TORONTO — A group representing the life insurance industry says a decision by the Saskatchewan Court of Appeal will support consumer protection rules that separate banking from insurance.
The Canadian Life and Health Insurance Association says the court found a 2018 regulation prevents life insurance companies from accepting deposits and amounts unrelated to insurance coverage, marking a win in the insurance industry’s fight with investment firms.
In the lawsuit, Mosten Investment LP had argued that Manufacturers Life Insurance Co.’s universal life insurance policy allowed for unlimited deposits and a guaranteed return.
The case caught the attention of prominent short-seller Muddy Waters, which argued in 2018 that a ruling in Mosten’s favour could lead to billions of dollars of losses.
But Manulife says it was successful in arguing that policyholders cannot make unlimited deposits into universal life insurance contracts and that deposits must relate to amounts required to pay the life insurance premium.
Ronald Miller, one the lawyers who represented Mosten, says the firm is reviewing the decision, and is disappointed the court would permit governmental interference into a contract that was issued decades before the new regulations were passed.
Manulife says the legal matter did not have any material impact on the company’s business, and shares of Manulife’s stock rose more than one per cent on Wednesday.
“In the interest of protecting consumers, many other provinces including Ontario, Prince Edward Island, Alberta, New Brunswick and Nova Scotia have introduced legislation to provide similar clarity and reinforce the separation of banking and insurance,” said CLHIA chief executive Stephen Frank in a statement on the ruling, adding that the industry group was pleased with the decision.
This report by The Canadian Press was first published March 10, 2021.
Companies in this story: (TSX:MFC)
The Canadian Press