Regulation on Information for Holders of Individual Variable Insurance Contracts Relating to Segregated Funds

REGULATION RESPECTING INFORMATION TO BE PROVIDED TO HOLDERS OF INDIVIDUAL VARIABLE INSURANCE CONTRACTS RELATING TO SEGREGATED FUNDS Insurers Act (chapter A-32.1, s. 485 par.1 and s. 496).

1. This Regulation applies to any insurer authorized under the Insurers Act (chapter
   A-32.1) to the extent that the insurer has underwritten an individual variable insurance contract, defined as an individual contract of life insurance, including an annuity, or an undertaking to provide an annuity, under which the insurer’s liabilities vary in amount depending upon the market value of the segregated funds that it holds and in which it allocates the amounts invested by the holder of the contract, which are, with the corresponding rights held thereunder by the contract holder, represented by means of segregated fund units allocated to the contract. This Regulation also applies to any provision of an individual contract of life insurance stipulating that dividends under the contract are allocated to such segregated funds.
2. The insurer must provide to the contract holder, within four months of each fiscal
   year end of the segregated funds whose units are allocated to the contract, an annual statement for the fiscal year presenting, at a minimum, the information listed in Schedule 1 in a form that is clear, readable, specific and not misleading, while highlighting it and so as not to cause confusion or misunderstanding.
3. The fund expenses of an applicable class or series of units of the segregated fund for
   each day that the units of such class or series of the segregated fund were allocated to the contract during the period covered by the statement are calculated using the following formula, making any adjustments that are reasonably necessary to accurately determine the fund expenses:
   A x B x C
   A = the fund expense ratio for the day of the applicable class or series of the segregated fund; B = the market value of a unit for the day of the applicable class or series of the segregated fund; and C = the number of segregated fund units allocated to the contract for the day; The above calculation must be repeated for each class or series of units of the segregated fund that were allocated to the contract during the period covered by the statement, and the results must be aggregated. For the purposes of this calculation:
   (a) the “fund expense ratio for the day” means the ratio, expressed as a percentage, of the amount of fund expenses of a class or series of segregated fund units for the day to the fund’s net asset value for the day; and (b) a reasonable approximation of the inputs “A” and “B” may be used if exact information is unavailable. For the purposes of subparagraph a, fund expenses mean all the segregated fund’s expenses that are paid or payable by the insurer out of assets of the fund, including management expenses and trading expenses.
4. A monetary administrative penalty of $250 in the case of a natural person or $1,000
   in other cases may be imposed on an authorized insurer that, in contravention of section 2, fails to provide the contract holder with the annual statement relating to the contract within

the prescribed time period, fails to provide all the information referred to in that section in the statement or provides incorrect or inaccurate information.
5. This Regulation comes into force on January 1, 2026.

Schedule 1
(section 2)
Information to be reported in the annual statement provided by an insurer to holders of individual variable insurance contracts General information:
 the statement date, defined as the date of the last day of the period covered by the statement;  the insurer’s name, contact information and website;  the contract name, contract tax status, issue date and contract number;  the name of the contract holder, the annuitant and the designated beneficiary, where they are different individuals or firms, as the case may be;  the name, telephone number and e-mail address of the representative responsible for servicing the contract or, where the contract was purchased without the intermediary of a natural person, of the firm or independent partnership; and  the following notice or a notice with wording substantially similar to:

• “The information provided in this annual statement is intended to help you track
  your financial goals.”;
• “You can obtain copies of the most recent Fund Facts, annual audited financial
  statements and semi-annual unaudited financial statements for the segregated funds within your contract by (indicate here how to obtain them).”; and
• “You can also contact us or your representative or, where your contract was
  purchased via a digital space, the firm or independent partnership, to obtain additional details about the information presented in your statement or contract.”. Performance information  for all the segregated fund units allocated to the contract, the market value at the start of the period covered by the statement and at the statement date;  for all the segregated fund units allocated to the contract, the total amounts invested and withdrawn by the contract holder from the issue date of the contract and the date corresponding to the first day of the period covered by the statement until the statement date, and the change in value of investments, between these same dates, for reasons other than investments or withdrawals by the contract holder;  the personal rate of return, as a percentage, calculated on the dollar-weighted method, since the issue date of the contract and, where applicable, for the 10 years, 5 years, 3 years and year ending on the statement date; and  the following notice or a notice with wording substantially similar to:
  “Your personal rate of return may be different than the rate realized by the segregated funds because the calculation of your personal rate of return depends on factors such as the timing of your investments and withdrawals.”. Information about fees and charges  for all the segregated fund units allocated to the contract, the amounts of all the fees and charges paid directly by the contract holder or charged to the contract during the period

covered by the statement, presented individually and in the aggregate, including without limitation:

