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Good morning.

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On behalf of all teachers, good morning.

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Awesome.

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Thank you very much.

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Good morning, and welcome to our third annual FSRA Exchange event.

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My name is Judy Pfeifer.

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I'm the Chief Public Affairs Officer and I'm honoured to MC today.

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Before we begin, we'd like to do our land acknowledgment.

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Before we begin, it's important to acknowledge the land we are on is the traditional territory

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of many nations, including the Mississaugas of the Credit, the Anishnabeg, the Chippewa, the Haudenosaunee

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and the Wendat peoples and is now home to many diverse First Nations, Inuit and Métis peoples.

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We acknowledge that Toronto is covered by Treaty 13 with the Mississaugas of the Credit

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and the Williams Treaties signed with multiple Mississaugas and Chippewa bands.

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Before we begin

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some housekeeping, I just want to remind everybody this session is being taped.

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We have simultaneous French translation,

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and the most important part,

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we're taking all questions by the app.

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So when you got your registration confirmation, you got a login and a passcode.

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I know, another passcode.

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You can go from this QR code.

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If you take a picture of it, put your camera on it, you see a little yellow thingamajig and you press on it.

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You're going to need to know your email and your passcode, but that's how we're taking questions today.

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So just a reminder, if you've not logged in, you've got some time to do it right now.

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In terms of today's event.

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We will take questions through the website.

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If you're having difficulty logging in or your passcode does not work, if you flag a member of the FSRA team,

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they will come and take your question written down and input it into the conference app.

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So great news today.

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This continues to be our largest FSRA Exchange.

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This year we have over 1,200 people participating.

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Last year you may recall we had 300 people in house.

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Today we have over 640.

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And then we have an additional 600 people online.

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People ask us, why do you do the online feature?

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We do it for two reasons.

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One, doesn't matter where you live in the province,

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you should be able to access our event without having to come to downtown Toronto.

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Second of all, we want our staff who can't come to see the conversation to help them become better regulators.

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So over the course of the morning, we're going to explore some challenges and opportunities

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facing financial services and how we can better protect consumers.

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On the conference website, you can findthe information about all of our speakers.

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In the afternoon, we will break into sector specific workshops.

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And then please join us at 2:30 for our reception.

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This morning we're going to

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start with remarks from our Board Chair.

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Joanne has been the FSRA Board Chair since 2021.

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She comes to FSRA with an accomplished career as President and CEO of Investment

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Funds Institute of Canada, President and CEO of Central Credit Union of Canada,

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and Vice President of the Canadian Bankers Association.

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Joanne.

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Please.

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Thanks, Judy.

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God, there's so many of you here.

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Welcome.

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It is great to see such a large audience.

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And I want to welcome as well those of you who are online.

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So again, thank you for coming,

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but I want to start by

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thanking in particular those of you who are here

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who sit on our Advisory, our Sector Advisory Committees,

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and also our Advisory Panel, our Consumer Advisory Panel.

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And, Laura, I don't know where you are, but,

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I want to thank Laura Tamblyn Watts, the Chair of that Committee.

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You know, all of

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the input we get from the Advisory Committees and in particular

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the Consumer Advisory Committee really strengthens the work we do.

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And it really helps us to understand,

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both sectoral issues and what consumers need.

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So thank you for that.

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So welcome again.

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In the few minutes,

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I've got I'm going to speak with you today.

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I want to come back

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to the theme that I highlighted last year,

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FSRA was given five years ago now.

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FSRA was given the mandate to transition

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into a principles-based regulator, or PBR for short.

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You know, we love our acronyms, so keep that PBR

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principles-based regulation.

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That approach

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drives outcomes, giving consumers choice, fairness and safety

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in the products and services available to them.

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And it allows financial services companies a greater capacity to innovate.

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As Board Chair,

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I've been hearing from people in many of our sectors

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about how we are implementing the principles-based regulation.

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Most of the comments, I'm happy

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to say, have been extremely positive,

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but I also hear concerns.

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Those who are expressing concerns

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believe there's ambiguity in the approach,

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and they are somewhat uncomfortable with the fact that we are moving away

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from the known, standard checklist

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and prescriptive requirements.

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Concern centers around the fact that there isn't clarity

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about how to achieve the outcomes FSRA expects.

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There's also concern that transitioning to principles-based

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regulation is leading FSRA to collect

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more of your information and data.

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Over the next few minutes I will speak to those concerns

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and hopefully leave you with a greater understanding of what we are doing

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and the benefits that we all are going to reap from that approach.

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So while we have

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highlighted FSRA's move to principles-based model,

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a better description

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is that we are moving to a hybrid model.

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A hybrid model is one that seeks to rely mainly on principles

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such as protecting the rights and interests of consumers

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and promoting high standards of business conduct.

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The model will set clear outcomes that we expect

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our regulated sectors will eventually meet.

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But while FSRA

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seeks to, will seek to rely mainly on the principles to support

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the regulatory outcomes

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we've identified, there will always be a need for rules

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under specific circumstances.

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We use the term rules in two senses.

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There are FSRA rules which are generally structured

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in a more principles based and outcomes focused manner.

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And there are existing statutory requirements and regulations

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that contain prescriptive standards, such as the requirement to hold a license.

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Some of our

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rules are more principles-based and some are more prescriptive.

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Therefore, depending on the context and the policy objective.

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For example,

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FSRA has worked closely with regulators across the country to agree on how

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the cost of investing should be calculated

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for segregated funds and mutual funds.

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We will implement this approach in a detailed FSRA rule,

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to enable customers to compare the costs

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of their various investments based on consistent reports.

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That's an example of a prescriptive rule.

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Principles-based regulation

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is founded on a supervisory relationship,

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which is cooperative, collaborative,

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and requires mutual trust.

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As your regulator FSRA won't act unilaterally

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for those who are committed to achieving the identified outcomes.

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We will work to build consensus and understanding.

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We trust, but verify

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using information and data

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that you provide to assess the achievement of your outcomes.

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The exercise benefits both FSRA

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and the regulated entity.

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The insight

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that we get by your data sharing allows FSRA

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to focus on fulfilling its statutory mandate.

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So good regulation, of course, as I've said,

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comes from that data because it provides an understanding

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of the business and service it is regulating.

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So good regulation comes from a regulator

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understanding your business,

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because it allows us to be more proactive and then reactive,

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allowing us to identify potential issues.

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And course correct before something becomes a full blown

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crisis and impacts the stability of the sector or undermines

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the consumer, the confidence of the consumer.

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This is really what PBR is meant to achieve.

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From the regulator's perspective, the ability to focus on the problems that matter.

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Let me give you a couple of examples,

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about that, that will illustrate what I'm talking about.

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We recently completed

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two thematic reviews of the Credit Union sector,

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one on residential mortgage lending and the other on deposit

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taking. A total of 58 Credit

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Unions, pretty much the entire system,

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provided detailed data.

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For many, it required a substantial effort

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and considerable resources to fulfill,

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but it was worth it.

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With higher interest rates, inflationary pressures

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and a resulting housing crisis.

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We found that Credit Unions have not, let me repeat,

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not materially increased lending activity in high-risk mortgages.

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The bottom line, we are not seeing system wide issues

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that should be addressed with more prescriptive Guidance

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or rules.

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The ability

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to access that data in a timely manner allowed FSRA

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to reduce the regulatory burden

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by not imposing additional requirements,

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which would be a solution

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looking for a problem.

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The Credit Union

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data demonstrated that while other information was showing

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that financial institutions were making riskier loans,

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Credit Unions were acting prudently.

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The second thematic review was on Credit Union deposit

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taking. That data helped us understand

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current trends in deposit taking activities,

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and enabled FSRA to identify opportunities

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to enhance deposit taking practices, particularly as they relate to

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periodic self-assessments, internal audit

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efficiency and board oversight.

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These thematic reviews and the data that supported

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them, have allowed us to get an accurate picture of the sector, enabling us

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to develop a regulatory response that is both measured and appropriate.

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An ongoing analysis of that

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data will tell us whether

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our solutions are working, or whether we need to change course.

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By the way, the data

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of these thematic reviews is being shared with the Credit Union sector.

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So it gives the sector,

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the Senior Management and the Board of Directors of each Credit Union,

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information that allows them to better

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manage their operations.

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I'll give you one further example of

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FSRA’s collection analytics in action.

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Our market conduct unit completed a first of its kind

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review of Life and Health Insurance

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Managing General Agencies or MGAs,

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in this case, the acronym as a whole lot easier than Managing

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General Agencies.

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Using the data collected

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our unit discovered that some MGAs

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and their agents were using poor training materials

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and selling complex products

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that were not appropriate for their consumers.

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In fact, some customers were being harmed.

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The investigation resulted

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in enforcement action against two MGAs

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and follow-up with other MGA agents and insurers.

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So with these

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examples, I hope I've clarified the key benefits

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and the promise of a hybrid, principles and rules-based

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regulation model.

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I think that, you know, I think we all think certainly at FSRA

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and the Board, that providing the information

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and data support

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to support our analytics

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is a more effective way of supervision

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than having a team of supervisors

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descending on you, asking questions,

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gathering documents,

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that may or may not tell the story.

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The full story.

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It can lead to less burden for you over time.

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And our discussions will be more focused.

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And our efforts directed to where they matter most.

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In most cases, the information

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and data we're asking for should already exist.

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If it doesn't, a request will create a constructive

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internal dialog about the value of good information and data.

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We believe it's foundational and fundamental to understanding

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your business, particularly as we move into an AI driven world.

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The responsible sharing of information and data will be the cornerstone

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for societal advancement and well informed decisions.

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So in closing, let me summarize the key points I'd like you to take away.

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First,

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consumer and beneficiary

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protection are at the heart of everything we do at FSRA.

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Second,

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we're thinking differently and are fully committed to implementing

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a hybrid principle-based and prescriptive-based

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approach that will give us the right outcomes.

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Third,

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we encourage you to share information

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and data to allow us to better understand your business,

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which will result in better regulatory decisions and outcomes.

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And fourth, as I noted

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about our Advisory, Sectoral Advisory Committees,

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consultation is foundational to FSRA, and we support robust

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dialouge and collaboration across all of our sectors.

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So thanks for being here today

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and continuing that dialog and conversation.

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Consumer protection

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is also a priority of the Government of Ontario,

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and particularly so for the Minister of Finance.

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Since being elected in 2018,

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the Honourable Peter Bethlenfalvy has been a strong advocate

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of improving and strengthening our public service

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and ensuring people from all walks of life have access

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to efficient public services when and where they need them.

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Now, as you know, the Minister is in the height

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in the middle of the budget season and taking time out

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to be with us today, tells you how important he knows each of your sectors

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are to serving the financial needs of consumers, depositors,

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and plan member and plan sponsors and the economy of Ontario.

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It's now my privilege

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to invite the Minister to the stage to say a few words.

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Minister.

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Well, good morning.

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And, thank you, Joanne.

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That was a great, overview.

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Multiple things to think about.

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And, you know, principle-based regulation, consumer,

00:01:32,258 -- 00:01:33,726
data, collaboration.

00:01:33,726 -- 00:01:36,663
You really hit some big themes in my career.

00:01:36,663 -- 00:01:39,532
I spent 15 years in New York and,

00:01:39,532 -- 00:01:42,435
working for TD and Dominion Bond Rating Service.

00:01:42,435 -- 00:01:46,606
And, you know, I saw that overly prescriptive, rules-based

00:01:46,706 -- 00:01:50,843
regulatory system versus Canada's and OFSI's

00:01:50,843 -- 00:01:54,514
principle-based regulation system, really have different

00:01:54,514 -- 00:01:57,617
outcomes in the financial crisis of 2000 and 2009.

00:01:57,617 -- 00:02:02,855
So I really applaud the work of your board, Joanne, and your service

00:02:02,855 -- 00:02:06,859
to FSRA, to Mark White and the team, and all the Board Members

00:02:06,859 -- 00:02:08,795
that are here today.

00:02:08,795 -- 00:02:11,497
You know, folks, this is a new organization, it’s

00:02:11,497 -- 00:02:16,135
still a puppy, having been merged of two other organizations.

00:02:16,135 -- 00:02:17,904
So the amount of progress

00:02:17,904 -- 00:02:21,674
that has been made really in five years, Joanne, is really remarkable.

00:02:21,674 -- 00:02:24,877
And so, I think, a round of applause for FSRA. Would be well

00:02:24,877 -- 00:02:26,579
warranted at this point.

00:02:31,384 -- 00:02:32,118
Now, we do have

00:02:32,118 -- 00:02:35,888
a rule, Joanne, that any acronym is $5 in the jar.

00:02:35,888 -- 00:02:37,256
And I think he broke that rule twice.

00:02:37,256 -- 00:02:40,092
So you owe us ten bucks.

00:02:40,092 -- 00:02:42,862
I do want to thank everyone for being here.

00:02:42,862 -- 00:02:46,966
You represent so much of the vital economic interests,

00:02:46,966 -- 00:02:49,969
financial interests of Ontario, right here in this room.

00:02:50,169 -- 00:02:54,540
Be it, Property and Casualty, be it Life, be it Credit Unions, be

00:02:54,540 -- 00:03:00,479
it Pension, be it Title Protection, you know, a range of industries.

00:03:00,479 -- 00:03:02,481
It's so important that we collaborate.

00:03:02,481 -- 00:03:06,752
I really like that point and share data because we have a common objective

00:03:06,752 -- 00:03:10,656
to have safety and soundness in our financial system, but to move

00:03:10,656 -- 00:03:15,628
forward in a very, complex world that isn't getting any less complex.

00:03:16,562 -- 00:03:20,800
I'm going to have a few remarks here, and I'm gonna frustrate my team

00:03:20,800 -- 00:03:23,836
because I go off script so often and I think I'm about to do it again.

00:03:25,371 -- 00:03:28,207
You know, I think the rapidly changing environment is what I look

00:03:28,207 -- 00:03:30,142
toward real leadership.

00:03:30,142 -- 00:03:33,045
You know, how do we respond to a changing environment,

00:03:33,045 -- 00:03:34,547
a changing economy?

00:03:34,547 -- 00:03:36,882
We know the world is a very complex place.

00:03:36,882 -- 00:03:38,451
And boy, we're seeing complexity

00:03:38,451 -- 00:03:41,821
like we've never seen before, certainly not recently.

00:03:42,521 -- 00:03:46,492
And so the ability for an organization like the Financial Services

00:03:46,492 -- 00:03:50,730
Regulatory Authority—said that to avoid $5, by the way...

00:03:51,697 -- 00:03:53,799
is so critical

00:03:53,799 -- 00:03:56,802
and I know we're going to continue on the provincial side

00:03:57,169 -- 00:04:01,707
to support the organization, to support the work that you do

00:04:02,041 -- 00:04:05,077
and to support the many industries that are represented in this room.

00:04:06,078 -- 00:04:10,149
You know, change is a positive thing, but we have to do smart change.

00:04:10,149 -- 00:04:13,285
And I think, that is what is occurring.

00:04:14,120 -- 00:04:16,455
I can tell you that from, my

00:04:16,455 -- 00:04:19,091
perspective, I continue to work day in, day out.

00:04:19,091 -- 00:04:23,429
You're right, we have a budget that I have to table, honour, before

00:04:23,696 -- 00:04:25,064
March 31st.

00:04:25,064 -- 00:04:29,668
And I can tell you that we continue to invest in a responsible

00:04:30,369 -- 00:04:33,138
fiscal plan and a path to balance.

00:04:33,138 -- 00:04:36,408
I think that's really important that we don't lose sight.

00:04:36,408 -- 00:04:40,446
That, you know, the more debts and deficits we rack up, we're just

00:04:41,247 -- 00:04:43,582
burdening the next generation.

00:04:43,582 -- 00:04:46,619
And so intergenerational issues are really big

00:04:46,619 -- 00:04:49,655
as we think about how we manage the fiscal policy.

00:04:50,322 -- 00:04:51,724
And I can tell you that,

00:04:53,392 -- 00:04:54,126
the environment

00:04:54,126 -- 00:04:57,463
that we're in, excuse me; high inflation coming down

00:04:57,863 -- 00:05:01,367
2.9% in the last print, headline inflation

00:05:01,767 -- 00:05:04,703
2.7%, actually in Ontario,

00:05:04,703 -- 00:05:08,207
is directionally positive, is still very high and many, many people

00:05:08,741 -- 00:05:11,744
in this province feel like we're in a deep recession.

00:05:12,278 -- 00:05:14,747
You know, many of us are fortunate, many are fortunate.

00:05:14,747 -- 00:05:17,916
But many, you know, to be able to

00:05:19,084 -- 00:05:23,522
afford the food, the cost of food, the cost of rent, the cost of a mortgage

00:05:23,522 -- 00:05:24,890
that's rolling over,

00:05:24,890 -- 00:05:27,926
the cost of day-to-day life is hurting many, many people.

00:05:27,926 -- 00:05:28,527
And in government

00:05:28,527 -- 00:05:32,431
we have to be very mindful of that in the economy

00:05:32,431 -- 00:05:35,367
and the economic environment that we're in.

00:05:35,367 -- 00:05:38,370
Today, I can say that the government

00:05:38,470 -- 00:05:42,741
continues to invest prudently and responsibly

00:05:43,442 -- 00:05:45,878
to build a strong province

00:05:45,878 -- 00:05:49,915
while staying on track to balance the budget.

00:05:49,915 -- 00:05:52,017
Ontario's labour market

00:05:52,017 -- 00:05:56,855
is showing strong 2023 results overall,

00:05:56,855 -- 00:05:59,858
but it has recently shown signs of reflection.

00:06:01,226 -- 00:06:04,463
And despite ongoing challenges,

00:06:04,463 -- 00:06:09,768
such as high Bank of Canada interest rates and inflationary pressure,

00:06:09,802 -- 00:06:14,039
Ontario's economy remains resilient,

00:06:14,039 -- 00:06:19,077
and is expected to continue to grow in 2024

00:06:19,311 -- 00:06:23,649
just as it did last year.

00:06:23,649 -- 00:06:25,350
You know from day one,

00:06:25,350 -- 00:06:28,120
our government made a promise to the people and stakeholders

00:06:28,120 -- 00:06:33,392
of Ontario to give, to govern in a way that is responsible and transparent.

00:06:33,392 -- 00:06:37,229
Joanne, you talked about collaboration and sharing data,

00:06:37,229 -- 00:06:41,366
and our government feels very strongly about data and using data.

00:06:41,366 -- 00:06:44,202
And if you can't measure things, you can't manage them.

00:06:44,202 -- 00:06:45,304
And we have a lot to do.

00:06:45,304 -- 00:06:47,439
You know, we are very much

00:06:47,439 -- 00:06:50,776
Silicon Valley North here in Canada and particularly in Ontario.

00:06:51,243 -- 00:06:54,880
We have a great artificial intelligence, great data

00:06:54,880 -- 00:06:58,717
and digital capabilities right here in Ontario, right here in Toronto.

00:06:58,717 -- 00:07:02,587
Not far from here, Waterloo and Ottawa and many other parts of Ontario.

00:07:03,021 -- 00:07:06,058
So we have to use that as a competitive advantage as we move forward.

00:07:06,725 -- 00:07:08,527
And I feel strongly about that.

00:07:08,527 -- 00:07:11,863
You know, government is a very complex organization.

00:07:12,464 -- 00:07:15,967
And right across the street from government is the private sector.

00:07:16,535 -- 00:07:19,805
And right across the street to the west is academia, represented

00:07:19,805 -- 00:07:20,839
by the University of Toronto

00:07:20,839 -- 00:07:23,842
and all the great colleges and universities that we have.

00:07:24,009 -- 00:07:27,012
And in just a little while,

00:07:27,279 -- 00:07:30,282
some private benefactors donated

00:07:30,482 -- 00:07:33,885
$100 million to build the new artificial intelligence

00:07:34,720 -- 00:07:38,757
office right across from my office in Frost, up at Queen's Park.

00:07:38,757 -- 00:07:42,194
So my view now is blocked by an artificial intelligence

00:07:42,728 -- 00:07:45,297
building, and I think that's a good thing.

00:07:45,297 -- 00:07:48,033
I think that's a good thing, because Ontario

00:07:48,033 -- 00:07:51,369
and Canada have such great competitive advantages.

00:07:51,803 -- 00:07:54,606
You know, we're able to work collaboratively across

00:07:54,606 -- 00:07:58,343
government, public sector, private sector, academia to get better

00:07:58,343 -- 00:08:01,346
outcomes for the people of Ontario and for Canada.

00:08:01,580 -- 00:08:03,715
So know that we will continue in that regard.

00:08:05,183 -- 00:08:05,717
You know, I do

00:08:05,717 -- 00:08:09,187
know that, I will talk about a couple of other things right now.

00:08:09,187 -- 00:08:12,190
One is that, you know, I'm touched on how

00:08:13,158 -- 00:08:15,460
the environment is very difficult for people.

00:08:15,460 -- 00:08:18,797
And as you serve your clients, many of you serve clients in this room.

00:08:19,531 -- 00:08:22,267
You know, remember that times are tough,

00:08:22,267 -- 00:08:24,035
that we're looking at ways to put more

00:08:24,035 -- 00:08:27,906
money back in people's pockets to make life a little bit affordable.

00:08:27,906 -- 00:08:29,674
We've cut the gas tax, for example.

00:08:29,674 -- 00:08:33,011
We've indexed a number of social welfare programs to inflation.

00:08:33,011 -- 00:08:35,814
First time that's ever been done by any government.

00:08:35,814 -- 00:08:40,619
You know, we continue to find ways to reduce fees, like dropping the

00:08:40,719 -- 00:08:45,657
license plate stickers that took money out of people's pockets.

00:08:45,657 -- 00:08:47,158
And we'll continue in that regard.

00:08:48,326 -- 00:08:50,695
I can say to you today

00:08:50,695 -- 00:08:53,565
that our government understands

00:08:53,565 -- 00:08:55,533
that people already

00:08:55,533 -- 00:08:58,503
have to be very careful with how they spend

00:08:58,503 -- 00:09:00,805
their hard-earned money.

00:09:00,805 -- 00:09:03,608
And that's why I will continue that work.

00:09:03,608 -- 00:09:07,245
I do want to talk about another area that our vision

00:09:07,245 -- 00:09:10,248
for Ontario is so paramount.

00:09:11,082 -- 00:09:14,019
And that is infrastructure and housing.

00:09:14,019 -- 00:09:17,889
You know, this, this great province has attracted so many people.

00:09:17,889 -- 00:09:21,826
If you're other than indigenous, everyone came from somewhere else.

00:09:22,694 -- 00:09:25,830
My parents came from war torn Hungary, and I met,

00:09:26,197 -- 00:09:29,834
Sandor, you're in this room somewhere who came from Budapest six years ago.

00:09:29,834 -- 00:09:34,072
Now works at FSRA, works in your supervisor area for Credit Unions.

00:09:34,606 -- 00:09:37,575
You know, as I travel around the world,

00:09:37,575 -- 00:09:42,280
one thing I keep hearing over and over again is how they view Canada.

00:09:42,881 -- 00:09:47,118
And they view Canada as a sea of stability, a beacon of hope

00:09:47,118 -- 00:09:51,356
for people, a beacon of freedom and democracy in a very troubled world.

00:09:52,090 -- 00:09:55,326
And that's why I think it's so critical that our government

00:09:55,326 -- 00:10:00,598
and our policies continue to focus on putting in place

00:10:01,366 -- 00:10:04,035
the conditions to grow,

00:10:04,035 -- 00:10:07,038
whether people are here or come from somewhere else.

00:10:07,405 -- 00:10:08,306
And what does that mean?

00:10:09,307 -- 00:10:09,941
That means that we

00:10:09,941 -- 00:10:12,944
have to work on housing and we have been.

00:10:13,011 -- 00:10:15,547
You know, a whole generation is finding it

00:10:15,547 -- 00:10:18,550
impossible to own a house.

00:10:18,616 -- 00:10:20,952
You know, when my parents came

00:10:20,952 -- 00:10:24,355
and I wasn't born yet. They met here in Toronto.

00:10:25,156 -- 00:10:29,494
My first experience was living in Montreal where

00:10:30,562 -- 00:10:33,831
my grandparents lived with three of my great grandparents.

00:10:34,766 -- 00:10:36,968
Plus, my mother's brother.

00:10:36,968 -- 00:10:39,971
You know, multi-generational in one house but they had a house.

00:10:41,806 -- 00:10:45,310
You know, my granddad and my father and my mother were able to find jobs.

00:10:45,710 -- 00:10:47,745
They were able to grow a family.

00:10:47,745 -- 00:10:49,647
They felt safe in this country.

00:10:49,647 -- 00:10:52,350
So I think we have to continue collectively

00:10:52,350 -- 00:10:55,486
supporting the environment to build more infrastructure, houses,

00:10:55,953 -- 00:11:00,058
the social infrastructure, health care, home care, long-term care,

00:11:00,758 -- 00:11:03,728
hospital beds, mental health and addiction.

