Uncertainty surrounds donations of life insurance in BC

Authored by Deina Warren, Associate Director, Legal Affairs

Charities in BC are in a state of uncertainty when it comes to accepting donations of life insurance policies.

The BC Financial Services Authority (BCFSA)[i] has apparently notified a charity that accepting or soliciting life insurance policies as donations is trafficking in insurance, an offence under s. 52 of the provincial Insurance Act.  In light of this interpretation, the BCFSA also advised that the charity is not allowed to solicit or accept life insurance policy donations.

Given that these donations are routine in the charitable sector, this communication has raised many as-of-yet unanswered questions: was the charity engaging in acts that fell beyond the scope of what is permissible? Is the directive limited to this charity based on the particular facts or will it be applied across the charitable sector in BC? Is a donation a “transfer” or “assignment” or “pledge” that is prohibited under the Insurance Act? Was the letter prompted by a complaint? What was the nature of the complaint? Of what impact and relevance is the  CRA policy statement that allows charities to issue official donation receipts for the cash surrender value of the policy at the time of donation?

This situation falls squarely within the ‘more questions than answers’ category.

BCFSA has not made this letter public nor has it issued any statements on its website. No source documents related to this concern are therefore available to review or analyze; however, we are closely monitoring this developing situation and will provide updates as they are available. In the meantime, if your charity accept or solicits these types of donations it may wish to suspend these activities until BCFSA clarifies the issue.

[i] The BCFSA is a newly created Crown Agency established under the Financial Services Authority Act, 2019 to administer six provincial statutes. As of November 1, 2019 the BCFSA assumed the responsibilities of the Financial Institutions Commissions (FICOM) which had operated as part of the Ministry of Finance.  For more information on the agency, see bcfsa.ca.