• fund expenses and, where the segregated fund has classes or series of units, the fund
  expenses are calculated for each class or series in accordance with section 3; Insurers are not required to report the fund expenses of a segregated fund that was established less than 12 months before the statement date;
• front-end load charges;
• if applicable, the fees referred to in section 2 of the Regulation respecting the
  prohibition on charging certain fees from holders of individual variable insurance contracts relating to segregated funds, for contracts entered into before June 1, 2023;
• remuneration related to advisory services payable by a contract holder in respect of
  the contract to an individual or entity registered as a firm, independent partnership or independent representative that is paid thereto by the insurer, on the instructions of the contract holder, from the investments in the contract;
• withdrawal fees;
• transfer fees;
• reset fees;
• early withdrawal or short-term trading fee;
• fees with respect to cheques returned due to insufficient funds;
• small policy fee; and
• insurance fees not included in fund expenses;
   any changes to the insurance fee, if applicable, where permitted by the contract;  the following notice or a notice with wording substantially similar to:
  “Fees and charges affect your returns.”;
  “If applicable, compensation or other fees charged to you and paid directly by you to the firm, independent partnership or independent representative are not included in the aggregate amount of fees and charges appearing on your statement.”; “We suggest you contact us or your advisor (or, where the contract was purchased via a digital space, the firm or independent partnership) to discuss the fees and charges you pay and their impact on the long-term performance of your investments and contract.”; and “More information about fund expenses can be found in the Funds Facts documents for the segregated funds in your contract.”;  the fact approximations have been used when calculating fund expenses, if applicable; and  the fact significant fees and charges would be payable if the contract holder were to end the contract, if applicable, as well as the effect of such fees and charges. If such significant fees and charges are those referred to in section 2 of the Regulation respecting the prohibition on charging certain fees from holders of individual variable insurance contracts relating to segregated funds, the notice may be replaced by an indication of their net value.

Information for each segregated fund whose units are allocated to the contract for the period covered by the statement:
 the segregated fund name;
 the market value of the segregated fund units allocated to the contract at the start date of the period covered by the statement;  since the start of the period covered by the statement until the statement date, the total amounts invested and withdrawn by the contract holder and the change in value of investments for reasons other than investments or withdrawals by the contract holder;  as at the statement date, the number of segregated fund units allocated to the contract, the market value per segregated fund unit and the total market value of segregated fund units allocated to the contract;  except where the segregated fund was established less than one year before the statement date, the segregated fund expense ratio, expressed as a percentage, obtained by the sum of the segregated fund’s management expense ratio and trading expense ratio; For the purposes of the above calculation, the trading expense ratio of a segregated fund for any financial year, expressed as a percentage, is obtained by dividing the total commissions and other portfolio transaction costs, including those of any secondary fund, before income taxes, for the financial year as shown on the fund’s statement of comprehensive income, by the same denominator as is used to calculate the management expense ratio and multiplying the result obtained by 100.  if applicable, the following notice or a notice with wording substantially similar to:
“The total market value of all the segregated funds within your contract is not necessarily the amount you would receive if you were to end your contract, because, if you did, fees and charges could be payable. You can obtain information about the actual amount you would receive by (indicate here how to obtain the information).”; “Under your contract, the fund has a deferred sales charge (or any other designation used by the insurer for the fees referred to in section 2 of the Regulation respecting the prohibition on charging certain fees from holders of individual variable insurance contracts relating to segregated funds, for contracts entered into before June 1, 2023). You can withdraw all the money in the fund, but you may be charged a fee to do so if you are withdrawing those funds before the end of the (indicate here the length of the period) deferred sales charge period.”; “The fund’s expenses are made up of the management fee (specify, if applicable, that the management fee includes the insurance costs for the maturity and death benefit guarantees) and trading costs. You don’t pay these expenses directly. We periodically deduct them from the value of your investments to manage and operate the funds. The expenses affect you because they reduce the segregated fund’s returns. These expenses add up over time. The fund expense ratio is expressed as an annual percentage of the total fund’s value and differs depending on the segregated fund. It corresponds to the sum of the fund’s management expense ratio and trading expense ratio. These costs are already reflected in the market values reported for your segregated fund investments.”; “The dollar amount of the fund’s expenses (indicate here where the amount is found in the statement) is calculated from the fund expense ratio provided for each of the contract’s segregated funds for the period covered by the statement. Consequently, there is no duplication of expenses.”; and  if applicable, a notice indicating that no fund expense ratio for the segregated fund is provided in the statement because the segregated fund was established less than 12 months before the statement date.

