(a) issue policies where the liabilities of the society in respect of the policies vary in amount depending on the market value of a fund consisting of a specified group of assets; or

    (b) accept or retain, on the direction of a policyholder or beneficiary, policy dividends or bonuses or policy proceeds that are payable on the surrender or maturity of the policy or on the death of the person whose life is insured, where the liabilities of the society in respect of the amounts accepted or retained vary in amount depending on the market value of a fund consisting of a specified group of assets.

Segregated funds required

(2) A society that issues policies described in paragraph (1)(a) or accepts or retains amounts described in paragraph (1)(b) shall

    (a) maintain separate accounts in respect of those policies or amounts; and

    (b) establish and maintain one or more funds consisting of assets that are segregated from the other assets of the society and that are specified as the assets on the market value of which the liabilities of the society in respect of those policies or amounts depend.

Creation and maintenance of segregated funds

(3) For the purpose of establishing or maintaining a segregated fund required by subsection (2), a society may, subject to the regulations, transfer an amount to the separate account maintained in respect of the segregated fund.

Transfers from segregated funds

(4) A society may, with the approval of the Superintendent, return the current value of an amount transferred under subsection (3) to the account from which the amount was transferred.

Claims against segregated funds

(5) A claim against a segregated fund maintained under subsection (2) under a policy, or for an amount in respect of which the fund is maintained, has priority over any other claim against the assets of that fund, including the claims referred to in section 161 of the Winding-up and Restructuring Act, except to the extent that the payment of that other claim is secured by a security interest in or on a specific, identifiable asset of the segregated fund.

Where fund can satisfy claim

(6) The liability of a society under a policy or for an amount in respect of which a segregated fund is maintained under subsection (2) does not, except to the extent that the assets of the fund are insufficient to satisfy a claim for any minimum amount that the society agrees to pay under the policy or in respect of the amount, give rise to a claim against any assets of the society, other than the assets of that fund.

Where fund cannot satisfy claim

(7) To the extent that the assets of the fund are insufficient to satisfy the liability of a society under a policy or for an amount in respect of which a segregated fund is maintained under subsection (2), that liability gives rise to a claim against the assets of the society, other than the assets of that fund, and that claim has the priority referred to in subsection 161(2) of the Winding-up and Restructuring Act.

Regulations

542.04 (1) The Governor in Council may make regulations limiting the extent to which a society may cause itself to be reinsured against risks undertaken by it.

Regulation may delegate to Superinten-
dent

(2) A regulation made under subsection (1) may provide that the Superintendent may, by order, determine the matters or exercise the discretion that the regulation specifies.

Annuities restriction

542.05 A society may issue annuities in Canada only if it is authorized to insure risks within the class of life insurance.

Residential mortgages restriction

542.06 (1) A society shall not make a loan in Canada on the security of residential property in Canada for the purpose of purchasing, renovating or improving the property, if the amount of the loan, together with the amount then outstanding of any mortgage having an equal or prior claim against the property, would exceed seventy-five per cent of the value of the property at the time of the loan.

Exception

(2) Subsection (1) does not apply in respect of

    (a) a loan made or guaranteed under the National Housing Act or any other Act of Parliament by or under which a different limit on the value of property on the security of which the society may make a loan is established;

    (b) a loan if repayment of the amount of the loan that exceeds the maximum amount set out in subsection (1) is guaranteed or insured by a government agency or private insurer approved by the Superintendent;

    (c) the acquisition by the society from an entity of securities issued or guaranteed by the entity that are secured on any residential property, whether in favour of a trustee or otherwise, or the making of a loan by the society to the entity against the issue of those securities; or

    (d) a loan secured by a mortgage where

      (i) the mortgage is taken back by the society on a property disposed of by the society, including where the disposition is by way of the realization of a security interest, and

      (ii) the mortgage secures payment of an amount payable to the society for the property.

Restriction on security interests

542.07 (1) Subject to subsection (3), a society shall not create a security interest in any property of the society as security for an obligation of the society unless

    (a) the security interest is created in relation to the reinsurance by the society of risks insured by another insurer; or

    (b) the Superintendent has approved in writing the creation of the security interest.

