletin F10-016) and

confirmed the presence of a quorum.

Residual Market Votes represented in person 849 Residual Market Votes represented by proxy 267 Residual Market Total represented (out of 1364 votes) 1116 Ontario RSP Votes represented in person 602

Ontario RSP Votes represented by proxy 155 Ontario RSP Total represented (out of 924 votes) 757

Alberta RSP Votes represented in person 176

Alberta RSP Votes represented by proxy 77 Alberta RSP Total represented (out of 327 votes) 253

New Brunswick RSP Votes represented in person 31

New Brunswick RSP Votes represented by proxy 13 New Brunswick RSP Total represented (out of 63 votes) 44

Nova Scotia RSP Votes represented in person 37 Nova Scotia RSP Votes represented by proxy 16 Nova Scotia RSP Total represented (out of 69 votes) 53 2. On a MOTION made by Mr. Shawn DeSantis, SECONDED by Mr. Gary Quon and

CARRIED, the Minutes of the Facility Association Annual General Meeting held on April 9th 2009, as previously circulated, were approved.

3. THE CHAIRMAN’S REMARKS – ATTACHED 4. THE PRESIDENT’S REMARKS – ATTACHED 5. REPORTS OF THE PROVINCIAL OPERATING COMMITTEES

The written reports were attached to the Agenda. The Chairman noted that not all of the Chairpersons were present, however, their representatives would be responding to questions on their behalf. On MOTION made by Mr. Noel Walpole, SECONDED by Mr. George Kalopsis and CARRIED, the reports were adopted.


6. REPORTS OF THE TECHNICAL COMMITTEES

The reports of the Technical Committees were circulated with the Agenda. The Chairman asked if there were any questions arising from these reports and indicated that representatives of these committees were present to answer any questions. On MOTION made by Mr. Robert Tisdale, SECONDED by Mr. Shawn DeSantis and CARRIED, the reports were adopted.

7. NOMINATING COMMITTEE REPORT

Mr. Gary Quon presented the Nominating Report on behalf of the Nominating Committee. Nominated for election to the Board of Directors by the Insurance Brokers Association of Canada for a two-year term expiring in the year 2012:

Thom C.J. Young Lundgren & Young Insurance Ltd. (Western

Region) Nominated for election to the Board of Directors for a two-year term expiring in the year 2012: Martin Beaulieu Intact Insurance Andrew Cartmell SGI Canada Insurance Services Ltd./Coachman

Insurance Company/Insurance Company of Prince Edward Island

Shawn DeSantis Royal & SunAlliance Insurance Francois Faucher TD Meloche Monnex Group James Russell Aviva Canada Inc. Robert Wesseling The Sovereign General Insurance Company

The continuing members of the Board of Directors with terms expiring in 2011 are: Barbara Bellissimo State Farm Insurance Companies George Kalopsis Echelon General Insurance Company Gary Quon Northbridge Financial Corporation J. Robert Tisdale Pembridge Insurance Jamie Reid AP Reid Insurance (Atlantic Region) Peter Blodgett Darling Insurance (Ontario Region)

Mr. Quon noted that the President is a member of the Board by virtue of his office.


8. ELECTION OF DIRECTORS

On MOTION by Mr. Noel Walpole, SECONDED by Mr. George Kalopsis and CARRIED, IT WAS RESOLVED that nominations be closed. As there were no further nominations, the Chairman directed that a single ballot be cast in favour of those nominated.

9. FINANCIAL STATEMENTS Mr. Doug Gray from the firm of Deloitte & Touche advised that they were presenting an

unqualified opinion with respect to the Financial Statements of the Facility Association Residual Market Segment as at October 31st, 2009, and the Risk Sharing Pools as at October 31st, 2009.

On MOTION made by Mr. Gary Quon, SECONDED by Mr. Bob Tisdale and

CARRIED, all of the above Financial Statements for the fiscal year 2009 as previously circulated were accepted.

10. APPOINTMENT OF AUDITORS

Upon MOTION made by Mr. Shawn DeSantis, SECONDED by Mr. Gary Quon and CARRIED, the firm of Deloitte & Touche was appointed as the auditors for Facility Association for the fiscal year 2010, with terms to be negotiated by the Board of Directors.

11. OTHER BUSINESS

No other business was brought before the meeting. 12. TERMINATION OF MEETING

There being no further business, on MOTION made by Mr. Noel Walpole, SECONDED by Mr. George Kalopsis and CARRIED, IT WAS RESOLVED that the meeting be terminated.