Information about maturity and death benefit guarantees for all segregated fund units allocated to the contract as at the statement date:
 the market value of segregated fund units allocated to the contract subject to the guarantee under the contract;  the maturity date of the guarantee of the contract;  the value guaranteed on the contract maturity date and on death of the annuitant; If the contract has more than one maturity date, the above information must only be provided for the maturity guarantee of the contract as a whole, not for each separate invested amount.  if the contract has an automatic reset provision, the date of the next automatic reset;  if the contract holder is allowed to make discretionary resets under the contract, a reminder to that effect; and  if applicable, the following notice or a notice with wording substantially similar to:
“An automatic reset will lock-in a new maturity or death benefit guarantee based on the current market value of the contract. A reset to the maturity guarantee will also restart the maturity guarantee period, delaying the maturity date of your contract.”; Information for contracts providing guaranteed withdrawal benefits where all or part of the contract is in the accumulation phase:
 the guaranteed annual withdrawal amount, at the earliest age at which the contract holder can begin receiving guaranteed withdrawals and, depending on the withdrawal options available to the contract holder under the contract, at age 65 and at age 70;  if applicable, the following notice or a notice with wording substantially similar to:
“The guaranteed annual withdrawal amount has been calculated assuming:

• you will make no further investments in the contract;
• you will make no withdrawal from the contract, aside from the guaranteed
  withdrawals;
• the market value of the segregated fund units allocated to the contract will not change
  between the date of calculation and the dates for which the guaranteed withdrawal amounts are shown and, if applicable, that no bonuses will be credited to the contract and that you will not reset any guarantees under the contract.” and  how contract guarantees are affected by withdrawals. The accumulation phase means the time between the date when the contract holder begins investing amounts in a contract that provides a guaranteed withdrawal benefit and the date when the contract holder notifies the insurer that the contract holder wants to begin receiving such guaranteed payments. Information for contracts providing guaranteed withdrawal benefits where all or part of the contract is in the withdrawal phase:

 the guaranteed annual withdrawal amount;
 how long the guaranteed annual withdrawal amount will be payable, assuming the contract holder does not make any withdrawals other than the scheduled withdrawals;  the amount the contract holder has chosen to receive annually, if different from the guaranteed annual withdrawal amount;  if the contract is a registered retirement income fund (“RRIF”), life income fund (“LIF”), Locked-in Retirement Income Fund (“LRIF”) or Restricted Life Income Fund (“RLIF”), the minimum RRIF, LIF, LRIF or RLIF withdrawal for the year following the statement date;  if the contract is a LIF, LRIF or RLIF, the maximum LIF, LRIF or RLIF withdrawal for the year following the statement date; and  the following notice or a notice with wording substantially similar to:
 “Any withdrawals that exceed the guaranteed annual withdrawal amount will decrease future guaranteed withdrawal amounts, except if required in respect of a RRIF, LIF, LRIF or RLIF minimum withdrawal amount. The guaranteed annual withdrawal amount will be payable to you even if the amount of money in your contract is less than the guaranteed payment amount.” The withdrawal phase means the time between the date when the contract holder triggers the guaranteed withdrawal benefit under a contract that provides such a benefit and the date when there is no longer enough money held within the contract to pay a scheduled withdrawal. Information for contracts providing a guaranteed withdrawal benefit where all or part of the contract is in the benefits phase:
 the guaranteed annual withdrawal amount; and  how long the guaranteed withdrawal amount will be payable. The benefits phase means the time between the date when the withdrawal phase ends for all or part of a contract that provides a guaranteed withdrawal benefit and the last date a guaranteed withdrawal benefit is payable.