Review flags concerns about money laundering in Canada’s real estate sector

By Jordan Press

THE CANADIAN PRESS

OTTAWA _ An in-depth review of Canada’s anti-money-laundering efforts has uncovered serious concerns that organized crime is using the country’s hot real estate sector to illegally funnel cash.

The report from the Paris-based Financial Action Task Force makes special note of real estate as an area of the economy with a high risk of illicit activity, one of a few weak spots in what the report calls a comprehensive federal regime to combat money laundering and terrorist financing.

The charitable and life insurance industries are also identified in the report as sectors at risk of providing financial help to terrorists and criminals.

Of particular concern are real estate schemes in which a foreign or domestic criminal provides cash to a local buyer, or more sophisticated schemes where loans and mortgages are combined with lawyers’ trust accounts to move money around quietly.

The Canada Revenue Agency is investigating questionable transactions in the Vancouver real estate market, part of a wider study the federal government is doing into ever-rising housing prices there and in Toronto.

The report released today suggests the risk of criminals using real estate to launder money and proceeds of crime is a cross-country issue and not solely focused on Toronto and Vancouver, It says Quebec is another region where there is a risk of abuse.

Agents told reviewers they saw the risk of money laundering as low, pointing out that they don’t handle cash-only deals  the money usually flows through lawyers, banks or mortgage companies.

The report, however, says financial agencies and agents involved in those transactions sometimes do only a cursory review of information to see if the buyer on paper is linked to a criminal or terrorist group.

Brokerage agents relied on their gut feelings to determine if something seemed suspicious, the report says.

It also says relying on lawyers is problematic because their actions on behalf of a client can’t be probed by law enforcement agencies, as the Supreme Court of Canada has held that those transactions are protected by solicitor-client privilege.

“In light of these professionals’ key gatekeeper role, in particular in high-risk sectors and activities such as real-estate transactions and the formation of corporations and trusts, this constitutes a serious impediment to Canada’s efforts to fight (money laundering),” the report says.

A spokesman for the Canadian Real Estate Association, which represents more than 150,000 agents across the country, said its officials are still reviewing the report.

Pierre Leduc said the association provides training for members with regards to requirements to report suspicious transactions, including in-person and online presentations, forms, checklists and other online learning tools.

Finance Minister Bill Morneau’s office has yet to respond to a request for comment.

The report finds that organized crime poses the biggest money laundering threat in Canada, with terrorist financing posing a smaller risk.

Most of the money flows through legally incorporated companies that conduct little or no business, the report says.

Fintrac, the federal agency tasked with combating money laundering and terrorist financing, says that more than 70 per cent of the money laundering cases and just over half of the terrorist financing cases it has dealt with involved legally incorporated companies.

Between 2008 and 2014, the Canada Revenue Agency did about 5,000 audits on charities, identifying 16 that posed national security concerns, eight of which ended with the agency revoking the group’s charitable status.

canada-press

The world, in reinsurance. Who pays for Fort McMurray?

Excerpted article written by Brad Kading | The Globe and Mail

Fires, floods, earthquakes. Once the realm of nightmares or fiction, worst-case natural disasters are increasingly becoming real-life headlines for Canadians. Even while May’s devastating Fort McMurray inferno remains a fresh memory, climate scientists warn of more frequent flooding and wildfires as rainfall patterns change.

The Alberta fire, estimated to have generated insured losses of $3.6-billion, is now listed as Canada’s costliest natural disaster. That more than doubles the previous record of $1.7-billion in insurable damages set just three years ago, also in Alberta, by catastrophic flooding. Moreover, a terrible earthquake, predicted by geologists as inevitable for British Columbia, could set horrible new records if it occurred near Metro Vancouver. The obvious question is, who pays in the aftermath? The simple answer: Consumers pay insurance premiums, insurance companies pay claims and economic losses that are not insured come out of government and public pockets in other ways. Someone has to pay. But invisible to most Canadians is the role international reinsurers play in absorbing such massive losses.

Reinsurance is essentially insurance for insurance companies. A Canadian insurer that looks at its customer accounts and believes it has too much catastrophe exposure compared with its capital buys reinsurance for that share of the risk.