M. Beaulieu Chairman

FA AGM – April 8, 2010 Page 1 of 8 Chairman’s Remarks

CHAIRMAN’S REMARKS

ANNUAL GENERAL MEETING – April 8, 2010

2009 was a year marked by uncertainty and change. In the first quarter

of the year, international equity markets were described by many

commentators as being “priced for Armageddon”. Ontario automobile

claims costs, particularly for Accident Benefits, continued to

deteriorate significantly, and then very near the end of the year, the

Supreme Court took what we believe to be the appropriate view of the

Minor Injury Regulation in Alberta, bring years of product uncertainty

to a close in that province.

Against that backdrop, Canadian automobile residual market volumes

remained remarkably stable and in fact declined in almost all

jurisdictions.

In my remarks today, I would like to provide you with some highlights

of the issues and initiatives the Facility Association Board of Directors,


staff, and volunteer committees have, and are continuing to, address

last year and this.

At the top of that list is the Hearing by the New Brunswick Insurance

Board, or NBIB, into the principle of including a cost of capital

provision in Facility Association rates. Virtually all stakeholders know

that it is essential for market stability and consumer choice for Facility

Association rates to be, in a general way, at the top of the market. It is

difficult, however, to achieve that appropriate market position when

the rate indication is not permitted to include all the cost elements of

the risk transfer. The NBIB recognized that not including a cost of

capital provision in Facility Association rates was, in fact, providing a

subsidy to the higher risk driving element insured through the Facility

Association and rendered a decision allowing the inclusion of a cost of

capital provision in Facility Association rates. New Brunswick is the

second province to allow the inclusion of all cost elements in Facility

Association rates, following Prince Edward Island. We are continuing

to pursue the inclusion of a cost of capital provision in other


jurisdictions. Most recently, the Nova Scotia Utility and Review Board

held a similar hearing to that of the NBIB on March 11th

of this year

and we are hopeful of a similar rational outcome from that Board.

Also in Nova Scotia, 2009 saw us return to a risk classification system

there that is more closely aligned with general industry practice and

that has lead to both a decline in new business applications overall and

a shift in the composition of those applications to a mix more typically

associated with the FARM mechanism.

Sometimes, what does not happen is just as significant as what did

happen, and that might be the appropriate way to view Prince Edward

Island. In the early part of the year there were some who believed a

Risk Sharing Pool was necessary there to accommodate the “Stay Safe

Driver Discount” for inexperienced drivers with clean records.

Throughout the year, however, the industry was able to demonstrate

convincingly the ability to deliver the discount without an RSP.


Last year, at this podium, the past Chair talked about the deterioration

in Ontario Accident Benefit Claims costs, and the President will show

the impact that has had in our results. I am pleased to note the recently

announced reforms that will take effect September 1st contain both

elements of choice and of cost control to the benefit of consumers

generally. Facility Association staff and committees will be working to

ensure we are compliant with the reforms moving forward.

In regulatory relationships, 2009 saw Facility Association Executive

management and the leadership of the Automobile Branch at FSCO

hold a series of four meetings around structured agendas of mutual

interest and concern, and this has lead to perhaps the best level of

shared understanding between our association and the Ontario

regulator in recent memory. We have also taken advantage of the

opportunity to provide input to the Canadian Council of Insurance

Regulators strategic planning process. In our comments, we stressed

the importance of keeping residual market mechanisms small to avoid

destabilizing the competitive market, and highlighted the opportunities


to help ensure those mechanisms remain small by reducing the

restrictions on underwriting and rating currently in place in a number

of the jurisdictions we serve.

From a management and governance perspective, the Facility

Association Board of Directors has tasked management with two

significant initiatives. The first is to embrace a comprehensive

Enterprise Risk Management framework, and we look forward to

seeing that integrated fully into Facility Association management in a

lasting way as the year progresses. The second is a review of the

governance and oversight surrounding actuarial and member reporting

processes. While residual market mechanism results are, by their very

nature, inherently more volatile than those of insurance companies, the

Board of Directors has charged management with, where possible,

reducing the number of “surprises” member companies receive from

the FARM and Risk Sharing Pools.


Other initiatives management will be pursuing throughout the year

include improving member and consumer communications, and an

overall governance review.

Operationally, I am pleased that we were again able to provide our

members with a comprehensive, audited report on the quality of our

internal control environment and I am even more pleased to announce

that the two control objectives identified as being “non-achieved” have

been remediated.

In terms of organizational structure, we have combined the Internal

Audit and Underwriting and Claims Compliance under a single leader,

Colin George, and we are already seeing the benefits of that integrated

approach as Colin has assembled his team.