00:11:04,028 -- 00:11:07,665
These are all important part of our plan to build Ontario.

00:11:08,132 -- 00:11:09,934
We have to build more roads.

00:11:09,934 -- 00:11:13,471
You have to build more subways and transit, public transit.

00:11:13,471 -- 00:11:14,272
That's what we're doing.

00:11:15,373 -- 00:11:17,842
And we're doing it all simultaneously.

00:11:17,842 -- 00:11:21,879
Because if we are going to continue to be the beacon of hope

00:11:22,513 -- 00:11:25,917
in the world and one of the great, great democracies of the world

00:11:25,917 -- 00:11:29,087
that Canada is, we got to be ready for everybody coming here.

00:11:29,420 -- 00:11:32,423
And that's a challenge that all of us in this room.

00:11:32,590 -- 00:11:36,461
My ask of all of you in this room is to continue working day in and day out

00:11:36,928 -- 00:11:39,931
to support this great province in the way you do.

00:11:40,898 -- 00:11:44,402
Now, I'd like to stay longer, but apparently I have to go back

00:11:44,402 -- 00:11:48,005
to Queen's Park and take some tough questions in question period.

00:11:48,406 -- 00:11:52,310
But before I do, I'm going to hop over to the TSX

00:11:52,910 -- 00:11:55,780
and I'm going to help open up the day and ring the bell.

00:11:55,780 -- 00:11:58,216
And the reason that I'm doing that is of course

00:11:58,216 -- 00:12:01,619
the Property and Developers Association of Canada Week.

00:12:02,486 -- 00:12:03,721
And why do I say all that?

00:12:03,721 -- 00:12:06,791
Because we're also very focused on the environment.

00:12:07,658 -- 00:12:10,995
We're very focused on building electric vehicles and the whole supply

00:12:10,995 -- 00:12:13,397
chain, including the critical minerals in the north

00:12:13,397 -- 00:12:17,201
right through the battery manufacturing and the assembly of electric vehicles.

00:12:18,236 -- 00:12:18,970
And it's important

00:12:18,970 -- 00:12:22,440
that we also focus on the environment

00:12:22,873 -- 00:12:26,811
as we navigate these uncertain waters and climate change.

00:12:27,178 -- 00:12:30,381
Part of the insurance I spoke with, Paul, I don't know where you are,

00:12:30,381 -- 00:12:35,319
but you're right there, talking about, catastrophic insurance.

00:12:35,953 -- 00:12:37,688
These things all intersect.

00:12:37,688 -- 00:12:41,859
And I would ask each one of you in your role, at whether you're at FSRA,

00:12:42,393 -- 00:12:46,030
and whether you're in the Pension industry, the Credit Union industry,

00:12:46,030 -- 00:12:49,100
the Life industry, the P&C industry, all the other industries that

00:12:49,100 -- 00:12:52,103
you represent here today, you're playing a role

00:12:53,104 -- 00:12:54,338
on building Ontario.

00:12:54,338 -- 00:12:58,709
You're playing a role on making and continuing to make Ontario and Canada

00:12:58,709 -- 00:13:01,145
the greatest country on the face of the earth.

00:13:01,145 -- 00:13:02,513
Thank you and have a great conference.

00:00:05,038 -- 00:00:06,239
Now I'd like to invite

00:00:06,239 -- 00:00:09,609
Mark White, FSRA CEO, to come to the stage,

00:00:10,043 -- 00:00:13,680
and he will be taking questions from Clare O'Hara, an award winning journalist

00:00:13,913 -- 00:00:17,917
for the Globe and Mail, who covers wealth management and insurance.

00:00:18,718 -- 00:00:21,755
Mark will be touching on a range of topics,

00:00:21,755 -- 00:00:25,458
and Mark always wants to have real hard questions.

00:00:25,959 -- 00:00:28,995
And then afterwards, he'll be taking questions from the audience.

00:00:28,995 -- 00:00:34,834
Just a reminder, if you've not logged in or screenshot, please do so now.

00:00:35,235 -- 00:00:38,805
And if you're not able to raise your handsFSRA staff will come

00:00:38,805 -- 00:00:41,808
and collect it over to Mark and Clare.

00:00:42,842 -- 00:00:43,443
Good morning.

00:00:43,443 -- 00:00:44,043
Good morning, Clare.

00:00:44,043 -- 00:00:44,811
How are you today?

00:00:44,811 -- 00:00:45,278
Great.

00:00:45,278 -- 00:00:48,615
And it's great to be back in person.

00:00:48,615 -- 00:00:52,151
I think we chatted a couple of years ago for the exchange and it was online,

00:00:52,685 -- 00:00:54,954
so it's fabulous to see so many faces.

00:00:54,954 -- 00:00:57,123
And welcome to everyone online as well.

00:00:57,123 -- 00:00:58,992
Haven't forgotten about you.

00:00:58,992 -- 00:01:01,327
So as you can

00:01:01,327 -- 00:01:04,330
imagine, we have a lot of sectors to hit, a lot of questions.

00:01:04,564 -- 00:01:05,532
But I did want to start off,

00:01:05,532 -- 00:01:08,534
Mark, you know, FSRA talks a lot about protecting consumers

00:01:08,668 -- 00:01:11,571
across many different sectors in the financial services.

00:01:11,571 -- 00:01:13,773
So since last year, you know, what has FSRA done

00:01:13,773 -- 00:01:17,176
that shows its commitment to hearingand acting on consumer issues?

00:01:17,176 -- 00:01:19,612
And how do you measure that success?

00:01:19,612 -- 00:01:22,615
Well, it's always difficult to measure your success with respect to consumers,

00:01:22,615 -- 00:01:27,053
but it has been since day one an important element, as Joanne

00:01:27,053 -- 00:01:30,757
said, it really is our primary object to consumer protection.

00:01:31,190 -- 00:01:32,992
And so we've continued to build on things

00:01:32,992 -- 00:01:36,596
that work for us, our Consumer Office,the Consumer Advisory Panel.

00:01:36,829 -- 00:01:40,166
Laura Tamblyn Watts the chair is here, and some of the members of Consumer

00:01:40,166 -- 00:01:43,803
Advisory Panel that continue to give us real insights and we resource them

00:01:44,037 -- 00:01:47,173
so that they're able to provide their own analysis and submissions.

00:01:47,173 -- 00:01:50,176
And I attend their meetings because I always learn from that.

00:01:50,243 -- 00:01:52,912
We continue to do things like Financial Literacy Day,

00:01:52,912 -- 00:01:55,882
Pension Awareness Day, our second Pension Awareness Day.

00:01:55,882 -- 00:01:59,685
Was this a couple of weeks ago, big successes

00:02:00,186 -- 00:02:02,855
and we've actually been realizing that we need to dig deeper.

00:02:02,855 -- 00:02:05,858
So we've been doing research on important consumer issues

00:02:06,325 -- 00:02:10,096
and that research manifests itself in how we regulate.

00:02:10,096 -- 00:02:14,267
and so auto and financial advisors andplanners, we've done research

00:02:14,567 -- 00:02:17,570
that's changing how we're supervising those sectors.

00:02:18,004 -- 00:02:21,007
In the area of consumers generally,

00:02:21,107 -- 00:02:24,777
we've identified that vulnerable consumers are at greater risk

00:02:25,178 -- 00:02:28,648
and that their relationship with their financial services providers is

00:02:28,948 -- 00:02:31,284
not one of trust and confidence.

00:02:31,284 -- 00:02:35,521
And so we've now published a planfor consultation about how we can deal

00:02:36,022 -- 00:02:39,725
with the vulnerable consumers and support them so that they feel

00:02:39,725 -- 00:02:43,162
more at ease and comfortable in dealing with institutions.

00:02:43,729 -- 00:02:48,067
Another area we've done research, really quite cutting edge on Mortgage Brokerage

00:02:48,434 -- 00:02:52,638
and we've identified there, particularlywith respect to private mortgages,

00:02:53,005 -- 00:02:54,874
that consumers need to know

00:02:54,874 -- 00:02:58,477
what their options are and what it means when they get into a private mortgage,

00:02:58,711 -- 00:03:01,714
because it's not the same as dealing with a financial institution.

00:03:01,914 -- 00:03:05,284
We've also done things like trying to inform consumers now

00:03:05,284 -- 00:03:08,521
not only on mortgages but something like financial advisors.

00:03:08,521 -- 00:03:11,524
We've just launched the what we call credential check,

00:03:11,757 -- 00:03:14,794
and that allows someone who wantsto know whether advisor or planner

00:03:15,127 -- 00:03:17,997
is actually who they are, what are their credentials.

00:03:17,997 -- 00:03:21,600
They can go to one place and basically get that information right away,

00:03:23,369 -- 00:03:24,603
other quick things

00:03:24,603 -- 00:03:28,574
we've now have because of governmentchanges that Minister Bethlenfalvy

00:03:28,574 -- 00:03:33,879
put through, we now have a fund from the monetary penalties we levy

00:03:34,347 -- 00:03:37,650
that we can use to benefit the sectors and consumers.

00:03:38,050 -- 00:03:41,887
We recently closed our first round of submissions and we're evaluating them

00:03:42,154 -- 00:03:45,057
and that will give us other ways that we can help consumers

00:03:45,057 -- 00:03:48,027
basically furthering research and education.

00:03:48,027 -- 00:03:51,497
And finally, I'll just talk for a moment about one of our great supervisory

00:03:51,497 -- 00:03:55,868
successes, the Take All Comers, which is an auto insurance issue,

00:03:56,302 -- 00:03:59,739
where auto insurers are obligated to take

00:03:59,739 -- 00:04:02,408
every customer who comes which meets the requirements.

00:04:02,408 -- 00:04:05,010
And so that has been a tremendous success for us as well.

00:04:05,010 -- 00:04:08,013
So there's been an awful lot going on at FSRA over the last year,

00:04:08,013 -- 00:04:09,749
all with the consumers in mind.

00:04:09,749 -- 00:04:10,416
Great.

00:04:10,416 -- 00:04:12,818
And you just jumped into my next section.

00:04:12,818 -- 00:04:14,753
So I definitely want to touch upon Auto Insurance.

00:04:14,753 -- 00:04:18,124
It's a section that I've started to pay more close

00:04:18,124 -- 00:04:21,760
attention to, and that's around the rising cost of auto insurance.

00:04:21,760 -- 00:04:27,166
In Ontario, car insurance rates have jumped by about 12% in the last 18 months.

00:04:27,433 -- 00:04:32,972
So that means in Ontario right now, the average premium is about $1,744.

00:04:33,272 -- 00:04:37,142
That's up from $1,555 at the end of 2021.

00:04:37,877 -- 00:04:39,945
So what is FSRA doing to make things better?

00:04:39,945 -- 00:04:41,280
And last year at the Exchange,

00:04:41,280 -- 00:04:44,350
you mentioned things around working to refine rate settings.

00:04:44,617 -- 00:04:47,353
So maybe you can touch upon the outlook for that.

00:04:47,353 -- 00:04:48,654
The rates.

00:04:48,654 -- 00:04:51,190
Yeah, I mean, costs are going up

00:04:51,190 -- 00:04:54,560
across the board, but in auto insurance, the rate of inflation

00:04:54,593 -- 00:04:58,330
is higher than other goods and services, and that's a statistical fact.

00:04:58,864 -- 00:05:01,734
Last couple of years, part of it is increased driving,

00:05:01,734 -- 00:05:04,703
but there's also basically even interest rates

00:05:04,703 -- 00:05:08,440
also affect costs in the auto sector, even in the longer term.

00:05:08,440 -- 00:05:12,011
If you look over the last, say, five years, theft has gone up.

00:05:12,378 -- 00:05:15,914
Vehicles are more expensive. Parts and labor costs more.

00:05:16,115 -- 00:05:16,982
Even rental car

00:05:16,982 -- 00:05:20,686
costs are statistically more expensive now than they were five years ago.

00:05:21,153 -- 00:05:25,424
So you talked about Ontario being up 12%, but in other jurisdictions

00:05:25,724 -- 00:05:30,329
it's up 32.9% in Québec over the last 12 months on preliminary data,

00:05:30,329 -- 00:05:35,768
25% of the Atlantic provinces and 21% in Alberta.

00:05:35,934 -- 00:05:37,469
I'm sorry, those are the five year numbers.

00:05:37,469 -- 00:05:41,373
So 32% Québec, 25% Atlantic,

00:05:41,540 -- 00:05:44,543
21% Alberta versus Ontario

00:05:44,843 -- 00:05:47,846
being up 12% in the last

00:05:48,480 -- 00:05:52,918
2023 numbers, which is preliminary, but it's still instructive.

00:05:52,918 -- 00:05:56,021
Québec was up 12.4%, Atlantic up

00:05:56,121 -- 00:05:59,291
10%, Ontario up 8%.

00:05:59,858 -- 00:06:04,830
Alberta, which actually capped its rate increases, was up 7.6%.

00:06:05,297 -- 00:06:08,901
So when I look at that, I think Ontario is actually doing both in the last year

00:06:09,201 -- 00:06:12,271
and the five years leading up to that, actually doing remarkably

00:06:12,271 -- 00:06:16,208
well because we have even greater cost pressures in many respects.

00:06:17,276 -- 00:06:20,279
We are going through a transformation and you alluded to this,

00:06:20,579 -- 00:06:23,949
it's about our rate setting and underwriting reform.

00:06:24,416 -- 00:06:27,686
And we realize that we've been in the business of approving rates

00:06:27,920 -- 00:06:31,356
instead of in the business of managing markets and consumer interests.

00:06:31,857 -- 00:06:35,294
And so what we're looking at doing is empowering consumers

00:06:35,827 -- 00:06:39,097
through making sure that insurers understand their obligation

00:06:39,097 -- 00:06:43,268
to be treating consumers fairly as well as

00:06:44,303 -- 00:06:45,437
get feedback.

00:06:45,437 -- 00:06:49,775
We want to try this as well as can you still hear me back there?

00:06:50,242 -- 00:06:54,846
But as well as making sure that insurers are aligned

00:06:54,846 -- 00:06:57,849
so that they have their systems and processes

00:06:58,183 -- 00:07:01,353
really focused on providing the best product

00:07:01,353 -- 00:07:03,488
that they can for consumers that will make sure

00:07:03,488 -- 00:07:06,525
they treat them fairly through their rates and underwriting processes.

00:07:07,259 -- 00:07:09,995
And particularly we're looking at giving consumers

00:07:09,995 -- 00:07:14,633
transparency through technology so that they'll be able to ease

00:07:14,633 -- 00:07:16,034
the burden of rate searching

00:07:16,034 -- 00:07:19,037
and make sure that they're getting the best rates which are available to them.

00:07:19,604 -- 00:07:25,210
In the end, a healthy and dynamic, competitive but regulated and supervised

00:07:25,210 -- 00:07:28,814
by FSRA market is the best alternative to keep rates down.

00:07:30,048 -- 00:07:33,018
So I want to touch upon one more thing with auto insurers.

00:07:33,018 -- 00:07:35,120
We're going to come back to fraud if we have time.

00:07:35,120 -- 00:07:36,922
But territory ratings, you know,

00:07:36,922 -- 00:07:39,424
this is also something we've talked about in previous years,

00:07:39,424 -- 00:07:40,659
and this is when someone goes to

00:07:40,659 -- 00:07:44,396
price out their auto insurance companies, look at a lot of different factors

00:07:44,396 -- 00:07:48,300
or age, gender, driving records, but they're also looking about where you live.

00:07:48,600 -- 00:07:51,670
And this is also known as postcode discrimination.

00:07:51,670 -- 00:07:54,072
And we know that many in the industry have expressed

00:07:54,072 -- 00:07:57,042
a lot of concern over postal code discrimination.

00:07:57,042 -- 00:08:01,713
And FSRA recently opened a Test and Learn Environment, allows insurers

00:08:01,713 -- 00:08:05,183
to examine ideas and innovate around the topic of territory rating.

00:08:05,450 -- 00:08:08,753
But why not just ban territory rating altogether?

00:08:08,987 -- 00:08:10,188
Isn't it just unfair?

00:08:11,156 -- 00:08:13,859
Well, actually, it's not unfair.

00:08:13,859 -- 00:08:16,528
Location is one of the primary determinants

00:08:16,528 -- 00:08:19,531
of your risk as an insured driver,

00:08:20,332 -- 00:08:23,668
your risk of theft where you drive most frequently,

00:08:23,668 -- 00:08:26,738
the density of the traffic, how good the roads are.

00:08:26,905 -- 00:08:29,474
That is all determined by where you live.

00:08:29,474 -- 00:08:33,645
And so to take geography out would mean that we would actually increase

00:08:33,879 -- 00:08:39,317
cross subsidization and we'd have rates that are less fair for many consumers.

00:08:40,118 -- 00:08:43,955
So it is the problem is, is that territories

00:08:43,955 -- 00:08:47,158
the way they were constructed based on our predecessor

00:08:47,692 -- 00:08:50,829
many years ago, 2005, they just took postal codes.

00:08:51,329 -- 00:08:53,331
And what happened is now people move

00:08:53,331 -- 00:08:57,068
literally across the street from one postal code territory to another

00:08:57,268 -- 00:09:00,271
and they can see a significant increase in rates.

00:09:00,305 -- 00:09:02,774
The Minister asked us to look at this and we have determined

00:09:02,774 -- 00:09:05,844
that that postal code based system is outdated.

00:09:06,144 -- 00:09:08,079
It needs to be changed.

00:09:08,079 -- 00:09:10,682
The problem is not that people use territory,

00:09:10,682 -- 00:09:13,685
it's that territory is not allowed to be refined

00:09:13,852 -- 00:09:17,122
based upon how the risks actually transpire in the marketplace.

00:09:18,156 -- 00:09:18,490
So what

00:09:18,490 -- 00:09:21,760
we're doing is we're allowing, using our innovation framework

00:09:22,260 -- 00:09:25,864
initially focused on the GTA, all insurers can come in

00:09:25,864 -- 00:09:29,634
and say we want to change the territories to something else

00:09:29,634 -- 00:09:32,637
that we think is data based actuarially sound,

00:09:32,670 -- 00:09:35,807
and it could be many more territories or possible that it's fewer

00:09:35,807 -- 00:09:39,210
territories or that there's some type of flexibility between territories.

00:09:39,210 -- 00:09:42,213
So it's not all black and white that moving across the street.

00:09:42,347 -- 00:09:46,551
So we're open to any suggestions and that means that consumers can then buy

00:09:46,551 -- 00:09:51,489
shopping around ultimately fine insurers with different territory patterns.

00:09:51,856 -- 00:09:54,859
So you won't have that situation when you move across the street

00:09:55,059 -- 00:09:56,094
and your rates go way up.

00:09:56,094 -- 00:09:59,764
Maybe it will be true with your insurer, but some other insurer will say that

00:09:59,764 -- 00:10:01,232
risk hasn't changed.

00:10:01,232 -- 00:10:01,966
All those issues.

00:10:01,966 -- 00:10:05,537
I talked about theft, traffic density, quality of roads,

00:10:06,037 -- 00:10:09,040
you know, the risk of you being an insured customer will be the same for you

00:10:09,040 -- 00:10:10,909
when you're on one side of the street or the other.

00:10:10,909 -- 00:10:13,912
And so we actually think that is the way to allow the market

00:10:14,012 -- 00:10:16,981
to figure it out again in a supervised fashion.

00:10:16,981 -- 00:10:18,583
And we will be able to control this

00:10:18,583 -- 00:10:21,252
through our Test and Learn Environment in our innovation framework.

00:10:21,252 -- 00:10:23,655
So we're very pleased the Minister asked us to look at this

00:10:23,655 -- 00:10:26,057
and we think this would be a tremendous improvement

00:10:26,057 -- 00:10:29,394
and we're also it can also be available to outside the GTA

00:10:29,627 -- 00:10:31,563
through the major filing process.

00:10:31,563 -- 00:10:34,799
So if you're in the GTA and you're concerned about your auto price

00:10:34,899 -- 00:10:36,968
right now, you can maybe start to even shop around.

00:10:36,968 -- 00:10:37,468
You might see

00:10:37,468 -- 00:10:41,539
some differences in those rates or is it too early quite yet to do that?

00:10:41,572 -- 00:10:43,641
Well, there's already tremendous differences in rates,

00:10:43,641 -- 00:10:46,344
so we always urge everybody to shop around.

00:10:46,344 -- 00:10:48,980
That is your best protection as a consumer.

00:10:48,980 -- 00:10:50,715
And there is something in insurance

00:10:50,715 -- 00:10:54,519
which in other jurisdictions they've actually prohibited it.

00:10:54,819 -- 00:10:56,754
But it's essentially a loyalty penalty.

00:10:57,889 -- 00:10:59,490
Insurers recognize

00:10:59,490 -- 00:11:03,261
and they do analysis on what the propensity is to renew

00:11:03,261 -- 00:11:07,598
without shopping around, and it is actually shockingly high.

00:11:08,366 -- 00:11:12,970
And so you don't get the best rate sometimes unless you do shop around

00:11:13,004 -- 00:11:15,373
because there is a certain transitive insurer

00:11:15,373 -- 00:11:18,743
might be happy with all the customers it has in a certain area. So

00:11:18,743 -- 00:11:22,380
it's not really working hard to get more customers, let's say from Mississauga.

00:11:22,880 -- 00:11:26,784
So maybe someone else, another insurer actually really wants to get more business

00:11:26,784 -- 00:11:27,785
from Mississauga

00:11:27,785 -- 00:11:30,988
and they're willing to price to get those business that business from you.

00:11:31,989 -- 00:11:32,757
Okay, I lied.

00:11:32,757 -- 00:11:35,226
I want to squeeze one more in about auto insurance here.

00:11:35,226 -- 00:11:39,430
And so last year at the FSRA Exchange, there was a discussion about health care

00:11:39,430 -- 00:11:42,700
benefits for accident victims and what gets paid to those Health

00:11:42,700 -- 00:11:45,837
Service Providers who service victims such as physiotherapists.

00:11:46,237 -- 00:11:49,841
And currently the professional services guideline does not restrict the amount

00:11:49,841 -- 00:11:52,944
that a health professional can bill a client, but it does determine

00:11:52,944 -- 00:11:57,949
the amount that an insurance company is obligated to pay a health professional

00:11:57,949 -- 00:12:00,418
for the services they provide when someone is injured

00:12:00,418 -- 00:12:01,786
and FSRA is the one who sets

00:12:01,786 -- 00:12:05,323
the fee maximums for rehabilitation services for accident victims.

00:12:05,590 -- 00:12:08,492
And that hasn't changed since 2014.

00:12:08,492 -- 00:12:11,529
And FSRA also sets the minor injury guideline

00:12:12,029 -- 00:12:15,032
establishing maximum fees to health service providers.

00:12:15,032 -- 00:12:18,069
And that guideline hasn't changed since 2014 either.

00:12:18,369 -- 00:12:20,338
And so what we're hearing from health service providers

00:12:20,338 -- 00:12:22,240
is that they're seeing that the fees are too low

00:12:22,240 -- 00:12:25,776
and they're having difficulties actually servicing accident victims.

00:12:26,110 -- 00:12:28,579
Other service providers are saying that these low rates

00:12:28,579 -- 00:12:31,582
are contributing to their desire to leave Ontario altogether.

00:12:31,816 -- 00:12:36,420
So giving your authority to adjust these fees, you know, what are you intending?

00:12:36,621 -- 00:12:38,990
Are you intending to rectify this oversight

00:12:38,990 -- 00:12:41,993
and what have you done since last year when it was first mentioned?

00:12:42,426 -- 00:12:45,429
Well, I'm not sure I agree with your assumption that this is an oversight.

00:12:45,563 -- 00:12:48,099
So we actually monitor the market.

00:12:48,099 -- 00:12:49,433
So let's give you a little bit of breakdown.

00:12:49,433 -- 00:12:54,372
First of all, the benefits to the insured, to the accident victim are controlled

00:12:54,572 -- 00:12:58,709
by the statutory SABS we call a statutory automobile benefit schedule.

00:12:58,709 -- 00:12:59,777
I think it is.

00:12:59,777 -- 00:13:05,182
And so that actually is everybody's policy so that you whether you're driving,

00:13:05,182 -- 00:13:07,017
whether you're a passenger, whether another vehicle,

00:13:07,017 -- 00:13:09,987
whether you're a pedestrian, you have coverage,

00:13:10,955 -- 00:13:12,790
that's the most important thing.

00:13:12,790 -- 00:13:15,626
What we're talking about here with the professional services guideline

00:13:15,626 -- 00:13:20,664
and the minor injury guideline is what insurers are obligated to pay

00:13:21,899 -- 00:13:22,933
is no questions asked.

00:13:22,933 -- 00:13:24,869
They don't need to

00:13:24,869 -- 00:13:26,937
be involved in providing these health

00:13:26,937 -- 00:13:29,940
care services to the Health Service Provider.

00:13:30,241 -- 00:13:33,577
And so it sets a guaranteed amount that the Health Service Provider

00:13:33,577 -- 00:13:35,446
for an insurer can get.

