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Part III of the Winding‐up and Restructuring Act sets out specific priority distribution schemes for insurance
companies and Canadian branches of foreign insurance companies. 11 In general terms, the order of priorities
is: (i) costs of the liquidation, (ii) eligible employee wages, (iii) claims under insurance policies (including
reinsurance obligations), (iii) ordinary creditor claims, and (iv) post‐liquidation interest. The Winding‐up and
Restructuring Act also allows for the transfer of the assets of the Canadian branch to the liquidator of the non‐
Canadian company, but only with the approval of the federal Superintendent of Financial Institutions.
3. Special Provisions for Winding‐up of Canadian Insurance Companies with Non‐
Canadian Branches
Some Canadian insurance companies carry on business in a non‐Canadian jurisdiction though an
unincorporated branch, which is subject to the regulation of the non‐Canadian jurisdiction (e.g., a ‘port‐ofentry’
state of the United States of America). Typically, the Canadian insurance company will have been
required to deposit assets in the non‐Canadian jurisdiction for the protection of the policyholders and creditors
of the non‐Canadian branch business. Where a Canadian insurance company is ordered to be wound‐up, the
Winding‐up and Restructuring Act requires the Canadian liquidator to take possession or control of all the
company’s assets and distribute them, without drawing any distinction between assets and liabilities within
Canada and those outside Canada. 12 The Act does not distinguish between policyholders and creditors inside
Canada and those outside Canada for the purpose of distributions of the assets in an insolvency. A liquidator
of a Canadian insurance company is therefore required, in the first instance, to carry out its duties for the
benefit of all policyholders and creditors of the company, regardless of their residence or jurisdiction.
However, where a court‐appointed officer in the non‐Canadian branch jurisdiction exercises control over the
assets of the non‐Canadian branch, and does not have a duty to claimants outside that jurisdiction (e.g., those
in Canada), the Winding‐up and Restructuring Act provides a mechanism for the Canadian liquidator to
effectively put the non‐Canadian court officer to an election. 13 If the mechanism is triggered, the non‐Canadian
officer must elect to either (i) transfer the assets in the non‐Canadian branch jurisdiction to the Canadian
liquidator (thereby entitling the non‐Canadian branch policyholders and creditors to participate fully in the
liquidation in Canada), or (ii) to retain the non‐Canadian branch assets, thereby triggering a deemed forfeiture
by the policyholders of the non‐Canadian jurisdiction of any claim to share in the assets in the Canadian estate.
4. Case Law Digest
a. Cross‐border Aspects of the Liquidation of Canadian Insurance Companies
and Canadian Branches of Foreign Insurance Companies
i. Jurisdiction of the Canadian Court
Canada (Attorney‐General) v. Reliance Insurance Company, [2008] O.J. No. 795
(Ontario Superior Court – Commercial List); leave to appeal refused [January 25,
2008 – Ontario Court of Appeal No. M35682]. Once a winding‐up order has
been made, including in respect of a Canadian branch of a foreign insurance
company, the proceedings are governed by the Winding‐up and Restructuring
Act.
Canada (Attorney‐General) v. Reliance Insurance Company, [2008] O.J. No. 795
(Ontario Superior Court – Commercial List); leave to appeal refused [January 25,
2008 – Ontario Court of Appeal No. M35682]. The jurisdiction of the Canadian
court is not defeated because a liquidation order has already been made in the
company’s country of origin. The Canadian court then administers the assets of
the company that are within its jurisdiction.
Kansa General International Insurance Co. (liquidator of) v. Maska U.S. Inc.,
[1998] Q.J. No. 1410 (Quebec Court of Appeal). Whatever assets a foreign
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Winding‐up and Restructuring Act, Part III
Winding‐up and Restructuring Act, section 33.
Winding‐up and Restructuring Act, section 164.