Investment Limits (Insurance Companies) Regulations (SOR/2001-396)

Valuation of Equity

Marginal note:Equity owned by company

6 For the purposes of sections 507 and 508 of the Act, the value of the participating shares and ownership interests referred to in those sections that are beneficially owned by a company and its subsidiaries prescribed by subsection 4 is equal to their book value as reported on the consolidated balance sheet of the company.

Interests of a Company in Real Property

General

Marginal note:Definition and value of interest in real property

• 7 (1) For the purposes of Part IX of the Act, other than subsection 502(3) of the Act, sections 8 to 12 define the interests of a company in real property and set out how those interests are to be valued.

• Marginal note:Exception

  (2) For the purpose of subsection 502(3) of the Act, the interests of a company in real property means real property referred to in paragraph 11(1)(a) and shares and ownership interests referred to in paragraph 11(1)(b) that become beneficially owned by the company, or by a designated entity controlled by the company, as a result of the realization of a security interest on a loan or debt obligation referred to in subsection 11(1).

Direct Interests — Real Property and Debt Obligations

Marginal note:Direct interests

• 8 (1) The following are interests of a company in real property:

  • (a) real property beneficially owned by the company or by a designated entity controlled by the company; and

  • (b) a debt obligation, for which the company or a designated entity controlled by the company is liable, that was issued for the purpose of acquiring or improving real property referred to in paragraph (a).

• Marginal note:Value of direct interests

  (2) The value of the interests of a company in real property is

  • (a) in respect of real property referred to in paragraph (1)(a), the book value of the real property; and

  • (b) in respect of a debt obligation referred to in paragraph (1)(b), any amount by which the book value of the debt obligation exceeds the book value of the real property referred to in that paragraph.

Indirect Interests — Real Property, Shares and Ownership Interests

Marginal note:Certain indirect interests

• 9 (1) The following are interests of a company in real property:

  • (a) at a particular time, real property

    • (i) that is beneficially owned by

      • (A) a related real property entity of the company that is a joint venture, or

      • (B) an entity in which an entity described in clause (A) has a substantial investment, and

    • (ii) that would be reported on a balance sheet of the company prepared as at that time in accordance with the accounting principles and specifications of the Superintendent referred to in subsection 331(4) of the Act; and

  • (b) shares and ownership interests beneficially owned by the company, or by a designated entity controlled by the company, in any related real property entity of the company other than a related real property entity referred to in paragraph (a).

• Marginal note:Value of those interests

  (2) The value of the interests of a company in real property is

  • (a) in respect of real property referred to in paragraph (1)(a), the book value of the real property; and

  • (b) in respect of shares and ownership interests referred to in paragraph (1)(b), the book value of the shares and ownership interests.

Indirect Interests — Loans and Debt Obligations

Marginal note:Certain indirect interests

• 10 (1) The following are interests of a company in real property:

  • (a) a debt obligation issued by a related real property entity of the company and beneficially owned by the company or by a designated entity controlled by the company;

  • (b) a loan made by the company, or by a designated entity controlled by the company, to a related real property entity of the company;

  • (c) a loan made by the company, or by a designated entity controlled by the company, to

    • (i) a real property entity in which a financial institution, bank holding company or insurance holding company controlled by the company has a substantial investment, or

    • (ii) a real property entity that is controlled by a real property entity described in subparagraph (i);

  • (d) a debt obligation issued by a real property entity described in subparagraph (c)(i) or (ii) and beneficially owned by the company or by a designated entity controlled by the company;

  • (e) a debt obligation that is

    • (i) issued by a related real property entity of the company,

    • (ii) beneficially owned by a third party, and

    • (iii) guaranteed by the company or by a designated entity controlled by the company; and

  • (f) a loan made by a third party to a related real property entity of the company and guaranteed by the company or by a designated entity controlled by the company.

• Marginal note:Value of those interests

  (2) The value of the interests of a company in real property is

  • (a) in respect of a debt obligation referred to in paragraph (1)(a) or (d), the book value of the debt obligation;

  • (b) in respect of a loan referred to in paragraph (1)(b) or (c), the book value of the loan; and

  • (c) in respect of a guaranteed debt obligation referred to in paragraph (1)(e) or a guaranteed loan referred to in paragraph (1)(f),

    • (i) if the debt obligation is issued by, or the loan is made to, an entity that is a related real property entity of the company and the entity beneficially owns real property that is an interest of the company in real property under paragraph 9(1)(a), any amount by which the face value of the guarantee exceeds the value of the real property determined in accordance with paragraph 9(2)(a), and

    • (ii) in any other case, the face value of the guarantee.