Encumbered property

(2) A society shall notify the Superintendent in writing of any beneficial interest in real and personal property acquired by the society, other than by way of realization, that is subject to a security interest.

Exceptions

(3) Subsection (1) does not apply in respect of security interests created on

    (a) such classes of personal property as the Superintendent may, by order, designate; or

    (b) property having a total value that is less than such amount as the Superintendent may, by order, specify.

Restriction on receivers

542.08 A society shall not grant to a person the right to appoint a receiver or a receiver and manager of the property or business of the society.

Restriction on partnerships

542.09 Except by order of the Superintendent, a society shall not be a general partner in a limited partnership or a partner in any partnership other than a limited partnership.

General restriction

542.1 (1) A society shall not, and shall not permit its prescribed subsidiaries to, enter into any debt obligation, within the meaning assigned to that expression by the regulations, or permit its prescribed subsidiaries to issue any share, other than a common share, if as a result the aggregate of the total debt obligations of the society, determined in the prescribed manner, and the stated capital of the society would exceed the prescribed percentage of the total assets of the society.

Exception

(2) A society need not include in the aggregate amount calculated for the purpose of subsection (1) the value of any debt obligation or the stated capital of any shares if the value of the debt obligation or the stated capital of the shares is included as part of the regulatory capital of the society.

Restriction on guarantees

542.11 (1) A society shall not guarantee on behalf of any person other than itself the payment or repayment of any sum of money unless

    (a) the sum of money is a fixed sum of money with or without interest on it; and

    (b) the person on whose behalf the society has undertaken to guarantee the payment or repayment has an unqualified obligation to reimburse the society for the full amount of the payment or repayment to be guaranteed.

Exception

(2) Paragraph (1)(a) does not apply where the person on whose behalf the society has undertaken to guarantee a payment or repayment is a subsidiary of the society.

Regulations

(3) The Governor in Council may make regulations imposing terms and conditions in respect of guarantees permitted by this section.

Prepayment protected

542.12 (1) A society shall not make a loan to a natural person if the loan would be repayable in Canada and the terms would prohibit prepayment of the money advanced or any instalment of that money before its due date.

Non-appli-
cation of subsection (1)

(2) Subsection (1) does not apply in respect of a loan

    (a) that is secured by a mortgage on real property; or

    (b) that is made for business purposes and the principal amount of which is more than $100,000 or such other amount as may be prescribed.

286. (1) Subsection 544(1) of the French version of the Act is replaced by the following:

Siège

544. (1) La société de secours maintient en permanence un siège au Canada, au lieu indiqué dans son acte constitutif ou ses règlements administratifs.

(2) Section 544 of the Act is amended by adding the following after subsection (2):

Change of head office

(2.1) The supreme governing body of a society may, by resolution passed and approved by at least two-thirds of the votes cast at a meeting, change the address of the head office within the place specified in the society's by-laws.

Notice of change of address

(2.2) If there is a change of address of the head office of a society, the society shall send a notice of the change to the Superintendent within fifteen days after the change.

287. Section 548 of the Act is amended by adding the following after subsection (2):

Copies to Superinten-
dent

(3) Within thirty days after a by-law of a society comes into effect or is amended, the society shall send a copy of the by-law or the amendment to the Superintendent. A society shall send to the Superintendent, within six months after the coming into force of this subsection, its by-laws that are in effect on the coming into force of this subsection.

288. The portion of subsection 549(1) of the Act before paragraph (a) is replaced by the following:

Return

549. (1) Every society shall, each year before June 30 of that year, provide the Superintendent with a return showing

289. Section 550 of the Act is amended by striking out the word ``or'' at the end of paragraph (a), by adding the word ``or'' at the end of paragraph (b) and by adding the following after paragraph (b):

    (c) assets of a segregated fund maintained as required by subsection 542.03(2).

290. (1) Subsection 552(1) of the Act is replaced by the following:

Restriction on substantial investments

552. (1) Subject to subsections (1.1) and (2), no society shall acquire or increase a substantial investment in any entity, other than an entity referred to in section 554 or 555.