00:13:35,446 -- 00:13:38,682
But it actually doesn't determine what that Health Service

00:13:38,682 -- 00:13:41,919
Provider can charge if the customer wants to pay more

00:13:42,553 -- 00:13:45,623
or they could also reach out to the insurer if that's some type of

00:13:45,623 -- 00:13:49,059
special service and say we should get more because of a special situation.

00:13:49,627 -- 00:13:52,163
So what this does is it actually controls

00:13:52,163 -- 00:13:55,165
the cost in the in the system.

00:13:55,866 -- 00:13:59,203
If we actually increase the PSG or MIG,

00:14:00,604 -- 00:14:01,772
that cost will then

00:14:01,772 -- 00:14:05,876
be a legitimate cost for insurers to come back and ask for rate increases.

00:14:06,343 -- 00:14:09,179
And so what we're doing here with the consumer

00:14:09,179 -- 00:14:12,383
interest in mind is we're balancing the competing objectives

00:14:12,583 -- 00:14:17,421
of keeping rates down by keeping costs under control, but

00:14:17,421 -- 00:14:22,159
making sure that accident victims are able to get needed and timely services.

00:14:22,826 -- 00:14:26,230
And so what we monitor and we're always glad to get more information on this,

00:14:26,397 -- 00:14:29,266
is whether there's actually a shortage of supply.

00:14:29,266 -- 00:14:33,637
If accident victims are not getting timely and necessary treatment,

00:14:34,305 -- 00:14:37,574
then so this is a supply issue then demonstrably

00:14:37,574 -- 00:14:40,577
we would be very concerned and want to increase these rates.

00:14:40,978 -- 00:14:43,981
But that is essentially the balancing that we're trying to get.

00:14:43,981 -- 00:14:46,050
And this is something that, yes, we are looking at

00:14:46,050 -- 00:14:48,218
and we will probably continue to look at in the future

00:14:48,218 -- 00:14:51,388
because inflation, of course, we are sensitive that it has eaten

00:14:51,388 -- 00:14:54,391
into the income of those Health Service Providers.

00:14:54,725 -- 00:14:55,559
Great.

00:14:55,559 -- 00:14:59,730
Now moving on from auto insurance into the P&C insurance sector.

00:14:59,730 -- 00:15:04,501
So when we look at P&C Property Casualty, that does not include auto.

00:15:04,768 -- 00:15:08,872
So what is FSRA seeing that has prompted you to prioritize, prioritize home

00:15:08,872 -- 00:15:13,610
insurance claims as well as the P&C MGA supervision in the non auto sector?

00:15:13,610 -- 00:15:17,381
And I'm going to get a lot of buckets for the acronyms today.

00:15:18,015 -- 00:15:21,251
Yeah. We should probably just put in $100. I’m going to put in like $500.

00:15:21,351 -- 00:15:24,555
So just like we observed

00:15:24,555 -- 00:15:28,659
as we started to look at the distribution channels in the Life and Health market,

00:15:29,226 -- 00:15:31,929
we realized that the predecessor regulators were very much

00:15:31,929 -- 00:15:33,697
about putting out some guidance

00:15:33,697 -- 00:15:37,201
and then trying to be responsive to complaints and doing enforcement.

00:15:37,668 -- 00:15:41,638
And we've tried to build out in that barbell of regulation is the middle.

00:15:42,339 -- 00:15:43,807
And so the first thing you have to do is

00:15:43,807 -- 00:15:45,776
you have to understand what's going on in the marketplace.

00:15:45,776 -- 00:15:47,811
So just like we did with Life and Health,

00:15:47,811 -- 00:15:50,781
we're now going to start to look at the distribution channels

00:15:50,781 -- 00:15:54,151
in the P&C business to understand, because they've changed a lot

00:15:54,151 -- 00:15:57,654
since the Insurance Act was put in place many years ago and understand

00:15:57,654 -- 00:16:01,858
what is the role of MGAs, for example, in the P&C and distribution channels?

00:16:01,858 -- 00:16:03,727
What is the role of brokers?

00:16:03,727 -- 00:16:06,863
Also, we do have enough complaint information

00:16:06,863 -- 00:16:09,866
and we also look at other jurisdictions and we know

00:16:09,933 -- 00:16:13,537
at least anecdotally in Ontario, that claims are a huge issue.

00:16:13,537 -- 00:16:16,073
Now a lot of that is because of natural disasters,

00:16:16,073 -- 00:16:19,209
basically people flooding, wind, storm damage.

00:16:19,509 -- 00:16:24,014
And so we want to be on top of that issue because it is in every jurisdiction

00:16:24,014 -- 00:16:25,082
around the world right now.

00:16:25,082 -- 00:16:29,119
A big focus are claims being adjusted fairly fast

00:16:29,653 -- 00:16:33,056
payments timely, are consumers getting the coverage that they want?

00:16:33,357 -- 00:16:36,827
Exceptions and policies tend to be coming more fine tuned

00:16:36,827 -- 00:16:39,429
because insurers are paying out more on claims.

00:16:39,429 -- 00:16:43,900
So is there knowledge in the information that people understand what their policy

00:16:43,900 -- 00:16:47,504
actually covers, like water damage, whether it's flood or sewer backups?

00:16:48,338 -- 00:16:50,307
It's a very complicated area.

00:16:50,307 -- 00:16:54,144
And so we just think looking at claims, because this is obviously going

00:16:54,144 -- 00:16:58,849
to be a landmark event in someone's life when their house is severely damaged

00:16:59,816 -- 00:17:03,086
by something that's an insurable or potentially insurable event.

00:17:03,353 -- 00:17:05,021
So we want to get on top of that.

00:17:05,021 -- 00:17:08,024
We have a workplan we've put out publicly.

00:17:08,058 -- 00:17:10,727
We're very transparent about what we're going to do in this area.

00:17:10,727 -- 00:17:15,132
We think we have good support from the insurance community.

00:17:15,132 -- 00:17:17,567
They realize that this is an area we need to look at.

00:17:17,567 -- 00:17:20,303
We'll work very closely with RIBO, which is the

00:17:20,303 -- 00:17:23,340
Registered Insurance Brokers of Ontario.

00:17:23,840 -- 00:17:25,208
I think I've got that acronym right.

00:17:25,208 -- 00:17:28,812
So I have to get my $5 back if I say what it is right after I use the acronym.

00:17:28,812 -- 00:17:29,412
Okay, good.

00:17:29,412 -- 00:17:33,416
But anyway, we work because they regulate brokers

00:17:33,617 -- 00:17:36,253
and we actually supervise RIBO in that activity.

00:17:36,253 -- 00:17:39,389
So we're looking at that unfair, deceptive acts and practices.

00:17:39,389 -- 00:17:41,024
How that all fits in.

00:17:41,024 -- 00:17:42,526
It is a big area,

00:17:42,526 -- 00:17:45,996
but it's one that we realize we have to build capabilities to look at.

00:17:46,563 -- 00:17:48,632
First of all, by understanding the business practices

00:17:48,632 -- 00:17:51,334
and the consumer issues that we think might be out there.

00:17:51,334 -- 00:17:52,102
Great.

00:17:52,102 -- 00:17:55,105
I'm going to jump over to pensions because I'm watching my clock ticked down.

00:17:55,438 -- 00:17:59,209
And just quickly on pensions, you know, why is FSRA focusing its time

00:17:59,209 -- 00:18:02,979
and energy and money on jointly sponsored pension plans?

00:18:04,014 -- 00:18:04,414
Yeah, So

00:18:04,414 -- 00:18:07,417
these are the big guys, the seven large plans,

00:18:07,450 -- 00:18:12,656
but they represent about $560 billion of assets,

00:18:12,922 -- 00:18:16,426
two thirds of the assets in the pension system in Ontario.

00:18:16,693 -- 00:18:18,361
It's massive.

00:18:18,361 -- 00:18:21,998
There's close to 2 million members and beneficiaries in these plans.

00:18:22,599 -- 00:18:25,535
And so that's why we have to look at it.

00:18:25,535 -- 00:18:29,639
We have a statutory object that says we have to protect the rights

00:18:29,639 -- 00:18:32,642
and benefits of plan members

00:18:32,642 -- 00:18:35,178
that include joint sponsored pension plans.

00:18:35,178 -- 00:18:37,681
Yes, they are government sponsored organizations.

00:18:37,681 -- 00:18:39,549
They are well-run organizations.

00:18:39,549 -- 00:18:42,719
They have complicated but important governance

00:18:42,719 -- 00:18:45,722
that provides representation from their members as well.

00:18:45,789 -- 00:18:47,390
But our job under

00:18:47,390 -- 00:18:50,727
the law is to make sure that those rights and benefits are protected.

00:18:51,361 -- 00:18:53,396
And so they're complicated organizations.

00:18:53,396 -- 00:18:56,733
When you're into that many billions of dollars, those seven large plans,

00:18:56,733 -- 00:19:00,603
$560 billion, some are larger than others, but they're all very sizable.

00:19:01,671 -- 00:19:03,773
It is complex what they do.

00:19:03,773 -- 00:19:07,043
They are doing some of the most complicated investment strategies

00:19:07,043 -- 00:19:10,814
in the world private equity infrastructure, derivatives

00:19:10,814 -- 00:19:13,950
strategies, you name it, private credit.

00:19:14,617 -- 00:19:15,618
They're in it.

00:19:15,618 -- 00:19:18,955
And we don't doubt that they know what they're doing,

00:19:18,955 -- 00:19:20,323
but we know they do different things.

00:19:20,323 -- 00:19:23,560
And we also know that also sophisticated

00:19:23,560 -- 00:19:26,563
pensions have made mistakes and gotten in trouble.

00:19:26,830 -- 00:19:30,200
And they almost come back almost always come back to breakdowns

00:19:30,700 -- 00:19:32,735
in risk management and governance.

00:19:32,735 -- 00:19:36,472
And so we're going to be focusing on is that the fiduciary is in the plan.

00:19:36,472 -- 00:19:38,808
We want to be there to support them, to make sure

00:19:38,808 -- 00:19:42,612
that we form an independent view on their risk management and governance.

00:19:42,879 -- 00:19:46,449
And we think that will be of value to those fiduciaries in the plans.

00:19:46,916 -- 00:19:50,787
I know it will be of value to the members who are relying on those plans

00:19:50,987 -- 00:19:53,990
and the government sponsors, because if losses occur,

00:19:54,691 -- 00:19:59,395
either benefits go down or the sponsors or the members contributions have to go up.

00:19:59,929 -- 00:20:03,533
And we think that we want to make sure avoidable risks are avoided.

00:20:04,100 -- 00:20:06,069
Great. And I do want to remind the audience, you are able

00:20:06,069 -- 00:20:09,372
to submit your questions this year and we will have them pop up

00:20:09,372 -- 00:20:12,375
for us to ask Mark at the end of the of the session.

00:20:12,742 -- 00:20:16,179
Jumping over to Credit Unions, you know, we started off this morning

00:20:16,179 -- 00:20:18,448
with some great comments from Joanne about Credit Union,

00:20:18,448 -- 00:20:19,849
the work that you've been doing

00:20:19,849 -- 00:20:23,219
and Credit Unions are similar to banks and have bank like risks.

00:20:23,219 -- 00:20:25,988
And we have seen the recent bank failures elsewhere.

00:20:25,988 -- 00:20:29,292
But can you talk a little bit about what worries you about our Credit Unions?

00:20:30,059 -- 00:20:30,693
Well, first of all,

00:20:30,693 -- 00:20:34,797
in the context of the issues that happened in the Silicon Valley bank

00:20:34,797 -- 00:20:38,234
and the regional banks in the US, we have looked at those carefully.

00:20:38,735 -- 00:20:41,304
They essentially had fairly unique business

00:20:41,304 -- 00:20:45,141
models focused on certain sectors, technology and Silicon Valley banks.

00:20:45,141 -- 00:20:50,613
They had large uninsured deposits that weren't actually sticky,

00:20:50,613 -- 00:20:53,616
they wouldn't they didn't have reasons to stay with the business

00:20:53,883 -- 00:20:57,086
and they had liquidity management practices that were suspect,

00:20:57,420 -- 00:21:00,523
including holding, yes, what looked like very high

00:21:00,523 -- 00:21:03,626
quality securities, but they weren't marking them to market.

00:21:04,293 -- 00:21:07,163
So then when they actually had to sell those securities to get money

00:21:07,163 -- 00:21:09,265
to pay the deposits, which were starting to run

00:21:09,265 -- 00:21:12,268
because the tech companies wanted their money, then

00:21:12,268 -- 00:21:15,271
they incurred losses and all of a sudden then they had capital problems.

00:21:15,771 -- 00:21:18,174
Silicon Valley Bank didn't even have a CIRO, I don't think,

00:21:18,174 -- 00:21:21,410
for like months and months they weren't addressing regulatory issues.

00:21:21,711 -- 00:21:24,413
So there was all kinds of things that went wrong there.

00:21:24,413 -- 00:21:28,651
And I can say with confidence those issues do not exist in our credit union system.

00:21:29,018 -- 00:21:31,821
So we can park that to one side.

00:21:31,821 -- 00:21:34,056
We have stable deposits in our Credit Unions.

00:21:34,056 -- 00:21:36,459
Their business models are tried and true.

00:21:36,459 -- 00:21:38,761
Now what does worry about them?

00:21:38,761 -- 00:21:42,031
You know, it's obviously a prudential regulator at heart.

00:21:42,098 -- 00:21:45,434
I'm a worrier, but I'll just hit four quickly.

00:21:45,534 -- 00:21:48,838
One is we'd like to see profitability increase

00:21:49,205 -- 00:21:51,240
and there has been margin compression.

00:21:51,240 -- 00:21:55,177
And normally when interest rates go up, margins should go up.

00:21:55,478 -- 00:21:58,447
That hasn't happened universally across the sector.

00:21:58,447 -- 00:22:02,652
And that's troubling sometimes because we think it is because of Treasury

00:22:02,685 -- 00:22:07,189
and asset liability matching principles, what an acronym there.

00:22:08,557 -- 00:22:10,960
We're also focused on that

00:22:10,960 -- 00:22:15,264
they need to continue to invest and that creates overhead.

00:22:15,531 -- 00:22:18,801
And that sometimes is a problem if you don't have sufficient scale.

00:22:19,335 -- 00:22:21,237
And so they are competing against the banks.

00:22:21,237 -- 00:22:23,973
And so if they're going to have products and services compete,

00:22:23,973 -- 00:22:26,208
they have to invest in that.

00:22:26,208 -- 00:22:28,177
The third thing we focus on

00:22:28,177 -- 00:22:32,581
is the adequacy of the Deposit Insurance Reserve Fund and ensuring

00:22:32,581 -- 00:22:36,485
that there's access to liquidity, particularly emergency liquidity,

00:22:37,286 -- 00:22:40,823
because that is the type of thing that you actually have to have to stop

00:22:40,823 -- 00:22:43,592
a small problem from becoming a big problem

00:22:43,592 -- 00:22:47,129
that the deposit insurance reserve fund to provide confidence to depositors

00:22:47,129 -- 00:22:48,864
that they don't have to worry

00:22:48,864 -- 00:22:49,665
and the liquidity

00:22:49,665 -- 00:22:53,502
to make sure that the credit union remains open and honours obligations,

00:22:53,869 -- 00:22:57,039
even though it has illiquid assets on one side and might have

00:22:57,773 -- 00:23:00,876
demands for the deposits which far exceeds their ability

00:23:00,876 -- 00:23:03,679
to get those assets into a liquid position.

00:23:03,679 -- 00:23:06,715
And the final thing we worry about this part based on our PACE Credit

00:23:06,715 -- 00:23:09,818
Union experience is we want to make sure we have the right resolution.

00:23:09,818 -- 00:23:13,489
Authorities, our regime right now does not have all the tools

00:23:13,489 -- 00:23:17,259
that most modern resolution regimes have, and that, frankly,

00:23:17,259 -- 00:23:20,729
was an issue and delayed our ability to act with respect to PACE.

00:23:21,630 -- 00:23:23,799
So we do have some worries.

00:23:23,799 -- 00:23:26,869
I'd call those normal course of business worries for a regulator.

00:23:27,136 -- 00:23:30,139
And we're always focused on, you know, that the things can go wrong.

00:23:30,406 -- 00:23:31,574
Joanne alluded to it, though.

00:23:31,574 -- 00:23:35,544
One of the things we're not worried about is the residential mortgage portfolios,

00:23:35,844 -- 00:23:38,647
Even though they have much more flexibility than the federally

00:23:38,647 -- 00:23:41,650
regulated banks, they seem to be using that wisely.

00:23:41,917 -- 00:23:45,955
And we're not seeing lending practices which are exposing

00:23:45,955 -- 00:23:48,958
their organizations to, you know, any out of line risk.

00:23:49,091 -- 00:23:50,993
So that's a great, great news story.

00:23:50,993 -- 00:23:53,529
With the Deposit Insurance Reserve Fund last year,

00:23:53,529 -- 00:23:57,032
you said you wanted to keep a close eye on whether the fund was at the right size.

00:23:57,700 -- 00:23:59,068
Is that something you're still monitoring?

00:23:59,068 -- 00:24:01,303
Are you happy with where that is?

00:24:01,303 -- 00:24:05,240
So there's been as Credit Unions get bigger, their deposit bases get bigger.

00:24:05,240 -- 00:24:07,643
And so there has been a historic 100

00:24:07,643 -- 00:24:11,313
basis points of deposit target for the DIRF.

00:24:11,447 -- 00:24:15,217
We've applied some very, I think, good statistical analysis

00:24:15,217 -- 00:24:17,953
to that based upon some of that data that Joanne was talking about,

00:24:17,953 -- 00:24:19,822
where we actually get into the large Credit Unions,

00:24:19,822 -- 00:24:23,325
We actually can we can stress their loan portfolios.

00:24:23,659 -- 00:24:24,727
So that's really remarkable.

00:24:24,727 -- 00:24:27,229
I think that's even better than they can do at the federal level.

00:24:27,229 -- 00:24:30,466
And so based upon that, we believe and we what we're having,

00:24:30,499 -- 00:24:32,668
we're just starting a discussion now with the sector

00:24:32,668 -- 00:24:34,703
that the DIRF it's in the interest of the sector

00:24:34,703 -- 00:24:36,605
because they are obviously co-insure each other.

00:24:36,605 -- 00:24:39,608
We believe there are a different DIRF target is appropriate.

00:24:39,908 -- 00:24:41,343
We have some external advice on that.

00:24:41,343 -- 00:24:43,612
We're sharing with the sector and we're going to work through that

00:24:43,612 -- 00:24:45,047
and hopefully come to a consensus

00:24:45,047 -- 00:24:48,050
with the sector and then go to the government together.

00:24:48,050 -- 00:24:48,717
Great.

00:24:48,717 -- 00:24:53,355
Moving on to Life and Health Insurance, as pointed out this morning as well,

00:24:53,355 -- 00:24:56,358
we have seen FSRA take some enforcement action in this sector.

00:24:56,558 -- 00:24:59,661
Now, how serious is FSRA about taking sufficient measures

00:24:59,661 -- 00:25:03,432
to prevent misselling and other consumer harms in this channel?

00:25:03,432 -- 00:25:06,535
And I do want to point out something that that was raised last year,

00:25:06,535 -- 00:25:11,139
and this is around what we call orphan Life Insurance policyholders.

00:25:11,340 -- 00:25:15,978
And this is where policyholders won't be serviced by their life agents

00:25:15,978 -- 00:25:18,814
because they've either retired or left the industry.

00:25:18,814 -- 00:25:23,151
And so they're orphaned because they're not able to track down their policies

00:25:23,151 -- 00:25:26,154
or they're not able to their families can't get a payout.

00:25:26,188 -- 00:25:27,155
So maybe you can talk a little bit

00:25:27,155 -- 00:25:30,158
about how that kind of comes into consumer harm as well.

00:25:30,659 -- 00:25:34,863
So I alluded earlier to our review of distribution channels and Life and Health,

00:25:35,297 -- 00:25:39,201
which made us realize that MGA is managing generally agents are playing

00:25:39,201 -- 00:25:44,106
a very important role and there's multiple levels of agents between the insurer

00:25:44,106 -- 00:25:47,109
and the agent who actually is the sales agent to the customer.

00:25:47,709 -- 00:25:52,214
We also identified through that that there were practices where complex

00:25:52,214 -- 00:25:56,018
products like Universal Life, which are great for a sophisticated,

00:25:56,018 -- 00:25:59,554
wealthy individual who used up their all their existing tax advantages

00:25:59,888 -- 00:26:02,958
and is doing estate planning, were being sold to people

00:26:02,958 -- 00:26:07,029
who were in lower socioeconomic situations and could not sustain that.

00:26:07,329 -- 00:26:09,631
And then when the policy lapses,

00:26:09,631 -- 00:26:12,634
all the upfront money they paid basically goes to fees.

00:26:13,235 -- 00:26:17,305
We consider that to be an unacceptable practice and I think most insurers do too.

00:26:18,039 -- 00:26:21,610
And so we realized that we need to use the tools that we have.

00:26:21,943 -- 00:26:25,046
We've put out guidance on what is suitable.

00:26:25,046 -- 00:26:29,584
If you are an agent, and that's the sales agent as well as the MGA,

00:26:29,618 -- 00:26:34,389
who is a type of agent, recognizing the insurers have an obligation.

00:26:34,489 -- 00:26:37,492
The phrase in the law is a reasonable system of compliance

00:26:37,692 -- 00:26:41,830
to make sure that they know what's happening in their channels.

00:26:42,497 -- 00:26:46,401
And our view is where an MGA takes on delegated functions

00:26:46,401 -- 00:26:50,305
such as the recruitment, the training, the oversight of agents, that they then

00:26:50,305 -- 00:26:51,640
should have the same obligation

00:26:51,640 -- 00:26:54,643
to make sure that they have a reasonable system of compliance,

00:26:54,643 -- 00:26:59,648
not that it relieves the insurer their responsibility, but a delegated function.

00:26:59,648 -- 00:27:02,050
They need to make sure that the marketplace is working

00:27:02,050 -- 00:27:04,653
and those agents are properly trained and supervised.

00:27:05,720 -- 00:27:06,288
There's also a

00:27:06,288 -- 00:27:10,125
discussion which we're happy to have comments on, is

00:27:10,358 -- 00:27:14,162
Can you be a suitable agent or suitable MGA overseeing agents?

00:27:14,362 -- 00:27:16,798
If you're selling unsuitable products?

00:27:16,798 -- 00:27:18,533
And so even though we don't have

00:27:18,533 -- 00:27:21,536
quite the suitability regime that exists in some other jurisdictions,

00:27:22,337 -- 00:27:25,240
I think there is an argument to be made that you can't be a suitable agent

00:27:25,240 -- 00:27:29,177
or a suitable MGA if you are in the business of selling unsuitable products.

00:27:29,611 -- 00:27:32,314
So that is something we're going to work on

00:27:32,314 -- 00:27:34,416
with effect to orphan policies.

00:27:34,416 -- 00:27:38,453
There's I think about $4.6 million life policies in Ontario.

00:27:39,788 -- 00:27:43,725
Most of the incentives are upfront, so the fees are paid upfront.

00:27:44,059 -- 00:27:45,560
And yes, that does lead to

00:27:45,560 -- 00:27:48,763
what they call orphan policies where someone leaves the business.

00:27:49,631 -- 00:27:52,600
Now, there is actually tremendous value in that book of business,

00:27:52,600 -- 00:27:55,603
and so we don't actually get a lot of complaints about orphan policies.

00:27:56,137 -- 00:27:58,907
And I believe that's because generally the book of business has value

00:27:58,907 -- 00:28:00,308
and gets sold to somebody.

00:28:00,308 -- 00:28:03,478
So it actually is picked up by an agent who wants to basically contact

00:28:03,478 -- 00:28:05,880
that customer and see if their needs have changed.

00:28:05,880 -- 00:28:08,883
So there's more insurance that could be purchased.

00:28:09,217 -- 00:28:13,188
And also, we think insurers do try to if there is an orphan client,

00:28:13,188 -- 00:28:15,924
they try to get an agent that will cover it. They use their own

00:28:17,225 -- 00:28:18,126
call centers to

00:28:18,126 -- 00:28:21,129
provide some basic advice on policy administration.

00:28:21,196 -- 00:28:24,732
And ultimately the insurer is in that contract with the customer.

00:28:24,933 -- 00:28:28,636
And the loss of the agent actually doesn't change the terms of the policy.

00:28:28,736 -- 00:28:30,638
So all the benefits are still there.

00:28:30,638 -- 00:28:33,441
So it is something that the market does not function well.

00:28:33,441 -- 00:28:37,412
If agents are leave and are not replaced.

00:28:37,812 -- 00:28:41,115
But the reason they don't is because then the advice is not provided.

00:28:41,115 -- 00:28:43,651
Life Insurance is complicated.

00:28:43,651 -- 00:28:46,421
That's why agents get compensation.