From that corporate need has evolved a specialty business that sees global reinsurers assuming the risk of Canadian fires and floods, then pooling it with U.S. hurricanes, British floods, European windstorms and earthquakes in New Zealand, Chile and Japan. These are all catastrophes in the making, and to a reinsurance actuary, they have some common elements – such as sudden or not-predictable events, or those that have an unpredictable loss size. By combining them on a reinsurer’s balance sheet, potential losses are spread globally, the risk is diversified and capital can cover catastrophes when they occur.

The larger the loss event, the bigger the reinsurance payout. New York’s World Trade Center tragedy was 60-per-cent reinsured; Louisiana’s Hurricane Katrina 40 per cent. The same holds true for Fort McMurray. According to published reports, many Canadian insurers ceded large portions of their wildfire loss to foreign reinsurers – some say as high as 85 per cent.

According to published reports, insurers have now disclosed a total of $2.57-billion in losses. Of that, reinsurers in Bermuda, Germany, Switzerland and the United States are paying the largest shares, with European companies undertaking nearly half, about 47 per cent. Bermuda comes next, covering nearly a quarter – $556-million in payments – of Canada’s wildfire claims.

Why Bermuda? The mid-Atlantic island is just 54 square kilometres, with a population almost exactly mirroring Fort McMurray’s (about 62,000). While tiny, Bermuda is a sophisticated heavyweight in the world of reinsurance, its market rating third-largest after London and New York. Well regulated financially, with tax information exchange agreements in place with Canada and 90 other countries worldwide, Bermuda is home to 15 of the top 40 global reinsurance corporations and boasts a 45-year track record in its commercial claims-paying ability. Notably, its property-catastrophe reinsurance market is now No. 1.

Reinsurance’s economic benefit to Canadians is clear: lower insurance premiums. By spreading catastrophe risk globally, consumer rates are less affected, as the bulk of capital to pay claims after fires and other tragic events is imported from overseas. In this way, it’s the shareholders of reinsurance companies who suffer the losses – not the customers of Canada’s leading insurers.

Insurance industry struggles with increasing costs of natural disasters

By Ian Bickis

THE CANADIAN PRESS

CALGARY _ Canada’s insurance companies, are grappling with an increase in environmental disasters and say property owners most at risk are likely going to have to pay more.

Craig Stewart, vice-president of federal affairs at the Insurance Bureau of Canada, says the industry sees severe weather as a top priority nationally.

“There are clear trends towards a warming atmosphere that have resulted in more significant losses from flooding… and as we’ve seen recently wildfire,” he said.

The industry is still tallying up the cost of Alberta’s Fort McMurray wildfire, but with claims estimated at $3.6 billion, the costliest natural disaster in Canadian history is already hitting insurers.

Joel Baker, president of MSA Research Inc., says this year will likely go down as the worst in decades for Canada’s general insurance sector, which excludes life insurance.

He said that in the first six months of 2016 Canadian insurers reported a $1.08-billion underwriting loss, compared with a $1.05-billion gain for the first six months of 2015.

Much of those losses will, in turn, be covered by reinsurance companies, which provide insurance for the insurance industry itself. But with a clear trend of increased natural catastrophes, insurance companies are looking for ways to better manage the risk.

Ulrich Kadow, head of Canadian operations at insurer Allianz Global Corporate & Specialty, says the industry is working to improve modelling and catastrophe exposure management to deal with the increased risk and volatility.

“The significance of these fires as a result of climate change is huge,” said Kadow.

“We need to make sure that we are on top of all these trends that evolve and develop.”

He said the industry is responding by looking at adjusting pricing, but hyper competition in the industry means companies have been limited in how much they can increase rates.

Kadow says the insurance industry is also being squeezed by low returns on investment, a key pillar in the industry’s financial health.

“It’s a double whammy,” he said. “On the underwriting side investments have been squeezed, and on the investment side the picture isn’t much rosier, either.”

Stewart says the industry has been adapting to lower rates for years, and can sustain a hit like the Fort McMurray wildfire, but longer term there are concerns.

“The industry’s well equipped to handle events such as Fort Mac. We can absorb it in any given year,” he said.

“It’s the cumulative effect of these events that can take a toll, year after year after year.”

He said partnerships with government at all levels is key to reducing future costs of natural disasters, and that IBC has been pushing the federal government to prioritize a national flood strategy as part of the upcoming national climate strategy.