Before I conclude my remarks, I would like to express special thanks

on behalf of the Board of Directors and indeed all members to two

long-serving Board members who will be leaving the Board as of


today: George Cooke of The Dominion and Noel Walpole of

Economical Mutual. Both George and Noel have served for almost 2

decades, not only as Board members but members of the Executive and

Investment Committees as well. I know I speak for all members of the

Board when I say how deeply impressed I am by the ability of these

gentlemen to set aside their competitive natures and approach the

governance of Facility Association from a true industry perspective.

On behalf of the Board, I wish them all the very best for the future. We

will miss them greatly.

As I begin my second year as Chair, I am looking forward to seeing

through to completion the initiatives I have outlined today, and I would

like to thank my fellow Directors, Facility Association management

and staff, and all of our volunteers for their continued efforts as we

move the work of the Association forward. I look forward to providing

you with the results of our efforts from this podium next year.


I will now turn the podium over to our President, David Simpson, for

his remarks.

Thank you Mr. Chairman. I said last year given the “laggingy y g gg gindicator” nature of residual market volumes that most of uswould be genuinely surprised if volumes did not go up last yearor this. I am very pleased to report we have, so far, genuinereasons to be surprised Because as the Chair mentionedreasons to be surprised. Because, as the Chair mentioned,residual market volumes are stable or declining in almost alljurisdictions.

As is my usual custom, I will take a few minutes to summarizethe financial results and market shares of the residual marketsegment and, where appropriate, Risk Sharing Pool, for eachjurisdiction. The financial results are based on our auditedjfinancial statements for fiscal year 2009. That means they arepresented on an undiscounted basis as at the fiscal year end ofOctober 31, 2009. The market share shown is for privatepassenger ehicles for calendar ear 2009 It is sho n on a

President's Remarks - FA AGM April 8, 2010 1

passenger vehicles for calendar year 2009. It is shown on apreliminary basis as we await finalized industry data.

The market share of the Residual Market segment forThe market share of the Residual Market segment forall jurisdictions combined was 0.5% down marginallyfrom 0.6% in 2008 and 0.7% in 2007.


The combined operating ratio for all jurisdictionsThe combined operating ratio for all jurisdictionscombined improved to 94%. The improvement wasinfluenced significantly by the release of the provisionsfor the challenge to the Minor Injury Regulation, orMIR, in Alberta following the Supreme Court’s decisionon that matter. MIR provisions remain in Prince EdwardIsland, Nova Scotia, and New Brunswick.


M i th h th j i di ti f E t tMoving through the jurisdictions we serve from East to

West, starting in Newfoundland & Labrador we can see

that the market share in that province rose from 2.4% in

2008 3 4% i 2009 h i i ifi2008 to 3.4% in 2009. In some ways that is a significant

increase, on the other hand, as the graph shows, 3.4% is

at the low end of historical norms there.


Th bi d ti ti f N f dl d &The combined operating ratio for Newfoundland &

Labrador came in at exactly 100% and as the graph

shows, the relatively small volumes in this province

l i h l il fi i l l h h hcorrelate with volatile financial results through the

years.


In Nova Scotia, we have seen a steady, and significant,

decline in market share over the last three years. This is the

result of two forces at work: the continued uptake in

volume for the inexperienced driver Risk Sharing Pool and

the implementation on May 1st of last year of a new risk

classification plan for the residual market segment that is,

broadly speaking, aligned with general industry practice.


L t d ti t th l t h iLast year we saw a dramatic, to say the last, change in

the combined ratio, as a prior estimates of the impact of

the product reform of 2003 were replaced with current

d itrend assumptions.

The changes appear exaggerated on a percentage basis

as the impact on prior years with much larger premium

volumes “flow through” to the current fiscal period.


As I mentioned, we saw increased use of the NovaScotia Risk Sharing Pool for inexperienced drivers, withthe market share of that Pool moving up from 2.1 to2.6%.


The Combined Ratio of the Nova Scotia Risk SharingThe Combined Ratio of the Nova Scotia Risk SharingPool showed a similar, but not as dramatic,improvement to the residual market segment for similarreasons.

President's Remarks - FA AGM April 24 2008 9

Our market share in Prince Edward Island in 2009Our market share in Prince Edward Island in 2009stablilized at 2%, which remains an “all time low” forthe province.


The PEI combined ratio improved to 86% and we areThe PEI combined ratio improved to 86% and we aremaintaining a provision for the Challenge to the MinorInjury Regulation there.


In New Brunswick the residual market segment marketIn New Brunswick, the residual market segment marketshare moved up marginally from 1.5 to 1.6%, and it hasbeen remarkably stable the last few years.


The combined ratio in New Brunswick moved up toThe combined ratio in New Brunswick moved up to174, largely due to the inclusion of a provision for achallenge to the Minor Injury Regulation in thatprovince.