00:28:46,421 -- 00:28:50,592
And so, it leads to what is the right incentive commission model.

00:28:50,992 -- 00:28:54,395
And the ideal one would be one where the advisor has an incentive

00:28:54,562 -- 00:28:55,730
and this could be you

00:28:55,730 -- 00:28:58,733
pay a fee for financial advice generally to a planner

00:28:58,866 -- 00:29:00,635
where you have a continuing relationship with them.

00:29:00,635 -- 00:29:02,170
That is the Cadillac.

00:29:02,170 -- 00:29:04,839
The truth is that that model probably doesn't work

00:29:04,839 -- 00:29:08,109
for people who aren't willing to pay that type of fee upfront or don't have

00:29:08,376 -- 00:29:11,412
the size of portfolio insurance needs to justify that.

00:29:11,746 -- 00:29:14,048
So we watch that part of the market very carefully.

00:29:14,048 -- 00:29:17,051
But as they say, it's surprising we don't get that many complaints

00:29:17,051 -- 00:29:20,288
in the area because I was going to bring up the compensation of

00:29:21,422 -- 00:29:22,357
the commissions that are paid

00:29:22,357 -- 00:29:25,360
because you're right, these are sort of policies are sold,

00:29:26,461 -- 00:29:29,230
the commissions are paid out when they sell it

00:29:29,230 -- 00:29:31,099
and it's not really paid out to service.

00:29:31,099 -- 00:29:33,634
And so I have spoken to a lot of financial advisors.

00:29:33,634 -- 00:29:38,172
To your point, they service these clients as a courtesy

00:29:38,406 -- 00:29:41,743
and then they kind of hope that maybe they'll be able to cross-sell.

00:29:42,210 -- 00:29:46,047
So do you think the industry would ever take a look at the way

00:29:46,047 -- 00:29:49,117
and this is a huge thing to change the way that you're compensated

00:29:49,117 -- 00:29:50,752
on a life insurance policy.

00:29:50,752 -- 00:29:52,587
But, you know, do you think it's right that commissions are paid

00:29:52,587 -- 00:29:56,991
to the agent who sold it and the residuals continue to be sold to that person,

00:29:57,258 -- 00:30:00,428
whether they're retired unless an insurance company intervenes and

00:30:00,928 -- 00:30:01,929
can collect those.

00:30:01,929 -- 00:30:03,731
But as far as I'm concerned, it

00:30:03,731 -- 00:30:06,734
there's a lot of retired people who still collect those small residuals.

00:30:06,934 -- 00:30:10,905
Is there a way the industry could perhaps redirect those residuals?

00:30:11,839 -- 00:30:15,109
Well, I think that is an important issue.

00:30:15,109 -- 00:30:19,547
And there is incentives guidance that we're looking at with our

00:30:20,314 -- 00:30:21,616
Canadian Council of Insurance Regulators.

00:30:21,616 -- 00:30:26,721
So it is an active topic for discussion, but it is very important that we allow

00:30:26,721 -- 00:30:31,559
for a sufficient upfront incentive so that people get the advice

00:30:31,559 -- 00:30:35,863
so they can know what their insurance needs are as well as the second piece.

00:30:35,863 -- 00:30:36,697
What you're getting at

00:30:36,697 -- 00:30:40,401
is making sure that there's the incentive to provide ongoing advice.

00:30:40,535 -- 00:30:43,871
And so that is a careful balancing act when you actually want

00:30:43,871 -- 00:30:46,974
to also minimize in the consumer interests our number one objective.

00:30:47,308 -- 00:30:49,944
You want to minimize the amount of fees that they're paying.

00:30:51,078 -- 00:30:53,147
So there's some balancing there.

00:30:53,147 -- 00:30:54,415
It's a tough one.

00:30:54,415 -- 00:30:56,951
And just finally, to jump back to the MGA channel,

00:30:56,951 -- 00:31:00,187
if MGAs have increased conduct requirements

00:31:00,187 -- 00:31:03,958
such as becoming a license class, will that let insurers off the hook?

00:31:04,759 -- 00:31:07,728
Well, I don't think it ever can, because the contract is

00:31:07,728 -- 00:31:10,731
between the insurer and the end customer.

00:31:10,798 -- 00:31:14,335
It's not like a securities where it is a different a separate instrument

00:31:14,669 -- 00:31:18,739
that is basically created by an issuer or sold by a distributor.

00:31:19,006 -- 00:31:21,242
And then it actually has sort of life outside.

00:31:21,242 -- 00:31:22,977
This is an ongoing contract,

00:31:22,977 -- 00:31:25,980
a contract of utmost good faith between the insurer and the customer.

00:31:26,380 -- 00:31:31,419
And so I think insurers always have to be responsible for their contract

00:31:31,752 -- 00:31:35,690
and through for how it's distributed and how they administer it over the term.

00:31:36,457 -- 00:31:39,760
That reasonable system of compliance doesn't have any exception for that.

00:31:40,161 -- 00:31:44,665
I will say that if to the extent we get more tools over MGAs,

00:31:45,066 -- 00:31:49,336
we'll actually have another way to regulate and get to the conduct

00:31:49,336 -- 00:31:52,673
that we want to see, and then obviously we won't have to put

00:31:52,673 -- 00:31:57,478
maybe as much pressure on insurers because if the MGA is the one

00:31:57,478 -- 00:32:01,415
supervising the agent where we see issues and we can go to that MGA

00:32:01,449 -- 00:32:05,319
and we can get that remedied, that'll be probably more effective than us

00:32:05,319 -- 00:32:07,755
go to the insurer who then

00:32:07,755 -- 00:32:10,825
uses its influence on the MGA and say there could be multiple tiers of MGA.

00:32:10,825 -- 00:32:14,462
So we it's much better if we can do that directly.

00:32:14,462 -- 00:32:17,431
But no, I think it's always going to be appropriate for the insurer

00:32:17,431 -- 00:32:19,099
to have that continuing obligation

00:32:19,099 -- 00:32:22,503
for its sales channels, because if it is the one in the contract.

00:32:23,070 -- 00:32:27,174
Great. Moving over to financial planners and financial advisers,

00:32:27,441 -- 00:32:30,444
also an area that I have been keeping a close eye on,

00:32:30,711 -- 00:32:33,480
many in the investment community is watching it closely, and this is around

00:32:33,480 -- 00:32:39,220
Ontario's Financial Professionals Title Protection Act that was passed in 2019,

00:32:39,220 -- 00:32:42,223
and that requires anyone in the province that wants to use a title,

00:32:42,256 -- 00:32:46,060
financial adviser or financial planner to obtain appropriate credentials

00:32:46,293 -- 00:32:47,695
from an approved provider.

00:32:47,695 -- 00:32:49,029
And since the bill passed,

00:32:49,029 -- 00:32:52,333
you know, FSRA has approved several credentialing bodies,

00:32:52,600 -- 00:32:55,402
and most recently they approved the Canadian Investment

00:32:55,402 -- 00:32:58,672
Regulatory Organization, which I'm going to refer to as CIRO.

00:32:59,006 -- 00:33:02,409
And that's caused a lot of concern for investor advocates,

00:33:02,409 -- 00:33:04,511
particularly around mutual fund licensed advisors.

00:33:04,511 -- 00:33:09,116
So why is FSRA allowing tens of thousands of individuals who are registered by CIRO

00:33:09,116 -- 00:33:12,820
but many considered to be salespeople to use the financial advisor title?

00:33:13,821 -- 00:33:14,722
We're doing it because it

00:33:14,722 -- 00:33:17,725
is demonstrably in the consumer interest

00:33:17,825 -- 00:33:21,762
and it is completely aligned with the regime that exists in law

00:33:21,762 -- 00:33:24,998
and the one that we heavily consulted on in our rules and our guidance.

00:33:25,632 -- 00:33:26,533
So let me take you back.

00:33:26,533 -- 00:33:29,536
Before this regime existed,

00:33:29,737 -- 00:33:32,773
anyone could use the title Financial Advisor, a Planner,

00:33:33,407 -- 00:33:37,077
no education, no credentials, no complaint, no discipline.

00:33:37,878 -- 00:33:40,114
Anybody could use that.

00:33:40,114 -- 00:33:43,117
So everyone agrees that's not good.

00:33:43,150 -- 00:33:46,153
Then let me take you before we had CIRO approved,

00:33:46,420 -- 00:33:49,990
so we now had credentialing bodies and they would basically say,

00:33:50,290 -- 00:33:52,593
we have a course, we have a program we're going to supervise.

00:33:52,593 -- 00:33:55,362
We're going to give it a title credential to this person,

00:33:55,362 -- 00:33:58,365
and they can become a financial advisor or a financial planner.

00:33:58,432 -- 00:34:02,636
But CIRO also had a huge body,

00:34:02,769 -- 00:34:05,772
a larger body of financial advisors than we had.

00:34:06,206 -- 00:34:09,009
They were using sometimes using a Financial Advisor title

00:34:09,009 -- 00:34:12,179
because they were grandfathered or they had a separate credential,

00:34:12,479 -- 00:34:15,849
but in many cases they could also just use the term investment advisors.

00:34:16,350 -- 00:34:18,252
So then we'd have consumers out there going

00:34:18,252 -- 00:34:20,020
Financial Advisor, Investment Advisor.

00:34:20,020 -- 00:34:22,523
What's the difference? They go to our credential check.

00:34:22,523 -- 00:34:25,192
If CIRO is not there, they're not able to find out that

00:34:25,192 -- 00:34:28,228
this person is a mutual fund

00:34:29,396 -- 00:34:31,331
salesperson,

00:34:31,331 -- 00:34:31,732
right?

00:34:31,732 -- 00:34:34,101
And get that knowledge, just go. It's an investment, right?

00:34:34,101 -- 00:34:36,436
There's and they're regulated by CIRO.

00:34:36,436 -- 00:34:37,638
But why CIRO?

00:34:37,638 -- 00:34:38,639
Will CIRO is actually

00:34:38,639 -- 00:34:41,875
the gold standard for many of the things we want to see in credentialing bodies.

00:34:42,409 -- 00:34:46,013
They're overseen by the OSC and the Canadian Securities Administrators.

00:34:46,546 -- 00:34:50,917
They have a very highly developed conduct and discipline framework.

00:34:51,551 -- 00:34:54,421
So the people that are in the CIRO framework,

00:34:54,421 -- 00:34:57,324
yes, they are well overseen, well regulated.

00:34:57,324 -- 00:35:00,394
The issue that some of the consumer advocates have and this is kind of

00:35:00,394 -- 00:35:04,398
like when you give something somebody and they always want more, I understand it.

00:35:05,365 -- 00:35:08,368
They're concerned that some CIRO

00:35:08,802 -- 00:35:11,004
basically licensees

00:35:11,004 -- 00:35:14,007
are basically looking at mutual funds as a sole product.

00:35:14,341 -- 00:35:17,344
But by being in our regime, they have a professional

00:35:17,577 -- 00:35:21,048
code of conduct, of ethics, minimum standards of competency.

00:35:21,048 -- 00:35:24,051
They have to not only understand their product that they sell,

00:35:24,184 -- 00:35:27,421
but they have a responsibility to understand alternative products.

00:35:28,021 -- 00:35:30,624
And I actually think that this is a good sign that CIRO

00:35:30,624 -- 00:35:31,391
the fact that they're willing

00:35:31,391 -- 00:35:34,394
to come into our regime knowing that that is the case,

00:35:34,761 -- 00:35:38,398
there's an opportunity for everybody to bring up the bottom

00:35:38,398 -- 00:35:42,302
end of that competency so that maybe you are only selling mutual funds,

00:35:42,636 -- 00:35:46,139
but you are supposed to be able to say, you know, in your circumstances,

00:35:46,139 -- 00:35:48,074
maybe you need to start buying ETFs

00:35:48,074 -- 00:35:51,077
or stocks or bonds or seek other diversification.

00:35:51,144 -- 00:35:54,147
So we want to get the marketplace to that point in time.

00:35:54,447 -- 00:35:57,918
By having CIRO in, we remove the consumer confusion.

00:35:58,318 -- 00:36:00,787
We have the ability now to get the best out of CIRO

00:36:00,787 -- 00:36:04,491
and bring the other credential bodies up to their standards where they're higher.

00:36:04,891 -- 00:36:06,960
And we'll bring worked with CIRO

00:36:06,960 -- 00:36:08,395
to bring its standards up

00:36:08,395 -- 00:36:10,564
to the higher standards of the other credentialing bodies,

00:36:10,564 -- 00:36:11,665
where they're greater.

00:36:11,665 -- 00:36:14,801
So I think it's to everyone's advantage and it also

00:36:15,535 -- 00:36:18,405
dramatically reduces the startup costs that are being charged

00:36:18,405 -- 00:36:21,808
to credentialing bodies, which I also think is in the interest of those bodies.

00:36:21,975 -- 00:36:23,143
And of course, all their members,

00:36:23,143 -- 00:36:26,947
because their members are the ones who ultimately pay is their concern,

00:36:27,414 -- 00:36:32,419
because CIRO does oversee two different types of advisors is a security license

00:36:32,419 -- 00:36:35,422
and what used to be known as the IROC channel.

00:36:35,455 -- 00:36:38,792
And there's a mutual fund channel concerned that someone may think they're

00:36:38,792 -- 00:36:43,363
talking to a securities licensed adviser, which is very different type of advice.

00:36:44,130 -- 00:36:46,232
Well, that concern exists today, though.

00:36:46,232 -- 00:36:50,337
And so by being in our regime now, because we consulted on this

00:36:50,337 -- 00:36:53,340
and this was broadly supported, is that, yes,

00:36:53,406 -- 00:36:57,877
the MFDA level should be qualified for financial advisors,

00:36:58,378 -- 00:37:01,548
but whenever they're using their credential

00:37:01,981 -- 00:37:03,850
or they're using the title Financial Adviser,

00:37:03,850 -- 00:37:06,386
they also have to say what their credential is.

00:37:06,386 -- 00:37:09,389
It will be apparent through the credential check tool we give

00:37:09,589 -- 00:37:14,094
so that that a consumer can easily find out that that person is different

00:37:14,094 -- 00:37:15,695
than someone who can give a full advice on

00:37:15,695 -- 00:37:19,399
stocks and bonds and investments versus the mutual fund channel only.

00:37:19,666 -- 00:37:22,669
And so that consumer transparency is very important.

00:37:22,702 -- 00:37:26,740
I could do a whole panel on this, so I'll flip over to mortgage

00:37:26,740 -- 00:37:29,976
brokers and then we're going to see if we can get to some audience questions.

00:37:30,210 -- 00:37:33,680
Obviously, a big topic in Canada right now is with housing prices,

00:37:33,947 -- 00:37:36,783
mortgage affordability and availability is a big issue.

00:37:36,783 -- 00:37:40,386
Are you concerned that this will cause increased risks and conduct

00:37:40,386 -- 00:37:43,389
issues in residential mortgages?

00:37:43,456 -- 00:37:45,158
Yeah, well, it always does.

00:37:45,158 -- 00:37:45,492
Every time

00:37:45,492 -- 00:37:49,529
there's stress in the marketplace, there's incentive for aberrant behaviors

00:37:49,896 -- 00:37:52,265
and also part of it is like Warren Buffett said,

00:37:52,265 -- 00:37:54,834
“when the tide goes out, you see who's been swimming naked.”

00:37:54,834 -- 00:37:59,172
So there will be people who will do fraud for mortgage

00:37:59,172 -- 00:38:02,342
because that's the only way they can get their house or keep their house.

00:38:03,042 -- 00:38:06,479
And so they will shade the information to try

00:38:06,479 -- 00:38:09,482
and do what they have to do and what we're concerned.

00:38:09,549 -- 00:38:12,252
about is the mortgage brokers that we supervise.

00:38:12,252 -- 00:38:15,154
Their volumes are always going to go down and they also

00:38:15,154 -- 00:38:18,191
will want to try and help that person who's having trouble getting a mortgage.

00:38:18,625 -- 00:38:19,659
And so it may even

00:38:19,659 -- 00:38:23,463
be out of good intentions, but they may not they may cut some corners

00:38:23,463 -- 00:38:26,766
in not providing the full information package to the financial institution.

00:38:27,200 -- 00:38:29,269
So we are concerned about from that perspective.

00:38:29,269 -- 00:38:30,803
We're also concerned about it

00:38:30,803 -- 00:38:34,374
from the increasing amount we're seeing in the private mortgage market.

00:38:34,974 -- 00:38:36,576
And we've put an education on that.

00:38:36,576 -- 00:38:39,045
A private mortgage is not a long term solution.

00:38:39,045 -- 00:38:41,848
They're shorter term, they're higher cost.

00:38:41,848 -- 00:38:45,218
They are not a way that you're going to end up owning a house after 25 years.

00:38:45,885 -- 00:38:49,022
It is a if it's a bridge to somewhere to a sale,

00:38:49,355 -- 00:38:52,725
to basically establishing your income so that you can get a more

00:38:52,725 -- 00:38:55,762
routine mortgage at better rates, longer terms.

00:38:56,229 -- 00:38:59,265
It is a viable alternative and so we've put out

00:38:59,399 -- 00:39:02,535
information for that for users of private mortgages.

00:39:02,802 -- 00:39:06,939
We've created a private mortgage agent licensing tier

00:39:06,939 -- 00:39:09,942
because they should have extras skills and experience,

00:39:09,942 -- 00:39:11,644
because you have to remember they're also dealing with

00:39:11,644 -- 00:39:14,647
not a sophisticated institution that protects themselves.

00:39:14,947 -- 00:39:17,250
They're dealing then with private investors.

00:39:17,250 -- 00:39:19,419
And so those private investors are also at risk.

00:39:19,419 -- 00:39:20,887
There's been some things in the paper

00:39:20,887 -- 00:39:23,890
you can see how quickly that some of these deals can go bad.

00:39:23,990 -- 00:39:25,158
And there is a history of that.

00:39:25,158 -- 00:39:28,628
So we've worked very hard to make sure that not only are we helping

00:39:28,961 -- 00:39:33,099
borrowers get access, private mortgages as well as institutional mortgages,

00:39:33,666 -- 00:39:38,137
but investors can protect themselves if they're going to participate in that

00:39:38,137 -- 00:39:41,474
because it is a higher yield but higher risk.

00:39:42,742 -- 00:39:43,509
And we end it

00:39:43,509 -- 00:39:47,780
exactly on the zero we're going to see I'm assuming it's going to pop up here.

00:39:47,780 -- 00:39:49,682
The questions.

00:39:49,682 -- 00:39:52,685
there we go.

00:39:52,885 -- 00:39:57,924
Is FSRA are working with the Ministry of Finance to modernize the Insurance Act.

00:39:57,924 -- 00:40:01,527
And this includes regulating unlicensed insurance intermediaries

00:40:01,527 -- 00:40:04,530
and updating the fire part of the act

00:40:05,965 -- 00:40:08,968
fire part of the act.

00:40:09,368 -- 00:40:11,203
I'm not quite sure what that is.

00:40:11,203 -- 00:40:13,973
If it's about the fire mutuals.

00:40:13,973 -- 00:40:16,976
That could be what it's about.

00:40:17,076 -- 00:40:19,812
I never thought that out of the fire part of the act.

00:40:19,812 -- 00:40:22,682
So the decision on

00:40:22,682 -- 00:40:26,285
what legislation will be amended is a government decision.

00:40:26,419 -- 00:40:30,556
We provide our advice to the ministry on where we think it is appropriate

00:40:30,556 -- 00:40:32,491
that there should be action taken.

00:40:32,491 -- 00:40:36,062
I do think that the Insurance Act in Ontario, when it compared

00:40:36,062 -- 00:40:39,498
to some of our provincial peers or federal, there it is.

00:40:39,565 -- 00:40:42,068
There are sections that are in need of an update.

00:40:42,068 -- 00:40:45,037
For example, we talked about the absence of an MGA licensing class

00:40:45,037 -- 00:40:48,040
when most insurance is now distributed through MGAs.

00:40:48,307 -- 00:40:52,044
So we do think that, you know, we're on record saying that, yes,

00:40:52,044 -- 00:40:55,681
this is something we should look at, but we do have existing regulatory tools

00:40:55,681 -- 00:40:58,150
and we will use those existing regulatory tools

00:40:58,150 -- 00:41:01,754
regardless of whether the Insurance Act is updated, because we have

00:41:01,754 -- 00:41:04,156
we have to protect the consumers and make the market function.

00:41:04,156 -- 00:41:05,658
But yes, I,

00:41:05,658 -- 00:41:07,660
I certainly think the minister wouldn't

00:41:07,660 -- 00:41:12,098
be shocked if I was on record saying that the Insurance Act is a piece

00:41:12,098 -- 00:41:15,201
of legislation that could probably use a review in the near future.

00:41:16,836 -- 00:41:19,772
Our next question is can a Credit Union access

00:41:19,772 -- 00:41:24,810
emergency liquidity through the Deposit Insurance Relief Fund?

00:41:24,810 -- 00:41:26,912
I read that out. It was an acronym.

00:41:26,912 -- 00:41:31,016
If there was a very short term crisis, this person is asking for a friend.

00:41:31,584 -- 00:41:34,620
Well, let's hope

00:41:34,620 -- 00:41:37,623
that friend isn't a Credit Union.

00:41:38,357 -- 00:41:42,394
So we do actually have an incredible amount of flexibility

00:41:42,394 -- 00:41:46,498
under the Credit Union Cassie Populaire Act to use the DIRF to provide

00:41:46,498 -- 00:41:50,336
financial assistance where we think it's in the overall interest.

00:41:50,569 -- 00:41:53,572
So our objects are to minimize loss to the DIRF.

00:41:53,572 -- 00:41:55,841
So basically, if it's a little bit of money now

00:41:55,841 -- 00:41:57,776
will avoid a bigger problem later.

00:41:57,776 -- 00:42:01,747
Our objects are also good financial stability, strong, stable sector.

00:42:02,114 -- 00:42:05,718
So we will actually use the DIRF we have we're empowered to do that

00:42:05,718 -- 00:42:07,253
in a creative way.

00:42:07,253 -- 00:42:11,857
In the PACE Credit Union, for example, we actually did provide a backstop

00:42:11,857 -- 00:42:15,527
liquidity facility so that the members of PACE Credit Union,

00:42:15,527 -- 00:42:17,229
even when it was going through its turmoil,

00:42:17,229 -- 00:42:21,200
we put $500 million on the line for a, you know, less than $1,000,000,000

00:42:21,200 -- 00:42:21,700
Credit Union.

00:42:21,700 -- 00:42:23,135
So that's a lot of money.

00:42:23,135 -- 00:42:24,903
But we wanted to know that there was

00:42:26,372 -- 00:42:28,574
a big gun there if it was ever necessary,

00:42:28,574 -- 00:42:31,577
so they didn't have to worry that there was going to be a liquidity problem.

00:42:31,644 -- 00:42:34,980
So we are willing to use the DIRF we also it's a matter of public record,

00:42:35,014 -- 00:42:38,951
have a 2 billion line of credit from the provincial government

00:42:39,184 -- 00:42:42,187
that we could also use that to supplement if we needed more funds.

00:42:42,254 -- 00:42:45,324
You know, it's just one of those things you want to have the trucks

00:42:45,324 -- 00:42:49,128
in the firehouse and we are looking at getting

00:42:50,062 -- 00:42:54,500
proper access to emergency liquidity with the Bank of Canada through its

00:42:54,500 -- 00:42:59,805
lending programs, including emergency lending or liquidity assistance.

00:42:59,805 -- 00:43:01,874
And that is something that has been facilitated

00:43:01,874 -- 00:43:05,477
by the federal government by recent changes to the Payments Canada Act.

00:43:05,878 -- 00:43:09,348
So we do care very deeply about these issues and we

00:43:09,348 -- 00:43:12,351
but we do think that there is adequate liquidity and we do have the

00:43:12,851 -- 00:43:16,555
legal tools to be able to use it to provide that short term funding.

00:43:17,556 -- 00:43:18,757
And the next question is

00:43:18,757 -- 00:43:22,327
the regulatory response to AI may take some time to finalize.

00:43:22,594 -- 00:43:25,898
Many businesses will make large investments over the next short time

00:43:26,131 -- 00:43:27,799
into these types of technologies.

00:43:27,799 -- 00:43:31,403
How we're financial service businesses expected to make these investments

00:43:31,670 -- 00:43:36,308
while moderating concerns over moderating concerns that technology or features

00:43:36,308 -- 00:43:40,512
will eventually be prohibited subsequent to investment or implementation.

00:43:41,580 -- 00:43:44,650
Well, the issue of investment in technology

00:43:44,816 -- 00:43:48,086
will be prohibited it is a difficult one for us to manage

00:43:48,086 -- 00:43:51,623
because a lot of that prohibition will not be by us as a regulator.

00:43:51,623 -- 00:43:56,495
It is possible, but most of that's probably in what is a fair use of data.

00:43:56,495 -- 00:43:59,531
What types of algorithms are, let's say, discriminatory.

