Manulife Financial Corp. has signed a reinsurance deal with Global Atlantic that it says will free up $1.2 billion in capital that it plans to use to buy back shares.

The Toronto-based insurer said Monday it is reinsuring $13 billion of reserves to Global Atlantic and its partners, including $6 billion in long-term care reserves.

By having Global Atlantic agree to insure its exposure to the portfolios, Manulife said the deal is expected to release $1.2 billion of capital that it plans return to shareholders via share buybacks.

The deal on long-term care (LTC) reserves was especially notable, as it’s a riskier area of insurance that Manulife has been working on deals for some time.

“With this largest-ever LTC reinsurance deal, we believe it marks an important step in establishing an active LTC reinsurance market,” Manulife chief executive Roy Gori told a conference call with investment analysts.

Manulife said it ceeded $270 million on the LTC reserves, while the rest of the reserves were done at full value.

Gori called the agreement a major milestone for the company as it reshapes its portfolio, reduces risk and delivers value to shareholders.

Scotiabank analyst Meny Grauman said in a note that the deal marked a “giant leap” for sentiment around LTC transactions by establishing a good valuation baseline for such deals.

Manulife said it has received approval from the Office of the Superintendent of Financial Institutions to buy back up to about 2.8% of its outstanding common shares starting in February.

Clients approaching retirement are increasingly interested in directing at least part of their savings to purchasing an annuity, says a financial advisor.

“I have had more questions about annuities in the last six months, I would say, than probably [over] my career,” said Jason Heath, managing director of Objective Financial Partners Inc. in Markham, Ont.

However, some clients get cold feet when they realize that buying an annuity means handing over a significant sum in return for the guarantee of periodic lifetime payments, Heath said.

Yet “the same people who might be jealous of retiree with a pension would never think of giving their money away to an insurance company to buy what is effectively a pension of their own,” he said.

Over the previous three decades of low interest rates, clients largely spurned annuities, which offered relatively meagre payouts. However, as the Bank of Canada, as well as other central banks globally, began hiking rates in the spring of 2022 in response to rising inflation, client interest in annuities began to increase.

As of February 2023, the monthly payout on a single-life annuity with a premium of $100,000 and a 10-year guarantee were up more than 20% compared to a year before.

Heath said he’s met with clients who see annuities as an attractive alternative to determining the appropriate amount to draw down from retirement savings for expenses, or to managing their own retirement investments.

“With Canadian bonds down double digits [last year], conservative investors who lost double digits on their bond portfolio are maybe thinking more about annuities as a true guarantee of fixed income as opposed to bonds, which do have some interest-rate risk,” Heath said.

Clients interested in annuities typically only direct a portion of their retirement assets to the purchase of a regular payout, Heath said.

To address client concerns about dying before reaping the benefits of the annuity, insurance companies offer guarantee periods, such as five or 10 years. They also may offer joint annuities rather than single-life annuities, where the life expectancies of both spouses factor into the payout.

However, the key benefit of “buying an annuity is not so much about protecting against the risk of dying young, it’s protecting against the risk of living a long life. [It’s] longevity insurance,” Heath said.

Canada should consider publicly funded long-term care (LTC) insurance to address the economic realities of the country’s aging population, suggests a new report from Toronto Metropolitan University’s National Institute on Ageing (NIA).

The report, released on Thursday, outlined how the aging population is leading to mounting LTC costs, requiring a viable solution.

Based on Statistics Canada data, Canadians aged 65 years and older will account for nearly 27% of the country’s total population by 2048, and the number of Canadians aged 85 and older is expected to triple in the same period — to as many as 2.8 million people.

In 2019, Canadian households spent $9.4 billion out of their own pockets to access additional LTC services beyond those that are publicly funded, according to the Organization for Economic Co-operation and Development, cited in the report.

Private insurers struggle to offer affordable LTC insurance premiums because of the small selection pool and high probability that the insured will require services, the report said.

“Establishing a national LTC insurance program in Canada could present a unique opportunity to re-imagine Canada’s social contract and better align its provision of LTC services to the needs and preferences of older Canadians,” it said.

Such a program could also help standardize care.

“A national LTC insurance program could present a chance to establish a national definition of LTC services, creating common standards for eligibility, benefits and the quality of care that Canada wants to commit to providing,” the report said.

The NIA examined LTC insurance programs currently offered by five countries and one U.S. state: Japan, Germany, South Korea, Taiwan, the Netherlands and Washington.

Each program varies in eligibility, benefits and user choice, and programs were financed through varying combinations of taxation, social contributions and out-of-pocket spending. The NIA applied its findings to the consideration of a national LTC insurance program in Canada.

For example, the potential program could support seniors to age in place by allocating LTC funding to more home and community care, instead of institutional care.

The program could also leverage Canada’s established network of public and private LTC home and community care providers, the NIA said. Establishing employees who work at a local level as care plan managers could help ensure that seniors receive appropriate, timely care based on their needs, the report suggested.

It also suggested using social insurance contributions as the program’s primary funding mechanism, supplemented by general taxation revenues. This would subsidize and redistribute costs across the entire Canadian population, which could lead to a more “equitable and sustainable” national program, the report said.

A national LTC program represents an opportunity to “reduce fragmentation, guarantee all Canadians a basic level of service and financial coverage for LTC services, and create a more consistent and sustainable level of funding for LTC for future older Canadians,” it said.

Hundreds of thousands of Canadians could be in the market for individual disability insurance because they depend on gig-economy work, but placing coverage is not easy, advisors suggest.

Individual disability insurers have traditionally favoured white-collar professionals like dentists and doctors, said Geoff Cook, certified financial planner with Infinite Financial in Barrie, Ont.

