Business insurance: Legislation creates slavery reporting obligations

In May 2026, goods-producing and importing companies in Canada of a certain size will be facing down their third reporting deadline under the Fighting Against Forced Labour and Child Labour in Supply Chains Act. The relatively new legislation requires these companies to produce an annual report attesting to the steps they have taken to reduce forced and child labour in their respective supply chains.

The rules, which came into effect on January 1, 2024, stipulate that companies must, before May 31 each year, report on the steps they have taken during the previous financial year to prevent and reduce the risk that forced labour or child labour was used at any step in the production of goods in Canada or in the production of goods imported by Canadian companies. Reports must include information about the company’s structure, its activities and policies, and provide insight into its supply chains, its education efforts and remediation mechanisms if these exist.

The businesses this applies to are those listed on a stock exchange in Canada, with a place of business in Canada and which have met at least two of three conditions during the company’s most two most recent fiscal years. The conditions include having at least $20-million in assets, having generated at least $40-million in revenue and/or employing an average of at least 250 employees.

“I think there is an understanding on the part of the government that truly, they want this legislation to work because they want transparency built into the supply chain,” says Robyn Campbell, managing director and national leader of the financial and professional alliance (FINPRO) for Marsh Risk. “The government wants to encourage this. My understanding is that there has been a forgiveness for slower reporting. In 2025 there were certainly organizations that were slow, but my understanding is nobody has actually been subject to a fine yet.”

Although the legislation likely applies to insurer’s clients (it affects directors and officer’s liability insurance – more on this in a minute), insurers themselves are not obligated to report.

When the legislation was first introduced, however, this was unclear. To comply, iA Financial Group published one of the few available reports which gives insight into an insurer’s supply chain. It found that the risk of modern slavery relating to its own workforce and operations and those of its subsidiaries is low given the nature of the company’s business and the jurisdictions in which it operates.

During the year leading up to the publication of its report, the insurer identified key suppliers of goods, its activities and started an initial mapping of its supply chains to identify risks involving modern slavery.

It did this by sending comprehensive questionnaires to iA’s suppliers and subsidiaries. It also reviewed and updated policies, statements and codes of conduct and provided training to both directors and to key employees, particularly those in procurement, legal, risk and compliance and sustainability. Although the subsidiaries are not subject to the Act, the company also identified two which manufacture, distribute and import goods into Canada. Employees in these companies also received training.

“As of the date of this report, iA Financial Group’s assessment did not identify specific risk of force labour or child labour,” the report states.

Since that report’s publication, the guidelines for entities published by Public Safety Canada have clarified the scope of the Act, including that entities engaged solely in distribution and sales are not required to file a statement. Given this development, representatives from iA Financial Group say the company no longer publishes a report for this purpose.

Insurers, however, particularly those operating internationally, are not unfamiliar with the need to comply with anti-slavery laws. Several including Manulife Financial Corporation, Sun Life Assurance Company of Canada and The Canada Life Group (U.K.) Limited also have Modern Slavery Act statements created to help the companies be in compliance with that 2015 legislation out of the United Kingdom.

The statements note that employees and temporary staff are paid above minimum wage, are provided with safe working conditions and are treated with dignity and respect. “The insurance sector has not been identified as a high-risk sector of modern slavery and human trafficking and the majority of our employees work in roles that require specialist qualifications,” Sun Life’s statement notes.

Since that legislation came into force, common measures employed by insurers include contractual changes to ensure that suppliers are in compliance with the Act. Training is also common, as are whistleblower and reporting hotlines – references to these were found in all four of the slavery statements reviewed by the Insurance Portal.

“Those involved in the recruitment of our employees or with procurement have been given specific guidance on the terms of the Act,” Sun Life’s statement continues. “We found our suppliers represent a low risk of modern slavery and, to date, we have not identified any causes of concern.”

