Canada's Federal Superintendent of Financial Institutions took control of Confederation Life and its banking arm, Confederation Trust, after directors agreed that their capital was no longer sufficient to protect policyholders, depositors and creditors. The regulators said they would seek the immediate liquidation of the mutual life insurance company, Canada's fifth-largest insurer, with assets of Cdollars 29bn ( pounds 14bn).
Winding-up petititons were filed in Ontario courts yesterday. Peat Marwick Thorne, the Canadian arm of the accounting firm KPMG Peat Marwick, has been named as the superintendent's agent in the process.
Confederation Life had suffered heavy losses in property and in mortgage loans, and had tried to strike an agreement with another Canadian insurer, Great-West Life Assurance. When that collapsed, it sought Cdollars 600m in new investment from US investors and a consortium of Canada's largest insurers.
Branches of Confederation Trust failed to open across Canada yesterday and a spokesman said all Cdollars 700m worth of deposits had been frozen by regulators. Regulators in other countries moved immediately to prevent the transfer of assets located abroad back to the parent company, in an effort to protect local policyholders.
Confederation's UK subsidiary, which has a total of 300,000 policyholders and pounds 5.4bn under management, is within days of announcing its sale to a big financial institution. The company has been told by the Canadian regulators to carry on business as usual until the sale is completed.
A spokesman said: 'The crisis faced by the parent may make a difference to the price paid for the company.' The UK company employs 1,600 people and has a 700- strong direct sales force working out of 40 branches.
Confederation Life has set up a free telephone helpline for policyholders on 0800-834072.Reuse content