Feds greenlight PACICC’s request to establish a ‘bridge insurer’ to resolve insolvencies

Canada’s federal government has added to the toolkit to help the Property and Casualty Insurance Compensation Corporation (PACICC) protect consumers from the impact of an insurance company insolvency.

The Minister of Finance and National Revenue has authorized PACICC to establish a ‘bridge insurer,’ to be known as PACICC-SIMA General Insurance Company (or PGIC). The federal government signed the bridge insurer’s patent of incorporation in July.

“This was a significant milestone for PACICC, as it delivered on an idea dating back to 2020 industry consultations, [when insurance company] members expressed preliminary interest in the idea of an OSFI-chartered bridge insurer to enhance PACICC’s Resolution Toolkit,” PACICC reported in its September edition of Solvency Matters.

The plan is for PGIC to lay dormant as a shell entity until needed. Any decision to activate PGIC will require a consensus decision of PACICC’s board of directors, the Office of the Superintendent of Financial Institutions [OSFI], and the relevant provincial regulators.

A set of threshold criteria must be met for both PACICC and the federal solvency regulator to agree to involve the bridge insurer.

PACICC approved starting the application process to form a bridge insurer in 2023, noting a similar bridge insurer company exists on the life insurance side. Assuris, a sister compensation fund on the life insurance side, has a ‘shell’ bridge insurer, CompCorp Life Insurance Company.

CompCorp was involved in the wind-up of Sovereign Life Insurance Company in 1993.

PACICC notes the International Association of Insurance Supervisors (IAIS) recommends that a bridge insurer be part of any effective insurance solvency resolution framework.

Case Study: Bridge insurer in South Korea

PACICC is closely monitoring the role of a bridge insurer in an ongoing situation in South Korea. There, a bridge insurer is acting as a buffer for consumers as the troubled company is shopped around to potential buyers.

“Recently, an interesting case has been playing out in South Korea involving the country’s 10th largest non-life insurer, MG Non-Life Insurance Company (MG),” PACICC notes in Solvency Matters. “On April 13, 2022, MG was declared an ‘insolvent financial institution’ by its regulator, the Financial Services Commission (FSC).

“This was the first time in eight years that FSC had labeled a financial institution as insolvent.”

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In February 2022, MG Non-Life Insurance’s debt exceeded its assets by $113.9 billion won (US$92.9 million), meeting the regulator’s criteria for an insolvent financial institution. Its net loss in 2021 stood at $61.7 billion won (US$50.3 million), down $38.8 billion won (US$31.6 million) from the previous year.

At the end of 2021, its risk-based capital adequacy, a key measure of its financial health, was 88.3% – less than the 100% percent standard set by the Insurance Business Act.

Under Korean law, an insolvent financial institution such as MG is obligated to find a new owner. But four public sale attempts had been made since April 2022, and they all failed.

Meanwhile, MG’s financial condition has continued to deteriorate. Its debt now totals $1 trillion won (US$733.8 million), and by the end of 2025 Q1, its capital adequacy ratio had fallen to -18.2%.

In 2025 Q1, MG held approximately 1.51 million insurance contracts, with 90% consisting of long-term policies such as health and accident insurance. Affected policyholders include 1.24-million individual clients and 10,000 corporate accounts.

Korea’s FSC announced in May 2025 that MG policy contracts would be transferred to five major non-life insurance firms — including Samsung Fire & Marine Insurance, Meritz Fire & Marine Insurance, KB Insurance, Hyundai Marine Insurance, and DB Insurance.

The transfer will be done through a bridge insurance company.

The Korean government’s objective is to pursue a sale of the company at the same time as the transfer of policies to the five other insurers. The transfer of policies is expected to be completed by the end of 2026 Q4. Meanwhile, a buyer is being sought by 2026 Q2. If a buyer isn’t found, the transfer of policies will proceed.

“It is definitely interesting that a bridge insurer is being used in Korea to deal with an industry insolvency,” PACICC says in Solvency Matters. “More intriguing, however, is the fact that it is being used for continuation of the troubled insurer’s policies (a solution more commonly seen in life insurance resolutions).

“PACICC will continue to monitor this file and others worldwide to advance our understanding about how our board could employ our new bridge insurer capability in a crisis.”