Developed through consultations with the industry since 2020, the proposal to establish a bridge insurer took a step forward last summer. This solution aims to transfer the insolvency file of a property and casualty insurer to a third party. 

The Property and Casualty Insurance Compensation Corporation (PACICC) confirmed this information in its most recent Solvency Matters quarterly newsletter, published at the end of September. On July 21, 2025, Canada’s Minister of Finance and National Revenue signed the letters patent authorizing the incorporation of PACICC-SIMA General Insurance Company (PGIC). 

Under the supervision of the Office of the Superintendent of Financial Institutions (OSFI), this bridge insurer allows PACICC to expand its resolution toolkit in the event of a crisis. PACICC’s board of directors approved the launch of the PGIC creation process. 

At the time, PACICC’s directors noted that the equivalent organization in life insurance, Assuris, had its own bridge insurer (SIAP Life), which had been used in the resolution of the 1993 insolvency of Sovereign Life. 

For now, CAPGS will remain dormant. The decision to activate it will be made jointly by PACICC’s board, OSFI, and all regulatory bodies involved in the insolvency of an insurer. 

PACICC has outlined a three-stage process involving seven questions to reach that point. Among these, before activating its bridge insurer, PACICC must be certain that activating CAPGS would be significantly less expensive than liquidation of the troubled insurer. 

A South Korean example 

In the most recent Solvency Matters bulletin, PACICC cites the case of MG Non-Life Insurance Company (MG), a property and casualty insurer in South Korea that went bankrupt in 2022. As early as the end of 2021, the company reported a capital adequacy ratio well below the national standard. At the time, it ranked 10th in the country for property and casualty insurance premium volume. 

After four unsuccessful public sale attempts, MG was declared insolvent by the regulator in April 2022. It was only in May 2025 that the country’s regulatory authority announced its intention to transfer policies to five large insurance companies through a bridge insurer, known as the Korea Deposit Insurance Corporation. The regulator wanted to liquidate MG, but the proposal met with strong opposition from the employees’ union. 

PACICC is monitoring developments in the case but writes that it is “more surprising” to see a bridge insurer being used to maintain policy continuity for the troubled insurer—a solution more commonly seen in the life insurance sector. 

Resolution capacity 

The creation of a bridge insurer stems from recommendations by the International Association of Insurance Supervisors (IAIS) to improve the resolution capacity of regulatory authorities in the event of an insolvency. 

Two additional steps must still be completed to obtain OSFI’s operating approval, as well as a licence to operate in each province and territory in Canada. The first CAPGS board meeting is scheduled for November 2025. 

Currently, PACICC believes that the funds it has on hand would be sufficient to manage the liquidation of one of its member insurers, except for the 15 largest. As of July 31, 2025, PACICC held $63.8 million in cash in its Compensation Fund, along with a $250 million standby line of credit facility. 

If necessary, PACICC can also levy a special assessment of up to 1.5 per cent of the direct written premiums in a given year. This corresponds to approximately $1.4 billion, which represents its long-term financial capacity. 

The current risk appetite limit set by the board is twice the maximum assessment capacity, or $2.8 billion. In certain scenarios, such as earthquake-related losses, PACICC’s assessment mechanism may prove insufficient. 

In 2021, a PACICC study estimated that Canadian insurers could withstand up to $29.5 billion in losses in the event of a major catastrophe in Canada. A powerful earthquake causing severe damage in Vancouver or Montreal would far exceed that threshold.