00:43:59,898 -- 00:44:05,537
And so it gets into things that we may not be the person prohibiting it.

00:44:06,371 -- 00:44:09,374
So it is up to the financial institutions to basically

00:44:09,608 -- 00:44:12,577
go down the AI and the data path wisely.

00:44:13,178 -- 00:44:16,281
A few years ago, I was actually responsible at

00:44:16,448 -- 00:44:18,784
one of the big banks here for overseeing all their models.

00:44:18,784 -- 00:44:20,919
So this isn't really new.

00:44:20,919 -- 00:44:24,823
I know it's in the press a lot now, but models that learned from themselves

00:44:24,823 -- 00:44:27,693
and from data and information have been around for years.

00:44:27,693 -- 00:44:31,430
And models based upon consumer information were being used

00:44:31,463 -- 00:44:35,033
and by large financial institutions in this country for many years.

00:44:35,467 -- 00:44:38,470
So these are not new issues.

00:44:38,904 -- 00:44:41,907
What is new is the breadth of the application

00:44:41,907 -- 00:44:45,577
and how in-your-face it is when you're seeing things like, you know,

00:44:45,644 -- 00:44:49,714
ChatGPT, just sort of those things that have learned from learning

00:44:49,714 -- 00:44:51,483
from huge databases.

00:44:51,483 -- 00:44:54,052
So I think these issues will continue to evolve,

00:44:54,052 -- 00:44:57,556
but I think it's mostly not the conduct and prudential regulator,

00:44:57,589 -- 00:45:00,592
although we would have concerns if we thought were privacy abuses,

00:45:00,725 -- 00:45:03,962
but we'll be the privacy regulator that the consumer data regulators,

00:45:04,262 -- 00:45:08,166
they're going to be the ones that are most creating the boundaries.

00:45:08,166 -- 00:45:12,070
And it is true there is uncertainty because people will need protection

00:45:12,070 -- 00:45:15,340
from issues which we probably haven't fully appreciated at this point.

00:45:16,208 -- 00:45:19,744
We're following the MGA thematic review, did FSRA

00:45:19,744 -- 00:45:23,582
conclude that additional reviews were required of the insurers involved?

00:45:25,016 -- 00:45:28,420
Yes. So we actually went through a couple different stages.

00:45:28,420 -- 00:45:31,423
This the first one was more just learning about the channels and MGAS.

00:45:31,690 -- 00:45:35,827
And then we did start to drill down on particular insurers and MGAs.

00:45:36,127 -- 00:45:39,130
And that's also been complemented by a great innovation

00:45:39,130 -- 00:45:41,766
which our insurance conduct team has led along.

00:45:41,766 -- 00:45:45,670
We call it cooperative supervisor reviews, where we go to major insurers

00:45:46,104 -- 00:45:47,672
involving the other provinces.

00:45:47,672 -- 00:45:48,573
We want to participate.

00:45:48,573 -- 00:45:50,976
The MF in particular is a great partner with this,

00:45:50,976 -- 00:45:52,410
and we go out and we do these reviews.

00:45:52,410 -- 00:45:58,049
So, yes, there are multiple layers to this and we are now building the conduct,

00:45:58,049 -- 00:46:02,020
supervision, resources in Life and Health that this isn't a one off.

00:46:02,520 -- 00:46:05,390
This is going to be a permanent feature of how we're going

00:46:05,390 -- 00:46:08,827
to basically supervise those insurers and manage that marketplace.

00:46:09,527 -- 00:46:12,564
I'm going to squeeze a question in about the Financial Planners

00:46:12,564 -- 00:46:15,567
Protection Act around Advocis.

00:46:15,934 -- 00:46:19,237
So what is the status of Advocis as a credentialing body in light of its

00:46:19,237 -- 00:46:23,274
financial situation and the legal troubles that have been reported in the media?

00:46:23,541 -- 00:46:26,444
You know, how does FSRA ensure the viability of credentialing bodies?

00:46:26,444 -- 00:46:28,813
And are you monitoring the legal outcome of that? Because

00:46:30,014 -- 00:46:32,751
while it is a credentialing body and so we have an obligation

00:46:32,751 -- 00:46:36,588
to watch what's going on there, they've been very forthcoming.

00:46:36,588 -- 00:46:40,792
The new management has been engaging with us whenever we've asked.

00:46:40,792 -- 00:46:44,996
They've been even proactive that they are a credentialing body in good standing.

00:46:44,996 -- 00:46:46,865
Their fees are fully paid.

00:46:46,865 -- 00:46:50,935
So there are you know, the people are using titles through them,

00:46:51,035 -- 00:46:54,038
should have confidence that that continues to exist.

00:46:54,038 -- 00:46:56,374
We have no reason to believe that they won't continue to do this.

00:46:56,374 -- 00:46:59,244
We think it is an important part of their business.

00:46:59,244 -- 00:47:04,048
They were an early adopter in wanting to be a credentialing body,

00:47:04,048 -- 00:47:06,651
they were very helpful through the process.

00:47:06,651 -- 00:47:08,286
Like all credentialing bodies

00:47:08,286 -- 00:47:10,288
I talked about, CIRO had some great strengths,

00:47:10,288 -- 00:47:12,757
but also some areas that maybe they aren't strong as other credential bodies.

00:47:12,757 -- 00:47:17,228
Advocis also has its weaknesses, and so we continue to be focused

00:47:17,228 -- 00:47:18,730
on supervising those.

00:47:18,730 -- 00:47:22,834
And of course, any organization that's going through change at the top,

00:47:23,234 -- 00:47:26,170
we're making sure that they're not cutting back on necessary resources

00:47:26,170 -- 00:47:29,173
that's still providing governance, that their eye isn't off the ball.

00:47:29,407 -- 00:47:33,611
And so we'll deal with that if we have to, through the normal supervisory tools.

00:47:34,178 -- 00:47:35,780
And we do keep an eye though, out.

00:47:35,780 -- 00:47:38,816
So, you know, we do have we work on plans

00:47:38,816 -- 00:47:41,819
that if a credential body ever does go away, what will we do?

00:47:41,819 -- 00:47:43,087
Because we will want to see that

00:47:43,087 -- 00:47:46,624
their title holders have a pathway to continued use of the title,

00:47:46,925 -- 00:47:49,360
even if the credentialing body that there are issues.

00:47:49,360 -- 00:47:52,363
But Advocis, it's all in good standing right now.

00:47:52,697 -- 00:47:57,035
Going back to an audience question is on the topic of climate change

00:47:57,035 -- 00:48:01,039
has been top of mind for other Canadian regulators, such as OSFI and the CSA,

00:48:01,506 -- 00:48:05,009
and these regulators have been requiring climate related disclosures from their

00:48:05,009 -- 00:48:08,680
regulated entities, such as disclosing information about financed emissions.

00:48:08,946 -- 00:48:11,149
Is FSRA headed in this direction as well?

00:48:13,584 -- 00:48:15,453
I don't want to disagree with the regulators,

00:48:15,453 -- 00:48:20,558
but most financial institutions that climate risk is derived risk

00:48:21,159 -- 00:48:24,228
because there are these they do have their own heating

00:48:24,228 -- 00:48:28,299
of their buildings, for example, but they're not actually producing

00:48:29,467 -- 00:48:32,170
things that generate carbon.

00:48:32,170 -- 00:48:35,173
They do provide financing, which can.

00:48:35,673 -- 00:48:37,608
So that's why I say it's a derived risk.

00:48:37,608 -- 00:48:41,579
And so their business activities have an influence on

00:48:43,614 -- 00:48:45,817
environmental issues we're dealing with.

00:48:45,817 -- 00:48:48,286
We're very concerned about it from a perspective of

00:48:48,286 -- 00:48:52,757
are they understanding climate change and environmental concerns as a risk.

00:48:53,558 -- 00:48:56,527
So if you're a Pension, for example,

00:48:56,627 -- 00:48:58,162
and you're investing some of those hundreds

00:48:58,162 -- 00:49:01,165
of billions of dollars I talked about, where are you investing them?

00:49:01,265 -- 00:49:04,335
And is there a risk that you are not diversified

00:49:04,635 -- 00:49:07,939
sufficiently and that you actually may end up with stranded assets?

00:49:08,406 -- 00:49:11,409
So that's from a good investment risk policy point of view

00:49:11,909 -- 00:49:15,947
we do leave it to others to take a perspective on climate

00:49:15,947 -- 00:49:18,950
that there should be no investment in oil and gas.

00:49:19,250 -- 00:49:23,321
We want to see the organizations being prudent in what they're doing.

00:49:23,554 -- 00:49:26,057
And so we're not against an institution that, let's say,

00:49:26,057 -- 00:49:29,060
a pension fund that says we don't want to invest in oil and gas anymore.

00:49:29,060 -- 00:49:32,697
But that's we don't see that as our role to tell them whether they should

00:49:32,697 -- 00:49:33,998
or should not do that.

00:49:33,998 -- 00:49:36,968
Our role is to make sure that they're protecting that.

00:49:36,968 -- 00:49:39,937
We're seeing that they're protecting the rights and benefits of their members.

00:49:40,171 -- 00:49:43,174
So obviously, if someone has too much exposure,

00:49:43,240 -- 00:49:47,278
unmanaged exposure and diversified exposure, that would be our primary concern.

00:49:49,413 -- 00:49:50,381
This is a great question.

00:49:50,381 -- 00:49:54,618
Does FSRA intend on modernizing PNC in Life Agent Licensing?

00:49:54,752 -- 00:49:58,689
This would include introducing CE continuing education requirements

00:49:58,689 -- 00:50:02,093
and licensing levels like mortgage brokers recently.

00:50:03,060 -- 00:50:04,528
Yeah, that is a great comment.

00:50:04,528 -- 00:50:09,300
It is something that we do look across our different regimes.

00:50:09,900 -- 00:50:12,069
I would say

00:50:12,069 -- 00:50:14,972
in the insurance area, yes, we could do more

00:50:14,972 -- 00:50:18,409
potentially at the licensing level, but I alluded to that

00:50:18,409 -- 00:50:22,113
we actually don't have true product suitability requirements.

00:50:22,546 -- 00:50:25,516
And so maybe so you have to kind of pick your battles

00:50:25,516 -- 00:50:28,519
as to where you think your biggest impact is going to be.

00:50:30,321 -- 00:50:32,790
I think we might be done.

00:50:32,790 -- 00:50:33,724
I lied.

00:50:33,724 -- 00:50:35,626
What are you doing to raise FSRA's awareness

00:50:35,626 -- 00:50:38,662
among consumers in Ontario, particularly the most vulnerable,

00:50:38,696 -- 00:50:43,400
whose first language is not English and who may not have easy online access?

00:50:44,768 -- 00:50:47,571
Yeah, FSRA awareness actually is a bit of a concern.

00:50:47,571 -- 00:50:50,407
Some of the consumer research I talked about in the first question,

00:50:50,407 -- 00:50:53,410
most people don't know who we are,

00:50:54,178 -- 00:50:56,814
which is of course, a little upsetting to me.

00:50:56,814 -- 00:50:58,916
My kids kind of know who I am, but they don't

00:50:58,916 -- 00:51:00,918
watch the videos on our website.

00:51:00,918 -- 00:51:02,152
They don't really know what I do.

00:51:02,152 -- 00:51:04,455
I think most regulators would fall into that bucket.

00:51:04,455 -- 00:51:07,458
Yes. So

00:51:07,691 -- 00:51:10,461
we think and that's why something like the public registry,

00:51:10,461 -- 00:51:13,430
we're trying to focus on credential check.

00:51:13,430 -- 00:51:17,268
And we actually have targeted strategies which don't cost a lot of money.

00:51:17,268 -- 00:51:20,271
So we don't we're not going to run ads on the Super Bowl,

00:51:20,537 -- 00:51:24,074
but we do things in media and particularly search related

00:51:24,308 -- 00:51:26,944
so that where we do have some information out there,

00:51:26,944 -- 00:51:30,247
if someone does a search on getting a private mortgage

00:51:30,247 -- 00:51:34,585
or buying a life insurance policy or finding a financial adviser,

00:51:34,918 -- 00:51:38,055
we want our information to come up quickly.

00:51:38,322 -- 00:51:38,989
Right.

00:51:38,989 -- 00:51:41,959
So whether it's top or not, I never know whether we're the ones who are going

00:51:41,959 -- 00:51:45,295
to pay enough to get to the top billing, but we want it to be on that front page

00:51:45,896 -- 00:51:48,232
and we think that that will make us more accessible.

00:51:48,232 -- 00:51:52,269
And it isn't, even though personally, I'd love people to know who FSRA is, it's

00:51:52,269 -- 00:51:52,569
not really

00:51:52,569 -- 00:51:56,140
that important to me as long as they find the information that they need.

00:51:56,840 -- 00:51:59,943
Think about the financial services that people are buying.

00:52:00,444 -- 00:52:02,279
They're often very episodic in their life.

00:52:02,279 -- 00:52:03,547
So they're event driven.

00:52:03,547 -- 00:52:05,249
You know, you're getting married.

00:52:05,249 -- 00:52:08,218
And so you're thinking about another person in your life or having a child.

00:52:08,218 -- 00:52:09,720
So you think about Life Insurance.

00:52:09,720 -- 00:52:11,321
You're buying a house for the first time.

00:52:11,321 -- 00:52:12,856
So you're thinking about a Mortgage.

00:52:12,856 -- 00:52:16,393
You're starting to think about your kids going to school or your retirement,

00:52:16,393 -- 00:52:17,795
so you're starting to save.

00:52:17,795 -- 00:52:20,197
So those are all big life changes.

00:52:20,197 -- 00:52:23,934
And so our information has to be there when you need it.

00:52:24,301 -- 00:52:27,371
I do think there's a great role for educating people,

00:52:27,371 -- 00:52:30,374
even if those are coming through school, giving them some basic grounding.

00:52:30,407 -- 00:52:34,178
But the truth is, if you don't use knowledge, it tends to atrophy.

00:52:34,444 -- 00:52:37,447
And so hopefully, though, we can give them enough

00:52:37,714 -- 00:52:40,517
basic knowledge through their education that then they at least know

00:52:40,517 -- 00:52:43,520
how to look for it when one of those life events is happening.

00:52:43,520 -- 00:52:47,558
And so our goal at FSRA is and we're doing some very simple things,

00:52:47,858 -- 00:52:50,827
it's like, if you're going to get a mortgage,

00:52:50,961 -- 00:52:53,964
here's what you need to ask about a Life Insurance policy.

00:52:53,997 -- 00:52:55,732
Here's what you need to ask.

00:52:55,732 -- 00:52:57,501
What's the value of a pension?

00:52:57,501 -- 00:53:00,971
And so that type of information where it's targeted and,

00:53:01,672 -- 00:53:04,074
you know, in a way that people can easily consume.

00:53:04,074 -- 00:53:07,477
So on a on a page basically, not something that's long and complicated.

00:53:07,744 -- 00:53:10,147
So it's very different when we're dealing with consumers,

00:53:10,147 -- 00:53:12,115
then we're dealing with the regulated sectors

00:53:12,115 -- 00:53:15,786
where the level of language, the complexity, we have to have to deal

00:53:15,786 -- 00:53:20,290
with that. So we're very optimistic that we will get our name out increasingly.

00:53:20,724 -- 00:53:23,994
We'll get our information out.

00:53:23,994 -- 00:53:26,496
And regardless of whether it's our name and our brand,

00:53:26,496 -- 00:53:29,900
even only the sectors know who we are, that's fine as long as the

00:53:29,900 -- 00:53:30,968
consumers get what they need.

00:53:31,969 -- 00:53:34,504
So I think we have enough time to end on Credit Unions.

00:53:34,504 -- 00:53:37,341
And I'm going to ask sort of a multi-pronged question here

00:53:37,341 -- 00:53:38,608
to the Credit Unions.

00:53:38,608 -- 00:53:42,379
So what's your position on Credit Unions moving to the federal regime?

00:53:42,813 -- 00:53:45,849
As well does FSRA want to continue regulating Credit Unions?

00:53:45,849 -- 00:53:48,852
And do you see any further consolidation among the Credit Unions?

00:53:49,753 -- 00:53:52,756
So credit unions, it all comes back to our objects,

00:53:53,190 -- 00:53:56,093
our objects, our basically about making sure

00:53:56,093 -- 00:53:59,930
the stability in the sector is strong, innovative, competitive,

00:54:01,231 -- 00:54:04,601
the DIRF and Credit Unions because it's a co-insurance plan and not exposed to

00:54:04,601 -- 00:54:08,338
loss members are protected, you know, from a conduct perspective.

00:54:08,772 -- 00:54:12,709
And so we look at those objects and they really drive the answer

00:54:12,709 -- 00:54:14,244
to all those questions.

00:54:14,244 -- 00:54:17,013
So if a Credit Union

00:54:17,013 -- 00:54:20,016
does want to go federal, that's a choice for its members.

00:54:20,750 -- 00:54:21,485
But we have

00:54:22,419 -- 00:54:25,422
a say in it because we have to think about the stability

00:54:25,489 -- 00:54:29,359
of the overall Credit Union sector in Ontario.

00:54:29,993 -- 00:54:32,529
And so we will have

00:54:32,529 -- 00:54:37,100
you know, an interesting debate about what does it mean if major Credit Unions

00:54:37,367 -- 00:54:40,370
do start to go federal for the stability of the sector.

00:54:40,637 -- 00:54:44,407
So I'm not precluding that discussion, but it is important for us

00:54:44,407 -- 00:54:47,811
to take our object very seriously when we're reviewing those decisions.

00:54:48,578 -- 00:54:50,814
What I think is really important, though, is we're trying

00:54:50,814 -- 00:54:53,817
to create what I call the Ontario advantage.

00:54:53,950 -- 00:54:58,321
The Ontario advantages that we believe we are developing a world class system

00:54:58,655 -- 00:55:01,658
for the regulation and supervision of Credit Unions in Ontario.

00:55:01,791 -- 00:55:05,595
It will be data based, it will be principles based, risk based supervision.

00:55:05,929 -- 00:55:08,798
It's going to make sure that we're not in there just checking loan files,

00:55:08,798 -- 00:55:12,636
that we're looking at the policies and processes within a Credit Union about

00:55:12,869 -- 00:55:14,971
they do their business, that they're members,

00:55:14,971 -- 00:55:16,740
they have codes of conduct that they're following.

00:55:16,740 -- 00:55:19,075
So the members are honored and well protected.

00:55:19,075 -- 00:55:20,710
We think that with that,

00:55:20,710 -- 00:55:22,712
some of the things I talked about with the Deposit Insurance

00:55:22,712 -- 00:55:26,282
Reserve Fund, making sure that there's good liquidity in the system, good regulatory

00:55:26,282 -- 00:55:29,719
tools that we do have to resolve a Credit Union, all that will give us

00:55:29,719 -- 00:55:34,157
a great Credit Union system and I think it will the Ontario advantage

00:55:34,591 -- 00:55:38,828
and the Credit Unions will want to stay so we're not inundated.

00:55:38,828 -- 00:55:41,798
I don't even know if we've ever received an application to go federal.

00:55:41,831 -- 00:55:46,870
Interestingly, most of the Credit Union to get to that size,

00:55:47,170 -- 00:55:49,005
they've realize that they can create a bank sub

00:55:49,005 -- 00:55:52,409
which gives them a federal charter, and so it gives them all the advantages

00:55:52,409 -- 00:55:55,779
if they need to go to provincial without actually changing

00:55:56,012 -- 00:55:57,914
their jurisdiction of incorporation.

00:55:57,914 -- 00:55:59,215
That's different than some of the B.C.

00:55:59,215 -- 00:56:01,251
Credit Unions where they have went federal.

00:56:01,251 -- 00:56:04,354
So you know, we're not against going federal,

00:56:04,354 -- 00:56:07,323
but we will always view it through our objects.

00:56:07,323 -- 00:56:10,193
What is the best for that credit union and for the system

00:56:11,327 -- 00:56:11,961
that also.

00:56:11,961 -- 00:56:13,897
So do we want to continue regulating Credit Unions?

00:56:13,897 -- 00:56:15,932
Yeah, it's our job.

00:56:15,932 -- 00:56:17,467
I mean, those are our objects.

00:56:17,467 -- 00:56:20,470
It's not a choice. You don't get a choice.

00:56:21,037 -- 00:56:22,372
You sign up to be a regulator.

00:56:22,372 -- 00:56:24,607
You look at your statute, you have objects.

00:56:24,607 -- 00:56:26,276
We do that. That's what we do for a living.

00:56:26,276 -- 00:56:29,479
So want is not it doesn't come into it.

00:56:29,913 -- 00:56:34,050
As to consolidation, sure, there's been a ton of consolidation

00:56:34,050 -- 00:56:37,053
of Credit Union sector and we do expect it's going to continue.

00:56:37,353 -- 00:56:41,090
But we don't have a view on what is the right number of Credit Unions

00:56:41,090 -- 00:56:43,159
or what is the right size of a Credit Union.

00:56:43,159 -- 00:56:46,796
We think obviously is a trend to larger because they can offer more products

00:56:46,796 -- 00:56:49,799
and services that can average down overhead costs.

00:56:49,899 -- 00:56:54,404
So there's there are advantages, but let's face it, there are many smaller

00:56:54,404 -- 00:56:57,407
and mid-sized Credit Unions that have very successful business models.

00:56:57,574 -- 00:56:59,642
They serve their communities.

00:56:59,642 -- 00:57:04,280
Credit Unions are very important source of competition to other financial

00:57:04,280 -- 00:57:07,317
institutions and understanding the needs of their members.

00:57:07,317 -- 00:57:09,018
That is probably their most unique

00:57:09,018 -- 00:57:11,287
selling proposition that I've seen over the years

00:57:11,287 -- 00:57:14,290
is that they work harder to understand their member needs

00:57:14,290 -- 00:57:15,858
and how they serve them.

00:57:15,858 -- 00:57:19,595
And so with that, yeah, we may continue with some smaller Credit Unions

00:57:19,595 -- 00:57:23,766
for forever, but yes, more consolidation.

00:57:23,933 -- 00:57:26,936
Yeah, I do think that that is probably going to happen.

00:57:27,136 -- 00:57:31,641
But we want the marketplace to essentially try and decide that sometimes we may

00:57:32,241 -- 00:57:34,544
of course we have to be involved in the decisions on mergers,

00:57:34,544 -- 00:57:37,313
but that's something that we're not out there advocating for.

00:57:37,313 -- 00:57:41,617
We're not going to try and centrally plan this like we have an industrial policy

00:57:41,617 -- 00:57:45,321
and we're going to decide that it should be 15 Credit Unions in Ontario or 50.

00:57:45,855 -- 00:57:49,892
We want to let the marketplace decide that what we supervise and we regulate it,

00:57:50,093 -- 00:57:51,994
always keeping our objects in mind.

00:57:51,994 -- 00:57:52,728
Right.

00:57:52,728 -- 00:57:55,164
And we are officially out of time.

00:57:55,164 -- 00:57:56,799
I appreciate all the comments.

00:57:56,799 -- 00:57:58,201
If you didn't get your question answered,

00:57:58,201 -- 00:58:00,002
I think we're just going to be holding on to them

00:58:00,002 -- 00:58:02,605
and we'll look to get a response and post them online.

00:58:02,605 -- 00:58:05,475
You can also reach out to me as well [email protected]

00:58:05,475 -- 00:58:08,845
Mark, thank you so much for joining me on stage today.

00:58:08,978 -- 00:58:10,112
It's been fantastic.

00:58:10,112 -- 00:58:13,483
Thank you Clara I’ve enjoyed it.

00:00:05,171 -- 00:00:05,605
All right.

00:00:05,605 -- 00:00:08,174
Welcome back everyone.

00:00:08,174 -- 00:00:09,676
As many of you know today,

00:00:09,676 -- 00:00:11,611
you can't really turn on the news

00:00:11,611 -- 00:00:15,482
without seeing the impact of climate change.

00:00:15,482 -- 00:00:19,586
And it has massive impacts across financial services.

00:00:20,320 -- 00:00:23,623
So today, facilitating our expert panel for climate

00:00:23,623 -- 00:00:26,726
discussion is the Head of Financial Institutions

00:00:26,726 -- 00:00:27,727
and Mortgage Broker

00:00:27,727 -- 00:00:31,698
Conduct and Media Superstar, Antoinette Leung.

00:00:32,298 -- 00:00:34,667
Introduce your panel.

00:00:34,667 -- 00:00:37,303
Sure. Thank you Judy.

00:00:37,303 -- 00:00:41,307
I'm very excited and delighted to moderate this panel.

00:00:41,608 -- 00:00:44,244
As a consumer protection agency,

00:00:44,244 -- 00:00:46,146
FSRA vision is financial

00:00:46,146 -- 00:00:48,648
safety, fairness and choice for consumers.

00:00:48,648 -- 00:00:51,684
And we know that climate is impacting

00:00:51,684 -- 00:00:54,287
everyone as consumers as well as business.