Property owners also need to learn how to protect themselves, whether it’s through fire-resistant shingles or better planning of greenery around the home, while communities also need to plan more for flood and fire mitigation.

“People need to know what their risk is, and they need to be empowered to protect themselves,” said Stewart.

As natural disasters and costs to the industry increase, he says there won’t necessarily be industry-wide rate increases, but companies will have to adjust premiums when they identify areas of greater risk.

“Generally, homeowners will start to pay out of pocket as climate impacts become less of a future and more of a present danger,” he said.

canada-press

Edited for ILSTV.com

No Negligence Where Customer Trips on Overlapping Mats

Reasons for judgement were released today by the BC Supreme Court, Vancouver Registry, dismissing a trip and fall lawsuit where a customer fell on over-lapping mats at a grocery store.

In the recent case (Biason v. Loblaws, Inc) the Plaintiff tripped and fell injuring herself while she walked on overlapping floor mats.  She argued that it was negligent for the store to have these mats overlap each other.  The Court noted that counsel could not point to other cases addressing such a fact pattern but ultimately found there was no negligence.  In dismissing the claim Madam Justice Baker provided the following reasons:

[29]         Mr. Patton testified that he was unaware of any previous incident involving a customer tripping over overlapped mats.  Although there was no direct evidence about the depth of the mats, from the description given, and the appearance of the mats on the recording, they were neither deep nor “plushy”.  The front end of the third mat that overlapped a portion of the rear end of the second mat was not wrinkled or buckled or folded back or lifting up in any unusual fashion.  Part of one mat was simply lying on top of part of another mat.

[30]         There is no evidence that there had been previous accidents due to overlapping mats – the evidence is to the contrary.  There is no evidence that the overlapping of mats was a recognized hazard in the industry.  Other customers had been walking over the mats without incident on the day that Ms. Biason tripped and fell…

[35]         I have read and considered all the other authorities provided by counsel.  Taking the authorities and all of the evidence into account, I have concluded that the plaintiff has failed to establish, on the balance of probabilities, that the placement of the mats in the defendant’s store constituted a failure on the part of the defendant to take reasonable care to ensure that the premises were reasonably safe.  The defendant placed the mats in the entryway to protect customers from a readily apparent and recognizable risk – the risk of slips and fall due to wet floors.  I am of the view that it was not reasonably foreseeable that a customer would fail to lift his or her feet sufficiently while walking to avoid tripping on the edge of one of the mats, even if those mats were slightly overlapping.

[36]         Having found no breach of the standard of care, and therefore no liability on the defendant’s part, Ms. Biason’s action must be dismissed.

Fort McMurray wildfire recovery ‒ do you need answers?

Most insurance claims from the Fort McMurray wildfire – the largest natural disaster in Canadian history – are progressing well. However, Insurance Bureau of Canada (IBC) is aware that a few people are dissatisfied with the decisions that have been made on their claim or with the pace of the recovery process.

Bill Adams, Vice-President, Western and Pacific, IBC, reaffirms the home, car and business insurance industry’s commitment to the residents of Fort McMurray. “We’re here to stay until the job is done,” he said.

Every insurance company that writes policies in Alberta has had extra staff – claims adjusters and customer service representatives – working to help Albertans recover from the fire. In fact, more than 5,000 insurance company personnel have been deployed to work on these claims. “This is an historic undertaking,” Adams said. “It’s inevitable that, in a disaster of this size, some people will not agree with the claims decision. Consumers have appeal options in these situations.”

Consumers have the following options:

  • Ask your claims adjuster for an explanation. If your claim has been declined, you have a right to know why. Ask for a clear explanation, in writing if possible. You can also request to speak with the company’s claims manager.
  • All Alberta-licensed home, car and business insurers have an ombudsperson and a dispute-resolution mechanism in place, including a complaints liaison officer. This information should be available on your insurance company’s website, or consumers can visit the Alberta Superintendent of Insurance, which also has a dispute-resolution process.
  • Call IBC’s Consumer Information Centre at 1-844-2ask-IBC (1-844-227-5422). Consumers can get unbiased advice from an insurance industry professional. You can also email us at fortmacfire@ibc.ca.