All statements reviewed also expressed similar sentiments. Canada Life says the company is committed to ensuring there is no modern slavery or human trafficking in its supply chains or in any part of its business. “Because of the nature of our business and our suppliers, our assessment showed a lower risk profile than in many other industries,” they write. “In 2024 there were no known instances of Canada Life UK suppliers failing to meet their obligations in relation to this act,” their Modern Slavery Act statement adds.

Not one insurer would comment further or respond to the Insurance Portal’s requests for an interview. (It was noted by one observer, on the condition of anonymity, that insurers would likely rather contract a bad case of fleas than be associated with a story about modern slavery.)

Insurers not entirely immune

Despite having this distance from the problem, some research notes that insurers are not completely immune or beyond the reach of criminal enterprises engaged in human trafficking and modern slavery.

One report from the Thomson Reuters Institute, Beyond policies: The hidden linkages of human trafficking and the insurance sector, notes that insurance policies can be a preferred means of laundering the proceeds of crime.

“After drugs and arms trafficking, forced labour is the world’s third most lucrative criminal activity, generating an estimated $150-billion of illicit revenue annually in the global private and shadow economy,” the report states. “As criminal enterprises that include human trafficking evolve and adapt to changing circumstances, unsuspecting sectors find themselves entangled in its criminality, including an unlikely player: the insurance industry.”

The report discusses money laundering, saying the funding of life insurance policies has been a common tactic to launder money, as these can be overfunded with laundered proceeds and withdrawn from via payments, cash surrender values or loans taken out against a policy. “Cooling off periods which allow for early termination and premium top ups, annuity policies, single-premium contracts and other high premium savings vehicles all provide a harbour for criminal activity. Because they are common characteristics of insurance products, it is often difficult to detect anything illegal,” the report adds.

Changing beneficial owners – to straw owners or to relatives without any clear and visible connection to the criminal activity – once the contract is drafted, is also noted as another tactic.

“The diversity of the insurance industry and the many types of policies which often involve large sums of money and sudden transactions can make it harder for law enforcement to spot unusual activity.”

On the flipside, insurers in Canada are expected to comply with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act legislation – much, if not all of which is already baked into insurer’s processes. These requirements are mirrored in compliance education about large transactions, beneficial ownership and politically exposed persons, and in the know your client (KYC) processes most are familiar with.

“Under the Act, certain businesses are required to establish a compliance program, identify clients, keep records and report certain types of financial transactions to FINTRAC, including international electronic funds transfers, large cash transactions, large virtual currency transactions and suspicious transactions,” FINTRAC representatives told the Insurance Portal.

Director’s and officer’s coverage

The real issue, then, is the risk exposure the relatively new forced labour Act in Canada creates for large businesses, their directors in particular.

Underwriting in this area has changed, as more underwriters start to ask different and pointed questions around supply chain concerns. “The sophisticated ones have been onto this for some time,” Campbell says.

“They are looking at and asking questions about enterprise risk beyond just first level suppliers,” she adds, noting that employee training and management level responsibilities for anti-slavery measures are all part of the underwriting process now. Geographies, supplier footprints and contract language are also under scrutiny. “A red flag would be a checkbox approach, the bare minimum. That’s not what they want. One-size-fits-all is not going to be cutting it,” Campbell says.

“Gone are the days where you could just say, ‘my supplier’s in Markham.’ There’s a level of sophistication.”

She says director’s and officer’s (D&O) insurance will likely cover defense costs for companies but will likely not include coverage for fines and penalties. (Although if the error or director’s omission in turn triggers a class action lawsuit over share price, the penalties themselves may be a relatively small concern.)

Certain carriers can also have endorsements on their policies for public relations in a crisis event. “Typically that’s where a CEO dies or there’s a bankruptcy event. There’s a number of categories, but arguably, a regulatory investigation of this magnitude could potentially trigger that. That would be sublimited under the policy.”

However, if the hypothetical class action lawsuit were triggered by alleged misrepresentation, she says this is exactly what D&O policies are purchased for. “That’s the promise. The truth will fall wherever it does, but that’s the support that a D&O policy should provide.”