00:00:54,287 -- 00:00:56,789
So I'm excited that we have two experts

00:00:56,789 -- 00:00:58,358
with us today to talk about

00:00:58,358 -- 00:01:02,262
how businesses can adapt their business model,

00:01:02,262 -- 00:01:05,498
to continue to provide services for consumers.

00:01:05,498 -- 00:01:09,369
And, I'd like to introduce our two experts.

00:01:09,369 -- 00:01:09,836
Dr.

00:01:09,836 -- 00:01:10,169
Blair

00:01:10,169 -- 00:01:12,405
Feltmate is the Head of the Intact Centre

00:01:12,405 -- 00:01:15,808
on Climate Adaptation at the University of Waterloo.

00:01:15,808 -- 00:01:19,412
And Paul Kovacs is the Founder and Executive Director

00:01:19,412 -- 00:01:21,281
of the Institute for Catastrophic

00:01:21,281 -- 00:01:23,783
Loss Reduction at Western University.

00:01:23,783 -- 00:01:26,352
Their full bios is on our conference website.

00:01:26,352 -- 00:01:30,056
So I want to jump right into our discussion.

00:01:30,056 -- 00:01:31,758
So maybe before we start,

00:01:31,758 -- 00:01:33,192
I would like to ask each of

00:01:33,192 -- 00:01:35,228
you to set the stage for us,

00:01:36,362 -- 00:01:38,631
about what is physical climate risk?

00:01:38,631 -- 00:01:39,565
What are some of the things

00:01:39,565 -- 00:01:41,467
that we're currently facing?

00:01:41,467 -- 00:01:43,903
Maybe I'll start with you, Blair. Sure.

00:01:43,903 -- 00:01:44,871
Thank you very much.

00:01:44,871 -- 00:01:47,073
And I am, pleased to be here this morning

00:01:47,073 -- 00:01:49,208
to talk about, climate change.

00:01:49,208 -- 00:01:50,343
And I thought I'd start out

00:01:50,343 -- 00:01:51,711
with something that, quite frankly,

00:01:51,711 -- 00:01:52,612
I can tell you right now

00:01:52,612 -- 00:01:53,746
for the first

00:01:53,746 -- 00:01:54,747
couple of minutes is going to be

00:01:54,747 -- 00:01:56,249
a little bit depressing,

00:01:56,249 -- 00:01:58,017
and it's not going to put you in a good mood,

00:01:58,017 -- 00:01:59,685
but I just want to really profile

00:01:59,685 -- 00:02:01,320
the formidability of the challenge

00:02:01,320 -- 00:02:03,156
we're facing with climate change.

00:02:03,156 -- 00:02:04,657
Extreme weather risk,

00:02:04,657 -- 00:02:07,860
emphasizing the point that it is irreversible.

00:02:07,860 -- 00:02:10,196
Period. Climate change is here to stay.

00:02:10,196 -- 00:02:12,198
We're not going backwards on climate change.

00:02:12,198 -- 00:02:14,801
We can slow down the rate of climate change

00:02:14,801 -- 00:02:16,803
by lowering the discharge

00:02:16,803 -- 00:02:19,839
of greenhouse gas emissions into the atmosphere.

00:02:19,839 -- 00:02:21,908
But we're not going backwards.

00:02:21,908 -- 00:02:24,644
And this is not my cavalier opinion.

00:02:24,644 -- 00:02:27,146
This is an opinion expressed by

00:02:27,146 -- 00:02:29,348
a variety of authoritative agencies,

00:02:29,348 -- 00:02:33,085
both at the national level and internationally.

00:02:33,085 -- 00:02:35,021
And if you allow me, I'm just going to read 1 or 2

00:02:35,021 -- 00:02:36,489
sentences from

00:02:36,489 -- 00:02:37,390
various agencies

00:02:37,390 -- 00:02:40,059
talking about the irreversibility of climate change.

00:02:41,194 -- 00:02:43,362
For example, in

00:02:43,362 -- 00:02:45,431
2019, the

00:02:45,431 -- 00:02:46,866
federal government of Canada,

00:02:46,866 -- 00:02:49,268
through Environment and Climate Change Canada,

00:02:49,268 -- 00:02:50,770
they wrote a report called

00:02:50,770 -- 00:02:53,206
Canada's Changing Climate Report.

00:02:53,206 -- 00:02:54,340
And this was authored

00:02:54,340 -- 00:02:55,241
by, more

00:02:55,241 -- 00:02:57,176
or less about a dozen climate scientists

00:02:57,176 -- 00:02:59,378
from Environment and Climate Change Canada.

00:02:59,378 -- 00:03:00,479
So they had the

00:03:00,479 -- 00:03:02,548
proper authority to

00:03:02,548 -- 00:03:04,884
pay attention to what they're saying in this report.

00:03:04,884 -- 00:03:06,385
And in that report,

00:03:06,385 -- 00:03:08,187
they state, and I'm quoting,

00:03:08,187 -- 00:03:10,122
“Canada's climate has warmed

00:03:10,122 -- 00:03:11,324
and will warm further

00:03:11,324 -- 00:03:14,093
in the future, driven by human influence,”

00:03:14,093 -- 00:03:16,028
which is the burning of fossil fuels

00:03:16,028 -- 00:03:19,065
that puts CO2 in the atmosphere and traps energy

00:03:19,065 -- 00:03:20,833
that would otherwise escape into space.

00:03:20,833 -- 00:03:23,636
It stays in the system and causes warming,

00:03:23,636 -- 00:03:25,504
driven by human influence.

00:03:25,504 -- 00:03:28,374
This warming is effectively irreversible,

00:03:28,374 -- 00:03:30,609
and this is the first time that I'm aware of that.

00:03:30,609 -- 00:03:32,211
The federal government of Canada

00:03:32,211 -- 00:03:35,414
recognized the irreversibility of climate change.

00:03:35,414 -- 00:03:39,652
And then in 2022, from the intergovernmental Panel

00:03:39,652 -- 00:03:40,686
on Climate Change,

00:03:40,686 -- 00:03:42,488
they wrote a report called, “Climate Change

00:03:42,488 -- 00:03:46,492
2022 Impacts Adaptation and Vulnerability.”

00:03:47,059 -- 00:03:49,028
And this is a group of several

00:03:49,028 -- 00:03:50,229
hundred climate scientists

00:03:50,229 -- 00:03:51,964
that all they do seven days

00:03:51,964 -- 00:03:53,766
a week to study climate science.

00:03:53,766 -- 00:03:56,235
And they wrote, and I quote,

00:03:56,235 -- 00:03:58,838
“it is indisputable that human activities,

00:03:58,838 -- 00:04:00,639
the burning of fossil fuels

00:04:00,639 -- 00:04:01,373
are causing

00:04:01,373 -- 00:04:04,076
climate change, making extreme climate events

00:04:04,076 -- 00:04:06,278
including heatwaves, heavy rainfall

00:04:06,278 -- 00:04:09,248
and droughts more frequent and severe.”

00:04:09,248 -- 00:04:10,149
And then,

00:04:10,149 -- 00:04:11,350
just a few months back,

00:04:11,350 -- 00:04:13,886
the United Nations Environmental Program,

00:04:13,886 -- 00:04:16,055
released a report called, “Broken Report.”

00:04:16,055 -- 00:04:20,559
And they said there's no credible pathway to 1.5°C.

00:04:20,926 -- 00:04:24,663
So, point number one is we're not going backwards on

00:04:24,663 -- 00:04:25,397
climate change.

00:04:25,397 -- 00:04:26,866
It's here to stay. Extreme weather

00:04:26,866 -- 00:04:29,235
will get more extreme as a function of time.

00:04:29,235 -- 00:04:30,836
Sometimes you'll hear in the media

00:04:30,836 -- 00:04:33,305
they talk about the new normal of climate change.

00:04:33,305 -- 00:04:34,840
There is no new normal.

00:04:34,840 -- 00:04:37,142
There's just evolving risk.

00:04:37,142 -- 00:04:38,777
We can slow down the rate of change,

00:04:38,777 -- 00:04:41,213
but it's going to get more challenging over time.

00:04:41,213 -- 00:04:42,515
And I'll leave it at that

00:04:42,515 -- 00:04:45,284
and maybe turn to Paul’s thoughts. Sure, Paul.

00:04:47,319 -- 00:04:47,653
Thank you

00:04:47,653 -- 00:04:49,154
for including climate change

00:04:49,154 -- 00:04:52,191
in the conversation today.

00:04:52,191 -- 00:04:54,593
From the research that I have been doing

00:04:54,593 -- 00:04:57,696
and the research that I've been following,

00:04:57,696 -- 00:05:00,299
our climate has changed.

00:05:00,299 -- 00:05:04,303
There's significant further change coming.

00:05:04,436 -- 00:05:08,674
And this is going to profoundly change the business

00:05:08,874 -- 00:05:11,110
of all of the financial institutions

00:05:11,110 -- 00:05:14,847
being monitored by FSRA.

00:05:14,847 -- 00:05:18,851
As a consumer of financial services living in Ontario,

00:05:18,884 -- 00:05:22,888
I'm counting on regulators, supervisors

00:05:23,255 -- 00:05:24,556
to assure me

00:05:24,556 -- 00:05:26,358
that the financial institutions

00:05:26,358 -- 00:05:30,362
are properly managing these risks.

00:05:30,696 -- 00:05:33,132
The failure of policymakers to deal with

00:05:33,132 -- 00:05:35,000
climate change

00:05:35,000 -- 00:05:37,970
has resulted in two fundamental risks

00:05:37,970 -- 00:05:40,372
for financial institutions.

00:05:40,372 -- 00:05:42,341
One being transitional risk

00:05:42,341 -- 00:05:45,878
and the other being physical risk.

00:05:45,878 -- 00:05:49,782
So it's the supervision of how financial institutions

00:05:49,782 -- 00:05:53,786
across all the sectors are handling transition risk

00:05:54,219 -- 00:05:57,489
and handling physical risks. That I'm concerned about.

00:05:59,825 -- 00:06:00,225
It's my

00:06:00,225 -- 00:06:04,229
opinion that on the physical risk area,

00:06:04,296 -- 00:06:05,164
you've got,

00:06:05,164 -- 00:06:07,366
Property Insurance companies that are about ten years

00:06:07,366 -- 00:06:09,134
ahead of all the other financial companies

00:06:09,134 -- 00:06:13,405
that have been
working on this file for more than a decade

00:06:14,039 -- 00:06:18,510
and doing some very prominent things

00:06:18,510 -- 00:06:22,014
and really trying to manage these risks.

00:06:22,014 -- 00:06:23,382
But on the physical risk side,

00:06:23,382 -- 00:06:25,551
outside of the Property Insurance Industry,

00:06:25,551 -- 00:06:27,219
there's very little going on.

00:06:27,219 -- 00:06:30,022
There's a lot that needs to be done.

00:06:30,022 -- 00:06:31,757
Some headlines in Québec

00:06:31,757 -- 00:06:33,292
Desjardins made some announcements

00:06:33,292 -- 00:06:36,628
about their lending for people living in floodplains.

00:06:36,628 -- 00:06:38,997
Some common sense stuff that

00:06:38,997 -- 00:06:40,432
I think should have happened years ago.

00:06:40,432 -- 00:06:42,634
So it's
great to see some changes starting to happen

00:06:42,634 -- 00:06:45,537
outside of the insurance industry.

00:06:45,537 -- 00:06:47,639
But they're way behind.

00:06:47,639 -- 00:06:50,309
The leadership that's been in the insurance industry

00:06:51,376 -- 00:06:52,344
on the,

00:06:52,344 -- 00:06:53,712
transition risk side,

00:06:53,712 -- 00:06:56,949
as Mark touched on earlier today,

00:06:56,949 -- 00:06:59,918
knowing how financial institutions are investing,

00:06:59,918 -- 00:07:02,587
knowing how financial institutions are lending,

00:07:02,587 -- 00:07:03,121
who they lend

00:07:03,121 -- 00:07:05,123
to, it's a lot more complicated

00:07:05,123 -- 00:07:05,824
with the change

00:07:05,824 -- 00:07:06,858
that's happening in the climate

00:07:06,858 -- 00:07:10,062
about the right investments to make

00:07:10,062 -- 00:07:13,532
and OSFI’s leadership to look for disclosure

00:07:13,532 -- 00:07:16,268
about how financial institutions

00:07:16,268 -- 00:07:19,237
are thinking about these risks.

00:07:19,237 -- 00:07:20,972
And thinking about this transition

00:07:20,972 -- 00:07:23,709
that's taking place, for me is very exciting.

00:07:23,709 -- 00:07:27,212
It's great to see the change that is starting to come.

00:07:27,212 -- 00:07:28,947
Anyway, so for me, setting

00:07:28,947 -- 00:07:31,383
the context, the climate is changing.

00:07:31,383 -- 00:07:32,818
It's going to have a profound impact

00:07:32,818 -- 00:07:34,419
on the financial sector.

00:07:34,419 -- 00:07:39,224
Having leadership from FSRA and OSFI to oversee

00:07:39,224 -- 00:07:42,160
how financial institutions are thinking about

00:07:42,160 -- 00:07:43,929
imagining this is incredibly important.

00:07:44,996 -- 00:07:45,664
And I

00:07:45,664 -- 00:07:49,668
think, within the sector, the regulatory sector,

00:07:49,868 -- 00:07:53,338
terms like,

00:07:53,338 -- 00:07:55,841
transmission risk and physical risk

00:07:55,841 -- 00:07:57,776
are going to become really commonplace,

00:07:57,776 -- 00:07:59,444
like prudential risk

00:07:59,444 -- 00:08:03,181
and Market Conduct risk, has been for many years.

00:08:03,181 -- 00:08:05,050
So understanding what those terms mean

00:08:05,050 -- 00:08:06,985
and how to properly act upon that,

00:08:06,985 -- 00:08:09,488
I think will be really important going forward.

00:08:09,488 -- 00:08:10,255
That's great.

00:08:10,255 -- 00:08:11,823
So that's actually a great segue

00:08:11,823 -- 00:08:15,160
into our first question, which is what do you think?

00:08:15,160 -- 00:08:16,995
You know,
each of our regulated sector

00:08:16,995 -- 00:08:20,999
can do to better prepare for extreme weather

00:08:21,099 -- 00:08:22,200
that is to come.

00:08:22,200 -- 00:08:23,168
And I know that, you know,

00:08:23,168 -- 00:08:24,369
you've both mentioned

00:08:24,369 -- 00:08:26,004
that on the P&C side,

00:08:26,004 -- 00:08:27,372
Property and Casualty side,

00:08:27,372 -- 00:08:29,007
there has been a lot of thinking about it.

00:08:29,007 -- 00:08:31,576
What about our other regulated sectors?

00:08:31,576 -- 00:08:34,079
Blair, do you have any thoughts on those?

00:08:34,079 -- 00:08:34,946
Yeah, I think

00:08:36,748 -- 00:08:38,917
there's good news here by the way.

00:08:38,917 -- 00:08:41,152
You know, we actually know what to do

00:08:41,152 -- 00:08:42,420
before turning to the sectors.

00:08:42,420 -- 00:08:43,955
We actually know what to do

00:08:43,955 -- 00:08:45,523
if we're talking particularly about Property

00:08:45,523 -- 00:08:47,092
Casualty Insurance and Life

00:08:47,092 -- 00:08:47,892
and Health Insurance

00:08:47,892 -- 00:08:51,963
because people's houses and basement flooding,

00:08:52,197 -- 00:08:54,566
we now know quantitatively that this adds

00:08:54,566 -- 00:08:57,669
psychosocial mental health stress to people.

00:08:57,669 -- 00:08:59,671
It affects long time lost time from work

00:08:59,671 -- 00:09:01,272
when their houses are flooded.

00:09:01,272 -- 00:09:03,608
It's not just a P&C issue now.

00:09:03,608 -- 00:09:05,944
It's also a Life and Health issue.

00:09:05,944 -- 00:09:09,481
But for example, for

00:09:09,481 -- 00:09:13,251
flooding and wildfire, which are the two most costly

00:09:13,251 -- 00:09:16,087
physical climate risks realized in the country.

00:09:16,087 -- 00:09:18,156
And flooding being the number one peril.

00:09:18,156 -- 00:09:20,225
And then out of that residential being,

00:09:20,225 -- 00:09:22,127
residential basement flooding

00:09:22,127 -- 00:09:24,029
being the most costly expression

00:09:24,029 -- 00:09:26,631
of climate change in the country.

00:09:26,631 -- 00:09:28,032
That's the bad news.

00:09:28,032 -- 00:09:31,536
The good news is that, over,

00:09:31,536 -- 00:09:34,506
about maybe the last ten years or so

00:09:34,506 -- 00:09:36,040
working with organizations

00:09:36,040 -- 00:09:38,176
like the Standards Council of Canada,

00:09:38,176 -- 00:09:40,345
the National Research Council,

00:09:40,345 -- 00:09:44,682
Canadian Standards Association, I think ICLR.

00:09:44,682 -- 00:09:47,185
And I like to think the INTACT Center and others...

00:09:47,185 -- 00:09:48,319
What we've developed over

00:09:48,319 -- 00:09:50,722
the last ten years for the country

00:09:50,722 -- 00:09:52,557
is very good,

00:09:52,557 -- 00:09:55,794
practical, meaningful, cost effective Guidance

00:09:55,794 -- 00:09:58,696
as actions that can be taken or implemented

00:09:58,696 -- 00:10:01,666
to mitigate flood risk at the level of the home

00:10:01,666 -- 00:10:03,968
and at the level of the community.

00:10:03,968 -- 00:10:05,336
And the same for wildfire.

00:10:05,336 -- 00:10:07,305
We know what to do to mitigate wildfire

00:10:07,305 -- 00:10:09,307
risk for homes, businesses and communities

00:10:09,307 -- 00:10:10,975
and forested and grassland regions

00:10:10,975 -- 00:10:12,043
to make it such that

00:10:12,043 -- 00:10:13,278
when a fire comes through,

00:10:13,278 -- 00:10:14,846
it doesn't burn down every home

00:10:14,846 -- 00:10:16,848
or burn down the community.

00:10:16,848 -- 00:10:20,885
Now for Property and Casualty Insurers, for example,

00:10:20,885 -- 00:10:23,888
one of the rather deeply involved in, the

00:10:23,888 -- 00:10:26,524
one of the areas that they're pushing,

00:10:26,524 -- 00:10:27,625
very aggressively

00:10:27,625 -- 00:10:28,226
and the Insurance

00:10:28,226 -- 00:10:32,630
Bureau of Canada and others is giving direction

00:10:32,964 -- 00:10:34,232
to homeowners

00:10:34,232 -- 00:10:37,969
as to actions they can take around their property.

00:10:37,969 -- 00:10:40,204
Generally speaking, over a long weekend

00:10:40,204 -- 00:10:43,408
without special expertise for very little money

00:10:43,408 -- 00:10:44,409
in the hundreds,

00:10:44,409 -- 00:10:46,411
maybe the low thousands of dollars,

00:10:46,411 -- 00:10:48,579
that on a scale of 0 to 100, 100

00:10:48,579 -- 00:10:50,181
being the worst for basement flooding.

00:10:50,181 -- 00:10:53,284
You can take a home from an 80 down to a 20

00:10:53,284 -- 00:10:54,218
just like that,

00:10:54,218 -- 00:10:56,554
by providing the appropriate information

00:10:56,554 -- 00:10:58,556
to people to act upon to protect their homes.

00:10:58,556 -- 00:10:59,390
The reason

00:10:59,390 -- 00:11:01,459
they're not protecting their home for most homeowners

00:11:01,459 -- 00:11:02,894
is, is not that they won't do it, it's

00:11:02,894 -- 00:11:04,095
because they don't know what to do.

00:11:04,095 -- 00:11:07,298
But when you actually give them the information,

00:11:07,298 -- 00:11:11,269
simple diagrammatic infographic style information,

00:11:11,269 -- 00:11:12,170
we find that,

00:11:13,337 -- 00:11:16,174
70% of people will take two actions to

00:11:16,174 -- 00:11:17,108
protect their homes

00:11:17,108 -- 00:11:19,310
from basement flooding within a six month

00:11:19,310 -- 00:11:21,479
period that they otherwise wouldn't have done.

00:11:21,479 -- 00:11:22,513
Now, let's see,

00:11:22,513 -- 00:11:24,816
with the Credit Unions, a role that they can play.

00:11:24,816 -- 00:11:26,751
And I'll give you one tangible example.

00:11:26,751 -- 00:11:28,019
So I'm going to mention Meridian.

00:11:28,019 -- 00:11:30,354
And this is positive news for Meridian,

00:11:30,354 -- 00:11:32,290
just in case Meridian’s here are getting nervous.

00:11:32,290 -- 00:11:38,463
On Meridian's website now they list infographics.

00:11:38,463 -- 00:11:40,932
They present infographics on their website

00:11:40,932 -- 00:11:42,900
to their customers that they can,

00:11:42,900 -- 00:11:45,903
or members, I think they call them, that

00:11:45,903 -- 00:11:47,305
that give them guidance on

00:11:47,305 -- 00:11:50,107
how to protect their home from basement flooding.

00:11:50,107 -- 00:11:52,109
The Property and Casualty insurers

00:11:52,109 -- 00:11:54,278
are doing exactly the same thing,

00:11:54,278 -- 00:11:56,180
rolling this stuff out in simple language

00:11:56,180 -- 00:11:57,882
to help people help themselves.

00:11:57,882 -- 00:11:58,816
And now also,

00:11:58,816 -- 00:12:01,919
we have the Life and Health Insurers on board doing

00:12:01,919 -- 00:12:04,255
the same thing. So the

00:12:05,323 -- 00:12:07,258
formability of the challenge,

00:12:07,258 -- 00:12:08,526
it almost can't be overstated.

00:12:08,526 -- 00:12:10,795
But the good news is we know what to do

00:12:10,795 -- 00:12:13,264
to counter the negative effects.

00:12:13,264 -- 00:12:13,698
That's great.

00:12:13,698 -- 00:12:14,799
So it's helping

00:12:14,799 -- 00:12:16,000
consumers help themselves

00:12:16,000 -- 00:12:19,837
so that businesses can continue to offer services.

00:12:19,837 -- 00:12:21,572
And just so everyone knows that

00:12:21,572 -- 00:12:22,974
a lot of these resources

00:12:22,974 -- 00:12:25,076
are actually included in the conference website.

00:12:25,076 -- 00:12:27,245
You can take a look at that. Paul,

00:12:27,245 -- 00:12:28,913
what about,

00:12:28,913 -- 00:12:29,947
are there anything else

00:12:29,947 -- 00:12:33,918
that we're missing that you think the regulated sector

00:12:34,018 -- 00:12:35,319
should be thinking about

00:12:35,319 -- 00:12:39,290
as we encounter more and more extreme weather events?

00:12:41,826 -- 00:12:44,261
We know the change that's coming to the climate

00:12:44,261 -- 00:12:46,030
the next 25 years or so,

00:12:46,030 -- 00:12:48,299
there will be more large storms,

00:12:48,299 -- 00:12:51,535
the kind of storms that can cause damage.

00:12:51,535 -- 00:12:54,772
About 90% of the damage in Ontario

00:12:54,772 -- 00:12:56,173
over the last 50 years

00:12:56,173 -- 00:12:59,710
or so has been for different kinds of risks.

00:12:59,710 -- 00:13:01,078
As Blair has touched on basement

00:13:01,078 -- 00:13:03,748
flooding and flooding, wildfires,

00:13:03,748 -- 00:13:06,217
also severe wind and hail.

00:13:06,217 -- 00:13:09,887
And for each of those four climate related risks,

00:13:09,887 -- 00:13:12,556
we know how to protect our buildings

00:13:12,556 -- 00:13:13,491
and our infrastructure.

00:13:13,491 -- 00:13:16,093
All of the protective actions are known.

00:13:17,661 -- 00:13:18,329
Critical

00:13:18,329 -- 00:13:20,030
thing for the financial services

00:13:20,030 -- 00:13:22,433
sector is to encourage people

00:13:22,433 -- 00:13:26,437
to start to bring those features into effect.

00:13:26,737 -- 00:13:28,773
My home is 130 years old.

00:13:28,773 -- 00:13:30,341
Most of the modern ideas

00:13:30,341 -- 00:13:33,010
weren't put into the home when it was built.

00:13:33,010 -- 00:13:34,044
They have to be added.

00:13:34,044 -- 00:13:36,180
And so I've added it to my home.

00:13:36,180 -- 00:13:39,517
But, the data shows for most of the homes in Ontario,

00:13:39,517 -- 00:13:41,418
the most

00:13:41,418 -- 00:13:45,089
fundamental protective measures are not yet in place.

00:13:45,089 -- 00:13:45,489
And that's

00:13:45,489 -- 00:13:47,124
why the losses have been getting up

00:13:47,124 -- 00:13:49,960
to the billions of dollars a year.

