Canada’s Finance Minister Jim Flaherty announced late last week that the Canadian government intends to introduce legislation that would prohibit banks from selling financial products that function like annuities.
“Since taking office, this government has taken steps to clarify the separation of banking and insurance activities,” said Flaherty in a statement released by the Department of Finance. “This will ensure that the business of insurance continues to be subject to the appropriate rules and regulations.”
The statement goes on to say that life annuity products fall under the same regulatory charter as insurance companies. Furthermore, under current Canadian law, banks are banned from promoting or selling life annuities, which are considered insurance products.
Yet, according to the Department of Finance, in recent years, some banks “have introduced products that perform the same or similar functions as life annuities.” Such products are not subject to the same regulations as those sold by insurance companies, noted the government agency.
The legislative amendments will be proposed “as soon as possible,” according to the statement. Any new laws would permit the grandfathering of existing products, subject to contract terms and conditions.