If you have exhausted the above options and still have not resolved your complaint, you can use this step:

  • The General Insurance OmbudService (GIO) is an independent, regionally based consumer dispute resolution system for the insurance industry. They provide consumers with a free, independent and impartial process to resolve complaints about home, car or business insurance. Call toll free: 1-877-225-0446.

For more information on insurance, your rights as a consumer and the complaint resolution process please visit ibc.ca.

About Insurance Bureau of Canada
Insurance Bureau of Canada (IBC) is the national industry association representing Canada’s private home, auto and business insurers. Its member companies make up 90% of the property and casualty (P&C) insurance market in Canada. For more than 50 years, IBC has worked with governments across the country to help make affordable home, auto and business insurance available for all Canadians. IBC supports the vision of consumers and governments trusting, valuing and supporting the private P&C insurance industry. It champions key issues and helps educate consumers on how best to protect their homes, cars, businesses and properties.

P&C insurance touches the lives of nearly every Canadian and plays a critical role in keeping businesses safe and the Canadian economy strong. It employs more than 120,000 Canadians, pays $8.2 billion in taxes and has a total premium base of $49 billion.

For media releases and more information, visit IBC’s Media Centre at www.ibc.ca. Follow IBC on Twitter @InsuranceBureau and@IBC_West or like us on Facebook. If you have a question about home, auto or business insurance, contact IBC’s Consumer Information Centre at 1-844-2ask-IBC.

If you require more information, IBC spokespeople are available to discuss the details in this media release.

SOURCE Insurance Bureau of Canada

Severe summer storms in the Southern Prairies cause over $66 million in insured damage

Insurance Bureau of Canada (IBC) reports that severe storms that swept through the Southern Prairies during the third week of July resulted in over $66 million in insured damage according to Catastrophe Indices and Quantification Inc. (CatIQ).

From July 18 – 20, a low pressure system caused heavy rainfall, large hail, high winds, tornadoes, and extreme lightning across the southern regions of Alberta, Saskatchewan, and Manitoba. This system caused significant hail damage in Medicine Hat, AB and caused tornadoes in Saskatchewan and Manitoba. This storm also saw winds of up to 107 km/h in the City of Winnipeg. Outlying areas west of Winnipeg reported winds upwards of 122 km/h.

“This summer has brought storm after storm to the Prairie provinces,” said Bill Adams, Vice-President, Western and Pacific, IBC. “As the traditional storm season begins to wind down, Canadians should take this opportunity to review their insurance policies, make sure they’re adequately covered, and implement a plan for when bad weather strikes.”

Most damage was reported to have occurred in Alberta. Damage to homes and autos in that province, largely due to hail, resulted in close to $52 million in claims. This storm follows a previous system that hit Alberta and Saskatchewan a week earlier which resulted in nearly $65 million in insured damage.

About Insurance Bureau of Canada
Insurance Bureau of Canada (IBC) is the national industry association representing Canada’s private home, auto and business insurers. Its member companies make up 90% of the property and casualty (P&C) insurance market in Canada. For more than 50 years, IBC has worked with governments across the country to help make affordable home, auto and business insurance available for all Canadians. IBC supports the vision of consumers and governments trusting, valuing and supporting the private P&C insurance industry. It champions key issues and helps educate consumers on how best to protect their homes, cars, businesses and properties.

P&C insurance touches the lives of nearly every Canadian and plays a critical role in keeping businesses safe and the Canadian economy strong. It employs more than 120,000 Canadians, pays $8.2 billion in taxes and has a total premium base of $49 billion.

For media releases and more information, visit IBC’s Media Centre at www.ibc.ca. If you have a question about home, auto or business insurance, contact IBC’s Consumer Information Centre at 1-844-2ask-IBC.

About CatIQ
Catastrophe Indices and Quantification Inc. (CatIQ) delivers detailed analytical and meteorological information on Canadian natural and man-made catastrophes. Through its online subscription-based platform, CatIQ combines comprehensive insured loss indices and other related information to better serve the needs of the insurance and reinsurance industries, public sector and other stakeholders. To learn more, visit www.catiq.com.

If you require more information, IBC spokespeople are available to discuss the details in this media release.

SOURCE Insurance Bureau of Canada

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