00:13:49,960 -- 00:13:51,996
That's why,

00:13:51,996 -- 00:13:54,865
the financial services industry is struggling because,

00:13:54,865 -- 00:13:56,500
you have our housing sector

00:13:56,500 -- 00:13:57,801
spending billions of dollars

00:13:57,801 -- 00:13:59,003
just to fix

00:13:59,003 -- 00:13:59,603
the damage

00:13:59,603 -- 00:14:00,337
that's been occurring

00:14:00,337 -- 00:14:03,607
because of flooding, a wildfire and wind.

00:14:03,607 -- 00:14:05,609
And until we start making the investments

00:14:05,609 -- 00:14:07,411
to protect ourselves,

00:14:07,411 -- 00:14:09,346
we're going to have these problems

00:14:09,346 -- 00:14:11,315
grow with climate change.

00:14:11,315 -- 00:14:12,683
But as Blair touched on,

00:14:12,683 -- 00:14:15,319
the exciting news is that we do know what to do.

00:14:15,319 -- 00:14:18,155
We've got proven solutions that are affordable.

00:14:18,155 -- 00:14:19,023
Our research shows

00:14:19,023 -- 00:14:20,891
you spend a dollar and you save 5 to 10.

00:14:21,992 -- 00:14:24,028
So the economic case is very, very strong.

00:14:24,028 -- 00:14:25,095
We just need to get more people

00:14:25,095 -- 00:14:28,098
to act upon the known science.

00:14:28,098 -- 00:14:29,099
That's great.

00:14:29,099 -- 00:14:30,934
So we talked about Insurance.

00:14:30,934 -- 00:14:33,203
We talked about Credit Unions.

00:14:33,203 -- 00:14:34,338
What about,

00:14:34,338 -- 00:14:36,974
Pension Plans that have an obligation

00:14:36,974 -- 00:14:40,077
towards their investors or the beneficiaries?

00:14:40,077 -- 00:14:43,047
Any thoughts on that front?

00:14:43,047 -- 00:14:44,581
Yes.

00:14:44,581 -- 00:14:48,886
So the Pension Plans in the country to date

00:14:49,253 -- 00:14:51,288
in talking about climate change

00:14:51,288 -- 00:14:54,158
have almost been looking exclusively

00:14:54,158 -- 00:14:55,993
at transition risk.

00:14:55,993 -- 00:14:56,560
What does it mean

00:14:56,560 -- 00:14:58,328
to portfolios for companies

00:14:58,328 -- 00:15:01,565
they invest in to as they have to

00:15:01,565 -- 00:15:02,800
move towards net zero

00:15:02,800 -- 00:15:04,768
and lowering their carbon footprint

00:15:04,768 -- 00:15:06,036
and realizing the costs

00:15:06,036 -- 00:15:07,404
associated with a carbon price.

00:15:07,404 -- 00:15:11,708
So there's lots of good thinking around that, largely

00:15:11,708 -- 00:15:15,679
driven by SFAC, the sustainable

00:15:16,146 -- 00:15:16,947
financial...

00:15:16,947 -- 00:15:19,349
I forgot what SFAC stands for now

00:15:19,349 -- 00:15:21,118
because I'm trying to think about it. Doesn't matter.

00:15:21,118 -- 00:15:23,287
The point is, there's been a lot of work

00:15:26,290 -- 00:15:29,426
on transition risk factoring into pension funds.

00:15:29,426 -- 00:15:33,430
But what's now also happening is, is we're looking at

00:15:34,998 -- 00:15:36,266
physical climate risk

00:15:36,266 -- 00:15:37,935
and the incorporation of physical climate

00:15:37,935 -- 00:15:40,737
risk into investment decision making,

00:15:40,737 -- 00:15:42,306
such that,

00:15:42,306 -- 00:15:44,208
and across different industry

00:15:44,208 -- 00:15:46,443
sectors, mining, forestry, petroleum,

00:15:46,443 -- 00:15:47,811
utilities, hospitality,

00:15:47,811 -- 00:15:51,448
telecommunications, financial services.

00:15:51,448 -- 00:15:54,451
We are making fairly good strides

00:15:54,451 -- 00:15:55,185
forward,

00:15:55,185 -- 00:15:58,555
saying under each one of these industry sectors,

00:15:58,555 -- 00:16:00,157
what are the key perils

00:16:00,157 -- 00:16:02,793
flooding, wildfire, ice storm, snow storm,

00:16:02,793 -- 00:16:03,427
whatever it might be,

00:16:03,427 -- 00:16:04,861
that are most problematic

00:16:04,861 -- 00:16:06,830
for the continuity of business operations

00:16:06,830 -- 00:16:09,099
on all these different industry sectors?

00:16:09,099 -- 00:16:13,003
And then below each one of these,

00:16:13,003 -- 00:16:15,339
impacts, perils,

00:16:15,339 -- 00:16:17,541
what are the top 1 or 2 impacts

00:16:17,541 -- 00:16:20,310
that if you are a portfolio manager,

00:16:20,310 -- 00:16:22,179
you should be zeroing in on

00:16:22,179 -- 00:16:23,614
to see if the company

00:16:23,614 -- 00:16:25,582
you're about to invest in or hold

00:16:25,582 -- 00:16:27,250
or divest the degree

00:16:27,250 -- 00:16:29,319
to which they're actually embracing actions

00:16:29,319 -- 00:16:31,188
to respond to the risk

00:16:31,188 -- 00:16:34,591
associated with that peril hitting this impact.

00:16:34,591 -- 00:16:36,660
So right now, on an industry

00:16:36,660 -- 00:16:39,730
specific basis, we're incorporating,

00:16:39,730 -- 00:16:40,998
physical climate risk

00:16:40,998 -- 00:16:42,532
into institutional investment

00:16:42,532 -- 00:16:44,534
decision making because otherwise,

00:16:44,534 -- 00:16:48,538
and by the way, every industry sector is impacted by

00:16:48,839 -- 00:16:49,973
physical climate risk.

00:16:49,973 -- 00:16:52,209
There is no sector that's immune.

00:16:52,209 -- 00:16:53,477
I had a graduate student

00:16:53,477 -- 00:16:55,879
sit down a little while ago and I said,

00:16:55,879 -- 00:16:58,014
I just want you to go through the headlines

00:16:58,014 -- 00:17:01,184
of the major newspapers for the last 5 to 8 years

00:17:01,184 -- 00:17:03,820
and write down any headline pertaining to physical

00:17:03,820 -- 00:17:05,789
climate risk, a flood or wildfire,

00:17:05,789 -- 00:17:07,991
ice storm, whatever it might be

00:17:07,991 -- 00:17:11,795
and link to a particular industry sector.

00:17:11,795 -- 00:17:13,029
And I thought,

00:17:13,029 -- 00:17:16,099
in this case, he would come back with a few headlines.

00:17:16,099 -- 00:17:18,301
Well, we could have actually, we could wallpaper,

00:17:18,301 -- 00:17:19,870
you know, the walls of this building

00:17:19,870 -- 00:17:21,538
with all the different headlines

00:17:21,538 -- 00:17:23,340
pertaining to everything from,

00:17:23,340 -- 00:17:26,576
fisheries to ice wine making, to you name it,

00:17:26,576 -- 00:17:29,346
a sector is being hit by physical climate risk.

00:17:29,346 -- 00:17:34,050
So for portfolio managers in institutional investing,

00:17:34,217 -- 00:17:36,553
they should be really looking seriously at

00:17:38,989 -- 00:17:40,190
preparing themselves to

00:17:40,190 -- 00:17:41,324
ask the right questions

00:17:41,324 -- 00:17:43,293
pertaining to physical climate risk for companies

00:17:43,293 -- 00:17:44,327
they invest in.

00:17:44,327 -- 00:17:48,331
And the tools are largely being developed to do that.

00:17:49,132 -- 00:17:52,168
That's great. So it's helping

00:17:52,168 -- 00:17:57,073
Pension Fund Managers to look at how they're invested

00:17:57,073 -- 00:17:59,409
companies are risk managing.

00:17:59,409 -- 00:18:00,277
And then from there.

00:18:00,277 -- 00:18:02,579
By the way, it's Sustainable Finance Action Council –

00:18:02,579 -- 00:18:05,215
that's SFAC. Yeah. That's great.

00:18:05,215 -- 00:18:06,483
I'm going to change gears a little bit.

00:18:06,483 -- 00:18:10,487
Just keep being very mindful of the time here.

00:18:10,754 -- 00:18:13,757
Board of Directors, you know,

00:18:13,757 -- 00:18:15,759
anything that you think

00:18:15,759 -- 00:18:17,160
a Board of Directors can do

00:18:17,160 -- 00:18:18,395
so that they're better equipped

00:18:18,395 -- 00:18:19,596
to give

00:18:19,596 -- 00:18:21,264
oversight over their management

00:18:21,264 -- 00:18:24,868
when it comes to physical climate risk.

00:18:24,868 -- 00:18:26,469
What needs to change?

00:18:26,469 -- 00:18:29,372
What advice would you have for them?

00:18:29,372 -- 00:18:30,340
Maybe I'll start with Paul.

00:18:31,941 -- 00:18:32,375
I'm really

00:18:32,375 -- 00:18:35,345
excited by the leadership that OSFI is showing to,

00:18:35,345 -- 00:18:39,616
promote disclosure by companies about how companies

00:18:39,616 -- 00:18:42,852
in the financial sector that are supervised federally

00:18:42,852 -- 00:18:47,057
are thinking about transition risk and physical risk.

00:18:47,824 -- 00:18:50,293
And some of the disclosure involves

00:18:50,293 -- 00:18:51,895
describing the management plans

00:18:51,895 -- 00:18:53,830
to deal with these risks.

00:18:53,830 -- 00:18:56,166
As management is documenting this,

00:18:56,166 -- 00:19:00,170
this is bringing the Board into the conversation.

00:19:00,236 -- 00:19:01,471
This is a new conversation,

00:19:01,471 -- 00:19:03,440
I think, for most financial institutions,

00:19:03,440 -- 00:19:06,276
as they're engaging the Board.

00:19:06,276 -- 00:19:08,311
I do believe that there's a lot of Board Members

00:19:08,311 -- 00:19:09,913
realizing that they don't feel ready

00:19:09,913 -- 00:19:11,681
for this conversation.

00:19:11,681 -- 00:19:12,749
They don't have the background,

00:19:12,749 -- 00:19:15,952
they don't have the training.

00:19:15,952 -- 00:19:18,855
You have a lot of experts that Blair and I work

00:19:18,855 -- 00:19:21,424
with in the climate community,

00:19:21,424 -- 00:19:24,160
not great communicators.

00:19:24,160 -- 00:19:25,228
So,

00:19:25,228 -- 00:19:26,229
climate can be made

00:19:26,229 -- 00:19:28,731
into a very complicated conversation.

00:19:28,731 -- 00:19:30,633
So who are the right people to have on the Board?

00:19:30,633 -- 00:19:33,036
It's not always a climate specialist

00:19:33,036 -- 00:19:34,437
who can

00:19:34,437 -- 00:19:35,371
give that guidance

00:19:35,371 -- 00:19:38,841
about what the right practices are for industry.

00:19:38,841 -- 00:19:40,143
So it's a real art to find out

00:19:40,143 -- 00:19:41,244
who should be on the Board

00:19:41,244 -- 00:19:42,212
and what kind of training

00:19:42,212 -- 00:19:44,013
the Board Members should have.

00:19:44,013 -- 00:19:48,251
But, having the overwhelming evidence

00:19:48,718 -- 00:19:49,586
that climate change

00:19:49,586 -- 00:19:51,554
is one of the most profound impacts

00:19:51,554 -- 00:19:54,190
that's happening for all the financial sectors,

00:19:54,190 -- 00:19:55,992
having Boards think about

00:19:55,992 -- 00:19:58,227
who are the right people to have on the Board

00:19:58,227 -- 00:19:59,262
and what's the right training

00:19:59,262 -- 00:20:00,797
so that they can support management,

00:20:00,797 -- 00:20:02,699
make decisions about investments

00:20:02,699 -- 00:20:05,335
with divisions, about loans,

00:20:05,335 -- 00:20:07,103
decisions about where to ensure

00:20:08,137 -- 00:20:10,340
is a really big need.

00:20:10,340 -- 00:20:12,342
And, the push going on

00:20:12,342 -- 00:20:14,477
within the prudential side

00:20:14,477 -- 00:20:17,046
through OSFI has been really exciting.

00:20:17,046 -- 00:20:18,881
It's great. Blair anything to add?

00:20:18,881 -- 00:20:19,949
Yeah, I, I would say

00:20:19,949 -- 00:20:22,385
because we're asked to be in front of a lot of Boards

00:20:22,385 -- 00:20:23,553
talking about this stuff.

00:20:23,553 -- 00:20:25,555
And I find for Boards, by and large,

00:20:25,555 -- 00:20:28,191
you know, very competent people sitting on Boards.

00:20:28,191 -- 00:20:29,959
And I don't know if it's by luck or design

00:20:29,959 -- 00:20:31,027
or a combination of both,

00:20:31,027 -- 00:20:33,062
but I find they tend to have

00:20:33,062 -- 00:20:35,765
people on the Board who know about cybersecurity

00:20:35,765 -- 00:20:37,600
or artificial intelligence

00:20:37,600 -- 00:20:38,901
or, you know, where long term

00:20:38,901 -- 00:20:39,936
interest rates are going to head

00:20:39,936 -- 00:20:43,706
at a global or national level, whatever it might be.

00:20:43,706 -- 00:20:47,744
But by and large, there's a real paucity of expertise

00:20:47,744 -- 00:20:51,747
at the Board level in reference to climate change.

00:20:51,747 -- 00:20:52,648
And I think they need

00:20:52,648 -- 00:20:54,383
to take a more conservative effort

00:20:54,383 -- 00:20:59,288
to find people who are fluent in that discussion and,

00:20:59,288 -- 00:21:01,257
and bring their expertise to the table.

00:21:01,257 -- 00:21:04,594
It's sort of like having a pharmaceutical company

00:21:04,594 -- 00:21:06,496
that has nobody on the Board

00:21:06,496 -- 00:21:09,031
of Directors, who's a pharmacist or a medical doctor,

00:21:09,031 -- 00:21:09,899
you know,

00:21:09,899 -- 00:21:10,833
it would leap,

00:21:10,833 -- 00:21:13,536
it would stand out as a void in knowledge.

00:21:13,536 -- 00:21:15,838
But for Boards to give appropriate

00:21:15,838 -- 00:21:18,641
oversight to management on this file,

00:21:18,641 -- 00:21:20,109
I think they need someone

00:21:20,109 -- 00:21:22,745
who's taken more than a weekend course

00:21:22,745 -- 00:21:23,980
on climate change.

00:21:25,548 -- 00:21:25,982
It's great.

00:21:25,982 -- 00:21:29,418
So education and seeking expert advice,

00:21:29,418 -- 00:21:30,486
that's what it is.

00:21:30,486 -- 00:21:32,288
So let's switch a little bit.

00:21:32,288 -- 00:21:35,458
Let's talk about the role of financial regulators.

00:21:35,458 -- 00:21:38,895
What are some immediate and mid-term actions

00:21:38,895 -- 00:21:41,397
that a financial regulator like FSRA

00:21:41,397 -- 00:21:43,199
should consider to make sure

00:21:43,199 -- 00:21:44,533
that we have a healthy market

00:21:44,533 -- 00:21:48,537
and consumers are continued to be offering choices.

00:21:49,639 -- 00:21:53,476
Mark shared with us in the conversation earlier today

00:21:53,476 -- 00:21:57,480
just how broad a mandate FSRA has

00:21:57,680 -- 00:22:01,584
and how specific some of the questions are as you move

00:22:01,584 -- 00:22:03,252
from one financial sector

00:22:03,252 -- 00:22:06,288
to another, to another, to another, to another.

00:22:06,288 -- 00:22:08,658
Climate change is cutting across all of that.

00:22:08,658 -- 00:22:12,361
And and there's not many issues like climate change

00:22:12,361 -- 00:22:14,330
that are affecting

00:22:14,330 -- 00:22:17,666
all aspects of what's happening here.

00:22:17,666 -- 00:22:20,770
So that's distinct and special here.

00:22:23,105 -- 00:22:24,040
And so for me

00:22:24,040 -- 00:22:25,708
that's quite intriguing that

00:22:25,708 -- 00:22:28,477
bringing climate change into this conversation,

00:22:28,477 -- 00:22:30,746
despite some nuances about how it affects

00:22:30,746 -- 00:22:32,114
individual sectors different,

00:22:32,114 -- 00:22:34,216
it is definitely cutting across all the sectors.

00:22:34,216 -- 00:22:35,785
So it's having a very

00:22:35,785 -- 00:22:38,654
profound impact on all of the sectors.

00:22:38,654 -- 00:22:42,658
So there is an opportunity for FSRA to get involved.

00:22:43,759 -- 00:22:46,529
It will certainly include a lot of the information

00:22:46,529 -- 00:22:50,466
type role that FSRA has regularly been playing.

00:22:50,466 -- 00:22:52,501
How all of the different groups

00:22:52,501 -- 00:22:53,702
that are being supervised

00:22:53,702 -- 00:22:55,871
can be informed with common information

00:22:55,871 -- 00:22:58,440
about some things that are happening,

00:22:58,440 -- 00:23:01,043
and that can happen quickly.

00:23:01,043 -- 00:23:03,279
The fact that as Blair and I are sharing

00:23:03,279 -- 00:23:05,614
on the physical damage side, the solutions are known.

00:23:05,614 -- 00:23:06,515
Let's get on with them.

00:23:06,515 -- 00:23:09,251
I mean, some of these things can be done today.

00:23:09,251 -- 00:23:10,886
They don't need time to develop.

00:23:10,886 -- 00:23:12,254
They can be put out very quickly.

00:23:13,289 -- 00:23:15,057
There are other elements that

00:23:15,057 -- 00:23:18,027
definitely spread over the multi-year focus

00:23:18,027 -- 00:23:18,994
that you're asking about

00:23:18,994 -- 00:23:19,728
and what

00:23:19,728 -- 00:23:21,230
the supervisors need to do

00:23:21,230 -- 00:23:23,999
over a longer period of time.

00:23:23,999 -- 00:23:27,069
OSFI monitored this file for many years

00:23:27,069 -- 00:23:28,837
and it's just recently decided

00:23:28,837 -- 00:23:31,240
to become very proactive,

00:23:31,240 -- 00:23:34,343
focusing primarily on disclosure,

00:23:34,343 -- 00:23:37,413
requiring companies to disclose.

00:23:37,413 -- 00:23:40,983
That's a really powerful thought process

00:23:40,983 -- 00:23:44,820
that forces the thinking within companies

00:23:44,820 -- 00:23:47,856
and getting that out to the supervisor,

00:23:47,856 -- 00:23:49,725
but to others about how

00:23:49,725 -- 00:23:52,261
these are being managed within the companies

00:23:52,261 -- 00:23:56,332
and frankly, their commitment at OSFI to always deal

00:23:56,332 -- 00:23:57,399
with prudential matters.

00:23:57,399 -- 00:23:59,134
They're pushing some limits here.

00:23:59,134 -- 00:24:01,070
Some of the way they're approaching this issue,

00:24:01,070 -- 00:24:04,306
I find that exciting. And I think that's helpful.

00:24:04,306 -- 00:24:06,608
So how FSRA can move around

00:24:06,608 -- 00:24:09,078
some of the leadership coming from OSFI,

00:24:09,078 -- 00:24:11,313
there are many institutions

00:24:11,313 -- 00:24:12,948
that are not federally supervised.

00:24:12,948 -- 00:24:16,652
And to expect similar expectations about disclosure,

00:24:17,686 -- 00:24:19,221
to make sure that they have access

00:24:19,221 -- 00:24:21,356
to similar type of information

00:24:21,356 -- 00:24:22,391
so that the messaging

00:24:22,391 -- 00:24:24,827
coming from one regulator in Canada

00:24:24,827 -- 00:24:26,495
about how the risk is

00:24:26,495 -- 00:24:28,697
evolving is not contradictory

00:24:28,697 -- 00:24:30,599
to what would come from FSRA.

00:24:30,599 -- 00:24:33,035
So coordinating some of the messaging going out

00:24:33,035 -- 00:24:34,303
are just a couple examples

00:24:34,303 -- 00:24:38,107
of some things that FSRA can do. Great, Blair.

00:24:38,107 -- 00:24:40,476
I like it very much like FSRA's mandate

00:24:40,476 -- 00:24:42,644
to serve the interests of consumers.

00:24:42,644 -- 00:24:45,214
And just a very practical example,

00:24:45,214 -- 00:24:47,649
and I'm not quite sure where FSRA’s

00:24:47,649 -- 00:24:49,218
authority stops and starts.

00:24:49,218 -- 00:24:53,222
But for example, here's a simple action item

00:24:53,589 -- 00:24:56,492
anybody who's getting a mortgage in this country

00:24:56,492 -- 00:24:57,993
with the closing package

00:24:57,993 -- 00:25:00,596
and then twice a year as a mail out, as a reminder,

00:25:00,596 -- 00:25:01,630
it should follow.

00:25:01,630 -- 00:25:03,365
They should be receiving direction

00:25:03,365 -- 00:25:04,900
on how to protect that home

00:25:04,900 -- 00:25:06,668
from basement flooding, period.

00:25:06,668 -- 00:25:08,737
If you own a home somewhere where it rains,

00:25:08,737 -- 00:25:11,473
your house is subject to flood risk, period.

00:25:11,473 -- 00:25:13,275
And some areas more than others.

00:25:13,275 -- 00:25:15,010
But that's the way it is.

00:25:15,010 -- 00:25:17,212
So when somebody gets a mortgage

00:25:17,212 -- 00:25:18,680
in that closing package

00:25:18,680 -- 00:25:20,048
and this is now, you know,

00:25:20,048 -- 00:25:21,216
the thing that they're going to get up

00:25:21,216 -- 00:25:21,583
and work

00:25:21,583 -- 00:25:23,819
for 25 years of their life to pay for it,

00:25:23,819 -- 00:25:25,954
it's probably going to be their retirement plan.

00:25:25,954 -- 00:25:27,956
You want to protect that investment.

00:25:27,956 -- 00:25:30,659
So I would make sure that in that closing package,

00:25:30,659 -- 00:25:32,794
there are simple, straightforward information.

00:25:32,794 -- 00:25:35,230
And it exists that any organization

00:25:35,230 -- 00:25:36,531
can put their logo on

00:25:36,531 -- 00:25:36,932
that says

00:25:36,932 -- 00:25:38,767
and by the way, for you, the homeowner,

00:25:38,767 -- 00:25:41,003
and we're now a partner in this deal with you,

00:25:41,003 -- 00:25:43,639
here's how you protect this property

00:25:43,639 -- 00:25:45,040
from basement flooding.

00:25:45,040 -- 00:25:45,607
And the average

00:25:45,607 -- 00:25:46,875
cost of a flooded basement

00:25:46,875 -- 00:25:49,277
on Ontario right now is $43,000.

00:25:49,277 -- 00:25:51,380
So if you have the average flood,

00:25:51,380 -- 00:25:52,748
that's not the place you want to be.

00:25:52,748 -- 00:25:55,017
If you could avoid it, avoid it.

00:25:55,017 -- 00:25:56,918
That's great. Thank you.

00:25:56,918 -- 00:26:01,023
So we may have some time for questions from

00:26:01,023 -- 00:26:01,690
the audience.

00:26:04,226 -- 00:26:05,360
And we'll see.

00:26:05,360 -- 00:26:08,530
I think the questions will be popping up

00:26:08,530 -- 00:26:12,501
on the monitor.

00:26:15,404 -- 00:26:15,771
Right.

00:26:15,771 -- 00:26:21,910
So this is a question on how do P&C Insurers

00:26:22,344 -- 00:26:27,549
best educate, inform and incentivize policy holders

00:26:27,549 -- 00:26:28,683
to take more action

00:26:28,683 -- 00:26:32,687
to mitigate exposure to extreme weather?

00:26:33,955 -- 00:26:35,724
Okay.

00:26:35,724 -- 00:26:37,826
I'll go quickly and...

00:26:37,826 -- 00:26:41,830
Up to about maybe 4 or 5 years ago,

00:26:41,830 -- 00:26:43,365
even when you talk to the Presidents

00:26:43,365 -- 00:26:45,634
and CEOs of the major P&C companies,

00:26:45,634 -- 00:26:47,969
they said themselves that the direction

00:26:47,969 -- 00:26:49,237
they gave to policyholders

00:26:49,237 -- 00:26:51,573
on how to protect properties from flooding or wildfire

00:26:51,573 -- 00:26:54,242
and so forth or what even their coverage

00:26:54,242 -- 00:26:56,211
was very poor and confusing.

00:26:56,211 -- 00:26:57,946
So one of the things they're doing now is,

00:26:57,946 -- 00:26:59,047
first of all, just in terms

00:26:59,047 -- 00:27:00,715
of what you're covered for versus

00:27:00,715 -- 00:27:01,783
what you're not covered for

00:27:01,783 -- 00:27:04,386
for overland flooding, for sewer backup,

00:27:04,386 -- 00:27:06,988
for just conventional flood risk in a basement.

