1. What is meant by an amount due or accrued to the insurer on account of income from designated insurance property that was "assumed in computing the insurer's Canadian reserve liabilities" for purposes of the definitions of "investment property" and "Canadian investment property" in Part XXIV?
2. Whether an insurer should "scale down" the value of amounts due or accrued when designating Canadian investment property and investment property in circumstances where the insurer's mean Canadian reserve liabilities are less than its mean Canadian investment fund.
3. Whether the formula in paragraph 2411(3)(b) of the Regulations provides the appropriate result in computing the minimum net investment revenue for purposes of paragraph 138(9)(b).
1. It is our understanding that in the annual return filed with OSFI due or accrued investment income is usually reported separately from the related property. Where due or accrued investment income from designated insurance property supports policy liabilities that are included in the insurer's Canadian reserve liabilities, such income will qualify as Canadian investment property or investment property and may be designated by the insurer as designated insurance property to the extent permitted under section 2401 of the Regulations.
2. There is no legislative requirement for the "scale down". However, due or accrued amounts designated by the insurer must clearly support Canadian policy liabilities to be considered Canadian investment property or investment property.
3. Result appears to be unintended. We will refer the matter to the Department of Finance for consideration.
1. Wording and intent of the legislation.
2. Legislation and question of fact.
3. Under the current rules, due or accrued amounts are included in calculating the average yield on investment property (i.e., B, E and H) but are specifically carved out of the total value of the investment property (i.e., C, F and J) in the formula. This appears to result in the use of an average yield that is less than the actual yield to the insurer in respect of its investment property.