CRA confirms that a life insurance policy issued by a foreign insurer that does not report to OSFI can no longer qualify as an s. 138.1(1) segregated fund

The preamble to s. 138.1(1), which defined a “segregated fund” as a specified group of properties in respect of which an insurer’s life insurance policy reserves varied depending on the specified group’s fair market value, was amended, effective for taxation years beginning after 2022, to add a further requirement that the specified group of properties be specifically reported (as interpreted in s. 138(12.3)) to the relevant authority (whose definition extends only to OSFI or, in some circumstance, a provincial insurance authority) as a segregated fund.

CRA confirmed that a life insurance policy, issued by a foreign insurer that does not operate in Canada and has no reporting obligation to a relevant authority respecting such a policy, would not qualify as a segregated fund under s. 138.1(1) after giving effect to this amendment. Furthermore, the Act did not provide any grandfathering in this regard.

Neal Armstrong. Summary of 8 November 2024 External T.I. 2024-1006321E5 under s. 138.1(1).