Indirect Interests — Secured Loans and Debt Obligations

Marginal note:Certain indirect interests

• 11 (1) If a company or a designated entity controlled by a company makes a loan to, or beneficially owns or guarantees the debt obligation of, a third party, the loan or debt obligation is an interest of the company in real property if it is secured by

  • (a) real property beneficially owned by a third party in conjunction with

    • (i) the company,

    • (ii) the designated entity,

    • (iii) a related real property entity of the company,

    • (iv) a financial institution, bank holding company or insurance holding company controlled by the company,

    • (v) an entity controlled by a financial institution, bank holding company or insurance holding company referred to in subparagraph (iv), or

    • (vi) a real property entity described in subparagraph 10(1)(c)(i) or (ii); or

  • (b) shares or ownership interests beneficially owned by a third party in

    • (i) an entity that beneficially owns real property in conjunction with the company, a related real property entity of the company or a designated entity controlled by the company, or

    • (ii) a related real property entity of the company.

• Marginal note:Value of those assets

  (2) The value of the interests of a company in real property is

  • (a) in respect of a loan or debt obligation that is secured by real property referred to in paragraph (1)(a), the lesser of

    • (i) the net realizable value of the third party’s interest in the real property at the time that the security interest was given, and

    • (ii) the amount determined by the formula

      A - B

      where

      A

      is

      • (A) if the loan was made by the company or a designated entity controlled by the company or the debt obligation is beneficially owned by the company or a designated entity controlled by the company, the book value of the loan or debt obligation, or

      • (B) if the debt obligation is guaranteed by the company or a designated entity controlled by the company, the face value of the guarantee, and

      B

      is the total net realizable value of any other security interests that were given for the loan or debt obligation;

  • (b) in respect of a loan or debt obligation that is secured by shares or ownership interests beneficially owned by a third party in an entity referred to in subparagraph (1)(b)(i), the lesser of

    • (i) the net realizable value of the third party’s interest in those shares or ownership interests at the time that the security interest was given, and

    • (ii) the amount determined by the formula

      A - (B - (C × D/E))

      where

      A

      is

      • (A) if the loan was made by the company or a designated entity controlled by the company or the debt obligation is beneficially owned by the company or a designated entity controlled by the company, the book value of the loan or debt obligation, or

      • (B) if the debt obligation is guaranteed by the company or a designated entity controlled by the company, the face value of the guarantee,

      B

      is the total net realizable value of all security interests that were given for the loan or debt obligation,

      C

      is the net realizable value of the entity’s interest in the real property referred to in subparagraph (1)(b)(i),

      D

      is the value of the shares or ownership interests that are given as the security interest, and

      E

      is the total value of the outstanding shares or ownership interests in the entity; and

  • (c) in respect of a loan or debt obligation that is secured by shares or ownership interests beneficially owned by a third party in a related real property entity referred to in subparagraph (1)(b)(ii), the lesser of

    • (i) the net realizable value of the third party’s interest in those shares or ownership interests at the time that the security interest was given, and

    • (ii) the amount determined by the formula

      A - B

      where

      A

      is

      • (A) if the loan was made by the company or a designated entity controlled by the company or the debt obligation is beneficially owned by the company or a designated entity controlled by the company, the book value of the loan or debt obligation, or

      • (B) if the debt obligation is guaranteed by the company or a designated entity controlled by the company, the face value of the guarantee, and

      B

      is the total net realizable value of any other security interests that were given for the loan or debt obligation.

Other Interests

Marginal note:Other interests

• 12 (1) The following are interests of a company in real property:

  • (a) a guarantee given by the company, or by a designated entity controlled by the company, to an entity other than the company or designated entity for the purpose of completing the development of real property that is beneficially owned by

    • (i) the company,

    • (ii) a designated entity controlled by the company, or

    • (iii) a related real property entity of the company; and

  • (b) an agreement made by the company, or by a designated entity controlled by the company, to support a third party’s cost of operating or financing real property that is beneficially owned by

    • (i) the company,

    • (ii) a designated entity controlled by the company, or

    • (iii) a related real property entity of the company.

• Marginal note:Value of those interests

  (2) The value of the interests of a company in real property is

  • (a) in respect of a guarantee referred to in paragraph (1)(a), the estimated cost of completing the development of the real property; and

  • (b) in respect of an agreement referred to in paragraph (1)(b), the amount of any funds advanced by the company, or by a designated entity controlled by the company, under the agreement.