Exception - indirect investment

(1.1) A society may acquire or increase a substantial investment in an entity, other than an entity referred to in section 554 or 555, by way of

    (a) an acquisition of control of a body corporate that is engaged in the insurance business and that has a substantial investment in the entity; or

    (b) an acquisition of shares of, or ownership interests in, the entity by

      (i) entities controlled by the society, or

      (ii) a body corporate that is engaged in the insurance business and that is controlled by the society.

(2) The portion of subsection 552(2) of the Act before paragraph (a) is replaced by the following:

Exception - temporary investments, realizations and loan work-outs

(2) A society may acquire or increase a substantial investment in an entity by way of

291. (1) Paragraph 554(1)(a) of the Act is replaced by the following:

    (a) a body corporate that is engaged in the insurance business;

(2) Subsection 554(1) of the Act is amended by adding the following after paragraph (e):

    (e.1) a real property corporation;

(3) Subsection 554(1) of the Act is amended by adding the following after paragraph (g):

    (g.1) a financial holding corporation that does not have a substantial investment in any entity other than in

      (i) a body corporate referred to in this subsection, or

      (ii) any other entity in which a body corporate that is engaged in the insurance business and that is controlled by the financial holding corporation has a substantial investment;

(4) Paragraph 554(2)(b) of the Act is replaced by the following:

    (b) in the case of a body corporate that is engaged in the insurance business or that is described by paragraph (1)(g.1) , the society controls the body corporate or would acquire control of the body corporate by acquiring or increasing the substantial investment .

(5) Section 554 of the Act is amended by adding the following after subsection (2):

Approval for indirect investments

(2.1) For the purpose of paragraph (2)(a), if a society obtains the prior written approval of the Minister for the society to acquire or increase a substantial investment in a body corporate that is engaged in an insurance business and through that acquisition or increase the society indirectly acquires or increases a substantial investment in another body corporate referred to in any of paragraphs (1)(b) to (i), and that indirect acquisition or increase is disclosed in writing to the Minister before that approval is obtained, the society is deemed to have obtained the prior written approval of the Minister for that indirect acquisition or increase.

Other permitted substantial investments

(2.2) Subject to any terms and conditions that may be imposed by the Minister, a society may, with the approval of the Minister, acquire or increase a substantial investment in an entity that is not a body corporate if the activities of the entity are the same as or substantially similar to those of a body corporate referred to in any of paragraphs (1)(b) to (i).

(6) Subsection 554(4) of the Act is repealed.

292. (1) The portion of subsection 558(1) of the Act after paragraph (d) is replaced by the following:

but the society shall, within five years after acquiring the shares or ownership interests, do all things necessary to ensure that the society does not have a substantial investment in any entity referred to in paragraphs (a) to (d).

(2) Subsections 558(2) and (3) of the Act are replaced by the following:

Transitional

(2) Notwithstanding subsection (1), where on September 27, 1990 a former-Act society had an investment in an entity that is a substantial investment within the meaning of section 10 and the society later increases that substantial investment by way of an investment made under subsection (1), the society shall, within five years after increasing the substantial investment, do all things necessary to ensure that its substantial investment in the entity is no greater than it was on September 27, 1990.

Extension

(3) The Superintendent may, in the case of any particular society, extend the period of five years referred to in subsections (1) and (2) for such further period or periods, and on such terms and conditions, as the Superintendent considers necessary.

Exception

(4) Where under subsection (1) a society acquires a substantial investment in an entity that it would otherwise be permitted to acquire or increase under section 554, the society may continue to hold the substantial investment if the approval in writing of the Minister is obtained before the end of the period referred to in subsection (1) or (2), including any extension of it granted under subsection (3).

293. Subsections 559(2) to (4) of the Act are replaced by the following:

Disposition

(2) Where a society acquires a substantial investment in an entity through the realization of a security interest held by the society, the society shall, within five years after the day on which the substantial investment is acquired, do all things necessary to ensure that the society no longer has a substantial investment in the entity.

Transitional

(3) Notwithstanding subsection (2), where on September 27, 1990 a former-Act society had an investment in an entity that is a substantial investment within the meaning of section 10 and the society later increases that substantial investment by way of the realization of a security interest pursuant to subsection (1), the society shall, within five years after increasing the substantial investment, do all things necessary to ensure that its substantial investment in the entity is no greater than it was on September 27, 1990.