The market share for the “First Chance” NewThe market share for the First Chance NewBrunswick Risk Sharing Pool moved up marginallyfrom 2.5 to 2.7% and it seems to have “settled in” ataround 2.5% of the market since 2006.


The combined ratio for the “First Chance” NewThe combined ratio for the First Chance NewBrunswick Risk Sharing Pool deteriorated to 174%, alsoreflecting the inclusion of a provision to reflect thechallenge to the MIR.


The Ontario residual market segment market shareThe Ontario residual market segment market sharemoved down to 0.1% in 2009, matching record lowlevels in a year that was extremely challenging for theindustry in terms of deteriorating claims costs. Itremains to be seen whether the product reformsannounced by government and rate action by voluntarycompanies will prevent a repeat of the 2002-2004period, when our record low volumes were followed bya sudden surge, as can be seen plainly from the graph.


The Ontario Residual Market segment combined ratioThe Ontario Residual Market segment combined ratiodeteriorated further in 2009. We continue to review theprivate passenger rate program semi-annually and havefiled on that basis. Our next private passenger rateincrease is for 12% effective May 1st, followingsignificant increases in March and November of lastyear.


The market share for the Ontario Risk Sharing PoolThe market share for the Ontario Risk Sharing Poolmoved up to 2.7%, its highest level since 1997.


The combined ratio for the Ontario Risk Sharing PoolThe combined ratio for the Ontario Risk Sharing Poolincreased significantly in 2009, reflecting thedeterioration of claims costs across the industrygenerally, especially in Accident Benefits.


In Alberta the Residual Market segment remainedIn Alberta, the Residual Market segment remainedsteady at 0.3% for the fourth year in a row.


The combined ratio for the Alberta Residual MarketThe combined ratio for the Alberta Residual Marketsegment improved significantly, reflecting the release ofthe provision held for the challenge to the Minor InjuryRegulation there following the Supreme Court’sdecision not to hear an appeal on the matter.


The market share of the Alberta Grid Risk Sharing PoolThe market share of the Alberta Grid Risk Sharing Poolcontinued to decline, moving down to 5.2% in 2009.Policies eligible for this Pool are only those policiescapped by the Alberta premium grid.


The combined ratio of the Alberta Grid Risk SharingThe combined ratio of the Alberta Grid Risk SharingPool improved due to the release of the Minor InjuryRegulation challenge provision.


The market share of the Alberta Non Grid Risk SharingThe market share of the Alberta Non-Grid Risk SharingPool, a Risk Sharing Pool for “grey” risks, somewhatanalogous to the Ontario Risk Sharing Pool, declined to2.4% from 2.7%.


Th bi d ti f th Alb t N G id Ri k Sh i P lThe combined ratio of the Alberta Non-Grid Risk Sharing Poolimproved, again largely the result of the release of theprovision held for the MIR challenge.


In the northern territories, we see the usual “mixed bag”of volatile results and market shares.







On behalf of the Board and the staff I would like torecognize the following committee members who havemoved on from their volunteer responsibilities with us sincepthe last Annual General Meeting:

Diane Vincent , Herb Cline and Sheetal Savani of theAccounting Committeeg

Andrew Cartmell and Benny Zhou of the ActuarialCommittee

T G f th R t & R l C itt d thTerry Geroux of the Rates & Rules Committee and theOntario Operating Committee.

Mark Rouleau and Rosalind Staples of the OperatingC itt f Alb t d th T it iCommittee for Alberta and the Territories.

I will truly miss the contributions of George Cooke andNoel Walpole to our Board dialogue. Both of them are truestatesmen, willing and able to take a long-term, broad viewof the issues facing our Association and our industry. I wishthem all the very best for the future.


I would like to recognize publicly two employees who will beretiring in June after many years of dedicated service.Georgette Chan, our Vice President of Operations, will beleaving after 36 years with us Underwriting Auditor Edleaving after 36 years with us. Underwriting Auditor EdPoyner will be leaving us after 11½ years. We will miss themboth very much and I have a high personal regard for theirdedication and loyalty and wish them all the very bestdedication and loyalty and wish them all the very best.

I would like to end my remarks by thanking the Board, theFacility Association staff and our business partners for theirsupport and guidance over the past year.

As always, I enjoyed working with and learning fromeveryone. And, as I always do, I am looking forward to doingeveryone. And, as I always do, I am looking forward to doingmore, and doing it better, in the year ahead.

Mr. Chairman, that concludes my remarks.


Documents

TO: MEMBERS OF THE FACILITY ASSOCIATION AGM DRAFT Minutes.pdfFrancois Faucher TD Meloche Monnex Group . James Russell Aviva Canada Inc. Robert Wesseling The Sovereign General Insurance