Geoff Zochodne | Financial Post

A recent acquisition of American International Group Inc. is now aiming to sell insurance to insurers in Canada.

Bermuda-based Validus Reinsurance Ltd., whose parent company was bought by AIG for US$5.56 billion last year, is eyeing a Canadian branch, according to notices given in the Canada Gazette.

New York-based AIG already operates in Canada through a subsidiary, AIG Insurance Company of Canada, which provides property and casualty insurance. Validus Reinsurance, however, would provide insurance for insurance companies.

“In particular, Validus Reinsurance, Ltd. intends to provide in Canada treaty and facultative reinsurance of commercial property and casualty and specialty risks,” a recent notice said. “All classes of insurance will be limited to the business of reinsurance.”

Validus plans on filing an application with a federal regulator, the Office of the Superintendent of Financial Institutions, for an order to enable it to insure risk in Canada, the notice said. The company’s “chief agency” in Canada will be located in Toronto.

AIG is a century-old insurer that operates in more than 80 countries and jurisdictions. It remains an S&P 100 stock, making it one of the biggest companies in the United States by market value, even after receiving an approximately US$180-billion bailout from the U.S. federal government during the financial crisis.

AIG has since repaid the government. It then branched out again last year by buying Validus Holdings Ltd., saying the acquisition would help it grow profits.

“We look forward to working with the Validus team on the expanded capabilities and value we can deliver to our clients and broker partners,” said Peter Zaffino, AIG’s chief executive officer of general insurance, in a release last July.

More recently, AIG reported a net loss of US$622 million for its quarter ended Dec. 31, 2018. However, its chief executive officer said in February they “continue to expect to achieve an underwriting profit entering 2019 in General Insurance and to reach double digit returns for consolidated AIG in three years.”

AIG did not respond to requests for comment on Monday.

The guideline OSFI uses for foreign insurers intending to set up a branch in Canada says applications for an order to insure typically take at least 12 to 18 months.

“OSFI reviews each application on a case-by-case basis,” a spokesperson said in an email.

Reinsurance has been a topic of interest to OSFI. The regulator released a discussion paper on reinsurance last June that included proposals intended to address certain risks.

“In light of the increasing reliance on reinsurance and the emergence of new and evolving business models related to the use of reinsurance, OSFI must ensure that its reinsurance framework remains appropriate,” the paper stated.

The insurance for insurers “has become increasingly important over time,” said Jeremy Rudin, Canada’s superintendent of financial institutions, during a Q&A session in December.

“I think, with climate change, it will become even more important,” Rudin added, according to a transcript of his remarks. “We hadn’t reviewed our reinsurance framework for a good ten years, so it was more than overdue.”

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