00:27:08,123 -- 00:27:09,758
They're doing a much, much better job.

00:27:09,758 -- 00:27:11,860
Most of the insurers now explaining this stuff

00:27:11,860 -- 00:27:13,261
in plain, simple language

00:27:13,261 -- 00:27:16,331
that people can read and understand. That's good.

00:27:16,331 -- 00:27:19,901
But also, the insurers are now very much

00:27:19,901 -- 00:27:22,170
on the leading edge of the curve in Canada

00:27:22,170 -- 00:27:27,042
as to supporting better understanding of the actions

00:27:27,042 -- 00:27:28,310
to be to be taken

00:27:28,310 -- 00:27:29,344
to mitigate

00:27:29,344 -- 00:27:30,979
risk in the country from flooding,

00:27:30,979 -- 00:27:33,348
wildfire, extreme heat, wind.

00:27:33,348 -- 00:27:34,883
They're supporting that research.

00:27:34,883 -- 00:27:37,018
And then

00:27:37,018 -- 00:27:39,554
helping to deploy the inculcation

00:27:39,554 -- 00:27:41,923
of that research into day to day operations

00:27:41,923 -- 00:27:44,326
to actually get risk out of the system.

00:27:44,326 -- 00:27:46,494
What we want to do is get all the risk

00:27:46,494 -- 00:27:47,162
out of the system.

00:27:47,162 -- 00:27:47,929
You can

00:27:47,929 -- 00:27:49,297
and then deal

00:27:49,297 -- 00:27:51,266
with the pricing of what's ever left over.

00:27:52,534 -- 00:27:53,134
The small part.

00:27:53,134 -- 00:27:55,403
I that is,

00:27:55,403 -- 00:27:57,572
the longer answer is I've written a book.

00:27:57,572 -- 00:28:00,375
So if you'd like to read my book, I have,

00:28:00,375 -- 00:28:02,711
laid it all out in detail.

00:28:02,711 -- 00:28:04,179
“Climate Risks Implications

00:28:04,179 -- 00:28:07,382
for the Insurance Industry in Canada.”

00:28:07,382 -- 00:28:08,683
Call our institute,

00:28:08,683 -- 00:28:11,119
we have 120 companies that support our work.

00:28:11,119 -- 00:28:13,321
And we give to them materials

00:28:13,321 -- 00:28:17,225
to give out to policyholders. We give to them...

00:28:17,225 -- 00:28:19,828
We have showcases, displays,

00:28:19,828 -- 00:28:22,096
videos, all kinds of materials.

00:28:22,096 -- 00:28:25,934
Any insurer in Ontario who would like to

00:28:25,934 -- 00:28:26,501
use members,

00:28:26,501 -- 00:28:28,403
I think 90 whatever percent

00:28:28,403 -- 00:28:29,504
are members of our institute.

00:28:29,504 -- 00:28:31,940
So we give our materials out and

00:28:31,940 -- 00:28:33,074
we're delighted to help them

00:28:33,074 -- 00:28:35,376
promote it to policyholders. Right.

00:28:35,376 -- 00:28:36,711
So we have another question.

00:28:36,711 -- 00:28:38,680
Very similar question.

00:28:38,680 -- 00:28:41,783
This is not about educating policyholders,

00:28:41,783 -- 00:28:45,019
but what insurance companies can do to prepare,

00:28:45,019 -- 00:28:46,688
since physical climate change

00:28:46,688 -- 00:28:48,056
is just going to increase.

00:28:49,123 -- 00:28:50,959
So this is where insurance companies

00:28:50,959 -- 00:28:52,927
are way ahead of the rest of the financial sector.

00:28:52,927 -- 00:28:54,762
They have models.

00:28:54,762 -- 00:28:57,165
They have actuarial data on actual losses

00:28:57,165 -- 00:28:58,766
that they've experienced.

00:28:58,766 -- 00:29:01,502
They understand which are territories,

00:29:01,502 -- 00:29:03,738
which regions have the greatest risk.

00:29:03,738 -- 00:29:05,540
They know the features of a home

00:29:05,540 -- 00:29:06,641
that we've been providing them,

00:29:06,641 -- 00:29:08,142
saying this home has higher risk.

00:29:08,142 -- 00:29:10,478
This home has lower risk.

00:29:10,478 -- 00:29:12,580
That's hard

00:29:12,580 -- 00:29:15,883
evidence that's available to all insurance companies.

00:29:15,883 -- 00:29:17,318
It's part of their practices.

00:29:17,318 -- 00:29:18,353
It's part of their pricing.

00:29:18,353 -- 00:29:21,889
It's part of their product design.

00:29:21,889 -- 00:29:22,924
Part of their choices

00:29:22,924 -- 00:29:25,059
about where insurance is available, not available.

00:29:25,059 -- 00:29:28,629
Whatever...There's just a lot of science available.

00:29:28,629 -- 00:29:30,031
Insurance companies are using it.

00:29:30,031 -- 00:29:31,699
I'm always surprised when I talk to people

00:29:31,699 -- 00:29:32,934
who are in the insurance industry

00:29:32,934 -- 00:29:34,869
why they don't use the same information

00:29:34,869 -- 00:29:36,537
to decide where to give a mortgage

00:29:36,537 -- 00:29:37,839
and where to make investments.

00:29:37,839 -- 00:29:40,808
But, insurance companies have a lot of data

00:29:40,808 -- 00:29:42,143
to do this.

00:29:42,143 -- 00:29:43,611
Maybe I can add one here. Sure.

00:29:43,611 -- 00:29:45,480
Where we spend a lot of time,

00:29:45,480 -- 00:29:47,081
now, I spend a lot more of my time with,

00:29:47,081 -- 00:29:49,117
I don't need more climate scientists

00:29:49,117 -- 00:29:51,452
tell me that the climate is, you know, things are bad.

00:29:51,452 -- 00:29:53,755
Or documenting

00:29:53,755 -- 00:29:54,756
by the way,

00:29:54,756 -- 00:29:56,457
the catastrophic loss insurable claims

00:29:56,457 -- 00:29:58,593
data in the country, it's not just going up,

00:29:58,593 -- 00:30:00,228
it's going up curvilinearly.

00:30:00,228 -- 00:30:01,929
Things are getting worse, faster.

00:30:01,929 -- 00:30:03,698
But we have known solutions.

00:30:03,698 -- 00:30:06,267
So where I spend my time now is much more with,

00:30:06,267 -- 00:30:08,903
behavioral economists, behavioral psychologists

00:30:08,903 -- 00:30:09,403
to look at

00:30:09,403 -- 00:30:10,838
how do you motivate the masses

00:30:10,838 -- 00:30:12,640
to behave in a particular way?

00:30:12,640 -- 00:30:13,674
We've got the tools

00:30:13,674 -- 00:30:15,543
but we're not utilizing the tools.

00:30:15,543 -- 00:30:17,578
So the trick is one of now

00:30:17,578 -- 00:30:19,680
if human psychology to a certain extent.

00:30:19,680 -- 00:30:21,549
So that's where we're spending

00:30:21,549 -- 00:30:22,450
more and more of our time.

00:30:23,451 -- 00:30:25,353
Thinking about how consumers

00:30:25,353 -- 00:30:26,454
use the information

00:30:26,454 -- 00:30:27,722
and then providing it to

00:30:27,722 -- 00:30:30,458
in a way that is, that resonate with them.

00:30:30,458 -- 00:30:31,726
So I think we probably have time

00:30:31,726 -- 00:30:33,661
for one more question because,

00:30:33,661 -- 00:30:37,131
because we'll have to move on to the next session.

00:30:37,131 -- 00:30:39,166
So, this one came from

00:30:39,166 -- 00:30:40,268
what do you think

00:30:40,268 -- 00:30:41,969
would be the right training for Boards

00:30:41,969 -- 00:30:43,971
regarding climate risk?

00:30:43,971 -- 00:30:47,975
And with so many regulators and bodies involved,

00:30:48,075 -- 00:30:52,079
who should the Boards be following?

00:30:53,347 -- 00:30:54,615
Blair and I spent a lot of time

00:30:54,615 -- 00:30:58,019
talking to boards in the insurance sector

00:30:58,019 -- 00:30:59,553
and so I have lots of experience.

00:30:59,553 -- 00:31:01,255
I could talk about,

00:31:01,255 -- 00:31:02,623
some of the particular questions

00:31:02,623 -- 00:31:03,691
that insurance companies

00:31:03,691 -- 00:31:07,929
give about product design pricing,

00:31:08,629 -- 00:31:12,466
use of models, avoiding solvency risk.

00:31:12,466 -- 00:31:13,267
We've had

00:31:13,267 -- 00:31:15,069
no property companies

00:31:15,069 -- 00:31:17,438
go insolvent in decades in this country

00:31:17,438 -- 00:31:19,440
because they've thought through all these things.

00:31:21,008 -- 00:31:23,744
And so getting the Board Members

00:31:23,744 -- 00:31:28,849
in insurance informed is sort of common.

00:31:31,052 -- 00:31:33,421
Occasionally, I've been invited to some Boards

00:31:33,421 -- 00:31:36,424
that are not in insurance, and

00:31:36,424 -- 00:31:38,392
I don't get good questions.

00:31:38,392 -- 00:31:41,529
I mean there was a time in insurance,

00:31:41,529 -- 00:31:43,564
I've been doing this stuff for 30 years.

00:31:43,564 -- 00:31:44,965
The insurance people didn't know what to ask.

00:31:44,965 -- 00:31:47,301
20, 30 years ago...but

00:31:47,301 -- 00:31:48,803
the conversations outside of insurance

00:31:48,803 -- 00:31:53,707
that I occasionally get invited to are very early and

00:31:55,142 -- 00:31:57,111
basic questions.

00:31:57,111 -- 00:31:59,380
Insurance companies would never give insurance

00:31:59,380 -- 00:31:59,947
to somebody

00:31:59,947 -- 00:32:02,216
who's been designated by the province of Ontario

00:32:02,216 -- 00:32:04,018
at extreme or high risk of flooding.

00:32:04,018 -- 00:32:07,555
You just can't get insurance from an insurance company,

00:32:07,555 -- 00:32:10,024
but you can get a loan.

00:32:10,024 -- 00:32:12,693
I mean.

00:32:12,693 -- 00:32:14,228
There you go.

00:32:14,228 -- 00:32:17,565
So the process, some of the knowledge that

00:32:17,565 -- 00:32:19,967
is available for Boards

00:32:21,235 -- 00:32:24,405
Management as well has to get going more on

00:32:24,405 -- 00:32:25,172
these issues.

00:32:25,172 -- 00:32:26,841
I'm more familiar with physical risk.

00:32:26,841 -- 00:32:30,177
That's what I work on. But Boards,

00:32:30,177 -- 00:32:31,579
yeah, but

00:32:31,579 -- 00:32:33,314
Management and Boards

00:32:33,314 -- 00:32:35,749
really need to get working on this.

00:32:35,749 -- 00:32:37,117
And also not, you know,

00:32:37,117 -- 00:32:38,819
Not to go back to the depressing stuff,

00:32:38,819 -- 00:32:41,488
but I don't think we've mentioned this yet,

00:32:41,488 -- 00:32:43,357
but we now have,

00:32:43,357 -- 00:32:46,560
10% of homes in Canada are no longer insurable

00:32:46,560 -- 00:32:47,595
relative to flood risk.

00:32:47,595 -- 00:32:48,362
That's 1.5

00:32:48,362 -- 00:32:50,030
million people in Canada

00:32:50,030 -- 00:32:52,933
can't get insurance coverage for their homes for

00:32:52,933 -- 00:32:54,001
basement flooding.

00:32:54,001 -- 00:32:55,970
They can still get it for theft and fire,

00:32:55,970 -- 00:32:58,205
but not for basement flooding.

00:32:58,205 -- 00:33:00,741
The good thing is,

00:33:00,741 -- 00:33:02,176
given that reality,

00:33:02,176 -- 00:33:06,013
you can still get a mortgage without flood insurance.

00:33:06,013 -- 00:33:09,350
However, we're starting to head into a direction

00:33:09,350 -- 00:33:12,252
where for wildfire risk in this country is becoming

00:33:12,252 -- 00:33:14,455
so prominent in certain regions

00:33:14,455 -- 00:33:16,724
that it's just a matter of time,

00:33:16,724 -- 00:33:18,726
as has already happened in California,

00:33:18,726 -- 00:33:20,427
with Allstate and State Farm.

00:33:20,427 -- 00:33:21,695
They're not writing new house

00:33:21,695 -- 00:33:23,797
insurance for fire risk in California.

00:33:23,797 -- 00:33:26,233
Well, Canada isn't immune to that either.

00:33:26,233 -- 00:33:28,369
So what happens if it just,

00:33:28,369 -- 00:33:30,537
you know, let's go beyond Ontario for the moment.

00:33:30,537 -- 00:33:32,139
If you're in, northern

00:33:32,139 -- 00:33:33,941
Alberta or parts of British Columbia

00:33:33,941 -- 00:33:34,908
where you can no longer

00:33:34,908 -- 00:33:36,543
get fire insurance for your home,

00:33:36,543 -- 00:33:37,811
because without fire insurance,

00:33:37,811 -- 00:33:39,346
you can't get a mortgage.

00:33:39,346 -- 00:33:41,582
I spent a lot of time with CMHC

00:33:41,582 -- 00:33:42,983
and brought this question up

00:33:42,983 -- 00:33:45,152
just a little while ago to the lenders

00:33:45,152 -- 00:33:46,553
working group of CMHC,

00:33:46,553 -- 00:33:48,222
which is basically the big banks

00:33:48,222 -- 00:33:50,290
that hold the mortgages in the country

00:33:50,290 -- 00:33:51,325
and said, you know,

00:33:51,325 -- 00:33:52,693
what is the plan

00:33:52,693 -- 00:33:55,395
if fire insurance isn't available?

00:33:55,395 -- 00:33:55,929
What is that?

00:33:55,929 -- 00:33:57,297
What are the repercussions of that?

00:33:57,297 -- 00:33:58,298
And how are we going to handle this

00:33:58,298 -- 00:34:00,400
from a mortgage perspective?

00:34:00,400 -- 00:34:02,136
And the room just goes dead quiet.

00:34:02,136 -- 00:34:03,537
You know, there was no plan.

00:34:03,537 -- 00:34:07,541
So this is the direction we're heading.

00:34:07,808 -- 00:34:11,378
And as bad as it may seem now, it's just.

00:34:11,378 -- 00:34:12,980
I'm not trying to be dramatic.

00:34:12,980 -- 00:34:14,615
Actually, I'm trying to be dramatic.

00:34:14,615 -- 00:34:17,851
We need to prepare for a more formidable future

00:34:17,851 -- 00:34:19,286
that's coming at us.

00:34:19,286 -- 00:34:22,322
And, we're starting to see these expressions

00:34:22,322 -- 00:34:23,457
with

00:34:23,457 -- 00:34:24,625
Desjardins talked about we're now

00:34:24,625 -- 00:34:26,627
not going to hold mortgages for certain communities going back.

00:34:27,594 -- 00:34:29,096
That's just the tip of the iceberg.

00:34:29,096 -- 00:34:30,998
It's going to keep coming, coming and coming.

00:34:30,998 -- 00:34:33,767
So, Canada has been sleepwalking

00:34:33,767 -- 00:34:34,902
in terms of preparedness

00:34:34,902 -- 00:34:36,536
for climate change and extreme weather risks.

00:34:36,536 -- 00:34:37,537
We need to pick up the pace.

00:34:37,537 -- 00:34:39,139
And here's a question to the audience.

00:34:40,207 -- 00:34:42,809
Canada now has...

00:34:42,809 -- 00:34:43,210
no...

00:34:43,210 -- 00:34:44,111
I'm going to ask the question

00:34:44,111 -- 00:34:45,145
and then I'll explain it.

00:34:45,145 -- 00:34:46,346
How many people here,

00:34:46,346 -- 00:34:47,514
by way of show of hands

00:34:47,514 -- 00:34:51,018
and by show of hands, I mean, like show of hands,

00:34:51,018 -- 00:34:51,718
are familiar

00:34:51,718 -- 00:34:55,722
with Canada's National Adaptation Strategy.

00:34:56,657 -- 00:34:58,525
Okay, so there's more or less

00:34:58,525 -- 00:34:59,926
600 people in this room,

00:34:59,926 -- 00:35:02,095
and there's about seven people have heard of Canada's

00:35:02,095 -- 00:35:04,131
National Adaptation Strategy.

00:35:04,131 -- 00:35:05,565
Get familiar with it.

00:35:05,565 -- 00:35:06,333
Canada now

00:35:06,333 -- 00:35:07,868
launched its national adaptation

00:35:07,868 -- 00:35:10,937
strategy of June, July of last year.

00:35:10,937 -- 00:35:13,040
The primary minister on it as Minister

00:35:13,040 -- 00:35:14,741
Guilbeault from Minister of Environment

00:35:14,741 -- 00:35:16,176
and Climate Change.

00:35:16,176 -- 00:35:17,844
In that strategy,

00:35:17,844 -- 00:35:19,579
there are 26 targets in it

00:35:19,579 -- 00:35:22,749
that Canada's to meet from an adaptation perspective.

00:35:22,749 -- 00:35:25,952
Ten of which are to be realized or success realized.

00:35:25,952 -- 00:35:29,956
And meeting those targets in 2024, 25 and 26.

00:35:30,123 -- 00:35:32,025
A multiplicity of them

00:35:32,025 -- 00:35:34,861
have applicability to financial services.

00:35:34,861 -- 00:35:36,763
So, FSRA, I would say

00:35:36,763 -- 00:35:37,898
this is an area

00:35:37,898 -- 00:35:39,900
that it should become part of your DNA

00:35:39,900 -- 00:35:43,270
almost and say for those 26 targets,

00:35:43,270 -- 00:35:45,672
are there seven of them where we can make

00:35:45,672 -- 00:35:49,409
a material contribution or something like that?

00:35:49,409 -- 00:35:49,943
That's great.

00:35:49,943 -- 00:35:52,412
We're going to go to our very last question,

00:35:52,412 -- 00:35:53,713
and then we'll have to wrap up.

00:35:54,714 -- 00:35:56,016
This is from our CEO.

00:35:56,016 -- 00:35:56,917
So is

00:35:56,917 -- 00:35:58,318
there a potential conflict

00:35:58,318 -- 00:36:00,954
between prudential regulation,

00:36:00,954 -- 00:36:04,357
which is about solvency and reducing payouts

00:36:04,357 -- 00:36:05,892
and conduct regulation

00:36:05,892 -- 00:36:09,796
that focus on consumer protection, consumer choice?

00:36:09,796 -- 00:36:13,767
Yes.

00:36:13,767 -- 00:36:15,535
Would you like to elaborate a little bit.

00:36:15,535 -- 00:36:17,470
Slightly longer answer is to move away

00:36:17,470 -- 00:36:18,872
from our climate conversation.

00:36:18,872 -- 00:36:21,541
Talk about earthquake.

00:36:21,541 -- 00:36:23,176
And on the earthquake file,

00:36:23,176 -- 00:36:25,278
there are a very large number of people in Canada

00:36:25,278 -- 00:36:26,846
who don't have earthquake protection.

00:36:26,846 -- 00:36:29,616
It's available for sale, but they don't buy it

00:36:29,616 -- 00:36:33,620
because the cost of achieving our prudential

00:36:33,787 -- 00:36:36,623
expectations are really high.

00:36:36,623 -- 00:36:40,393
And, and makes the product being offered,

00:36:40,393 -- 00:36:41,328
for anybody who has it,

00:36:41,328 -- 00:36:42,262
they're under-insured

00:36:42,262 -- 00:36:44,230
because they have enormous deductibles

00:36:44,230 -- 00:36:45,865
and other things brought in anyway.

00:36:45,865 -- 00:36:50,470
So there is absolutely contradictory objectives

00:36:51,037 -- 00:36:53,306
on some of these issues.

00:36:53,306 -- 00:36:54,674
And earthquake is the one where

00:36:54,674 -- 00:36:56,543
if you want to do any homework, you'll find it

00:36:56,543 -- 00:36:57,811
in your face fairly quickly.

00:36:59,079 -- 00:37:00,947
So it's really about working with

00:37:00,947 -- 00:37:03,450
consumers, educating them, helping them.

00:37:03,450 -- 00:37:04,718
They need to do both.

00:37:04,718 -- 00:37:07,387
Prudential is really important

00:37:07,387 -- 00:37:10,857
and Market Conduct is incredibly important.

00:37:10,857 -- 00:37:14,361
So how do you get that balance.

00:37:14,361 -- 00:37:15,495
It's a challenge.

00:37:15,495 -- 00:37:17,263
Something for us to think about.

00:37:17,263 -- 00:37:18,832
We have to wrap

00:37:18,832 -- 00:37:21,134
because, we have another session coming up,

00:37:21,134 -- 00:37:24,904
but thank you for sharing your perspective on how

00:37:24,904 -- 00:37:25,905
the financial services

00:37:25,905 -- 00:37:27,941
sector can prudently manage the risk,

00:37:27,941 -- 00:37:32,712
but also keeping consumers in mind. Before we close

00:37:33,480 -- 00:37:35,048
20 seconds each,

00:37:35,048 -- 00:37:37,050
what are your final thoughts that you want to leave

00:37:37,050 -- 00:37:37,884
with the audience

00:37:37,884 -- 00:37:39,385
about specific actions

00:37:39,385 -- 00:37:43,389
that they can take to manage this risk going forward?

00:37:43,656 -- 00:37:45,592
Start with you, Blair.

00:37:45,592 -- 00:37:46,793
Everybody in this audience,

00:37:46,793 -- 00:37:49,929
relative to their area of work, should be doing

00:37:49,929 -- 00:37:51,998
sort of a deep dive self-examination

00:37:51,998 -- 00:37:54,000
on how physical climate risk

00:37:54,000 -- 00:37:56,669
may bear relevance to their work.

00:37:56,669 -- 00:38:00,240
And then the last thought is just the

00:38:00,240 -- 00:38:01,341
biggest limitation

00:38:01,341 -- 00:38:02,742
of forward movement in Canada

00:38:02,742 -- 00:38:03,409
on preparedness

00:38:03,409 -- 00:38:04,444
for climate change

00:38:04,444 -- 00:38:06,212
is lack of sense of appreciation

00:38:06,212 -- 00:38:08,414
for the need to act with urgency.

00:38:08,414 -- 00:38:09,883
We've got to we've got to,

00:38:09,883 -- 00:38:11,284
urgency has got to come fire up

00:38:11,284 -- 00:38:12,385
higher up on the food chain.

00:38:13,453 -- 00:38:15,388
The change that's happened to the climate

00:38:15,388 -- 00:38:17,223
is very small compared to the change

00:38:17,223 -- 00:38:20,093
that's going to happen to our climate,

00:38:20,093 -- 00:38:24,697
and the implications for making good investments

00:38:24,697 -- 00:38:27,600
by financial institutions, making good loans,

00:38:27,600 -- 00:38:28,868
providing insurance

00:38:28,868 -- 00:38:31,070
are going to get much more difficult

00:38:31,070 -- 00:38:33,139
as the climate changes.

00:38:33,139 -- 00:38:34,741
And so the supervision

00:38:34,741 -- 00:38:36,909
for those of us who are consumers,

00:38:36,909 -- 00:38:39,278
counting on our supervisors,

00:38:39,278 -- 00:38:41,347
the supervision of financial institutions

00:38:41,347 -- 00:38:41,781
to make sure

00:38:41,781 -- 00:38:42,882
they're making good choices

00:38:42,882 -- 00:38:46,352
about loans and investments and

00:38:46,352 -- 00:38:49,288
insurance is just going to get more challenging.

00:38:49,288 -- 00:38:50,790
It'll become more critical

00:38:50,790 -- 00:38:52,859
for proper supervision

00:38:52,859 -- 00:38:55,428
over time as things move forward.

00:38:55,428 -- 00:38:57,530
So, think about climate change,

00:38:57,530 -- 00:38:58,898
get to understand climate change,

00:38:58,898 -- 00:39:00,366
don't have to get all the science.

00:39:00,366 -- 00:39:01,901
You just need to understand

00:39:01,901 -- 00:39:05,038
how financial institutions are making choices.

00:39:05,038 -- 00:39:06,572
And are they doing their homework?

00:39:06,572 -- 00:39:08,374
Do you see them thinking about this?

00:39:08,374 -- 00:39:09,375
Well, that's

00:39:09,375 -- 00:39:10,076
what I'm looking

00:39:10,076 -- 00:39:13,479
for, is the core message back to those in FSRA

00:39:13,479 -- 00:39:15,281
and those in the regulatory sector.

00:39:15,281 -- 00:39:15,915
That's great.

00:39:15,915 -- 00:39:16,449
Thank you.

00:39:16,449 -- 00:39:17,717
I know we had a very short time,

00:39:17,717 -- 00:39:19,352
but thank you for sharing your insights.