“You can’t really buy disability without [working] 30 hours [a week], at least,” he said. “And then you’ve got to supply a T4, and if you don’t supply a T4, you might not actually be getting a decent product.”

“Many in the gig economy are self-employed and they are concerned about reporting their income to justify the benefit amount,” said Jean Salvadore, senior director of life and living benefits with RBC Insurance. She explained that underwriters can work with business owners and contract workers to evaluate business and personal income so that all income is counted.

Placing individual disability for gig workers can also be complicated because workers could potentially have multiple jobs, said Toronto-based advisor Brian Shumak.

As such, advisors should manage gig workers’ expectations on coverage availability. For example, if a gig worker can get individual disability coverage, it will probably be in the guaranteed renewable category rather than non-cancellable category, Shumak said.

In a non-cancellable policy, premiums cannot be increased, benefits cannot be reduced and the insurer cannot unilaterally cancel the contract. With a guaranteed renewable disability policy, the insurer can raise the premiums for everyone in a certain class or category but cannot raise individual premiums.

“The ability to qualify for a non-cancellable product is diminishing and as a result of the historic claims experience, you’re going to see a lower desire for the remaining companies to maintain the non-cancellable product,” Shumak said, alluding to Manulife Financial Corp.’s decision in 2022 to stop selling its non-cancellable products.

Another area in which to manage expectations is the scope of disability coverage. In the event of a claim, a dispute could arise between the claimant and insurer over whether or not the claimant can do their job, Cook said, suggesting that an advisor should explain the definition of “disability” in a policy to clients.

The ideal policy would pay income replacement if the policyholder cannot do the duties of the job they are trained to do, Cook said. “[But] there’s another definition of disability called ‘any occupation,’ which means, for lack of better terms, that if you can work anywhere, we won’t pay you. If you can’t pound nails as a carpenter but you could be a greeter at Wal-Mart, we won’t pay you.”

“Any occupation” coverage is generally less expensive.

The share of Canadians in gig-economy jobs (including drivers, artists and freelancers) nearly doubled to 10% in 2020 from 5.5% in 2005, Employment and Social Development Canada said in a report released in March. This works out to roughly two million Canadian gig workers. A separate 2019 Statistics Canada survey found 48.6% of gig workers had no wage-earning job and relied solely on gigs.

Manulife Financial Corp. has named Cleveland Clinic Canada as its new medical director for group benefits, the insurer said in a release on Thursday.

The collaboration allows Manulife to leverage the academic medical centre’s experts and research.

“Working with Cleveland Clinic Canada will assist Manulife in achieving its goal of helping Canadians prevent, treat and recover from physical and mental health complications,” the release said.

Mental health claims, in particular, have soared since the pandemic. In 2021, Canada’s insurers paid $580 million for mental health claims — up by 75% from 2019, the Canadian Life and Health Insurance Association said in the 2022 edition of its annual update on the industry. For comparison, physiotherapy and chiropractic claims are about $700 million each.

Manulife has about five million group benefits customers, the release said.

Vancouver-based independent wealth management firm Nicola Wealth has acquired Levine Financial Group, a Toronto-based provider of insurance products and services to doctors in Ontario, the firm announced Monday.

The move aligns with Nicola Wealth’s strategy to grow across the country and allows it to bring its “integrated approach to wealth planning alongside its diversified investment platform to medical professionals across Ontario,” the firm indicated in a release.

With offices in B.C. and Ontario, Nicola Wealth manages $12.7 billion in assets for high-net-worth families and entrepreneurs.

Levine Financial’s clients will “benefit from our financial planning and diversified investment platform,” said Vanessa Flockton, senior vice-president of advisory services at Nicola Wealth, in the release. “Together, we can offer medical practitioners the comprehensive plans they need as they consider the complexities of their financial future.”

According to the release, Nicola Wealth and Levine Financial will continue independent operations while looking for “opportunities to optimize and collaborate on shared initiatives.”

Placing disability insurance for business owners will become more difficult now that Manulife Financial Corp. has stopped accepting new business for four products.

In a memo obtained by Advisor’s Edge, Manulife said that effective Sept. 30, it will stop selling Proguard, Venture, ExpenseComp and Buy-sell Plus. These disability insurance products are aimed at executives, incorporated professionals and business owners.

The memo stated that Manulife had made the change “in response to the shrinking demand for non-cancellable disability products.”

“Closing these products allows us to focus on the other areas, and we’ll continue to offer disability products through the other channels,” said Manulife in a statement confirming the memo’s contents. “We will continue to offer Affinity and Group Benefits disability products to Canadians as well as continue to provide coverage and fulfill the contractual obligations to those who already purchased disability coverage prior to and on Sept. 30, 2022.”

Non-cancellable is a type of individual disability insurance in which premiums cannot be increased, benefits cannot be reduced and the insurer cannot unilaterally cancel the contract.

Manulife’s decision leaves RBC Insurance and Canada Life as the other major insurers offering individual disability products, a spokesperson for New York-based brokerage and wealth management firm NFP Corp. confirmed in an email.

“The fewer players there are in the market, the less flexibility there is for consumers and the less incentive there is for evolution of products or pricing competitiveness. So it is never good when a company leaves the market,” said Lawrence Geller, a chartered life underwriter and president of Campbellville, Ont.-based L.I. Geller Insurance Agencies Ltd.

“I don’t know if this is a wave or if Manulife just said, ‘Hey, we’re not interested in this,” said Steve Meldrum, corporate insurance specialist and broker with Medicine Hat, Alta.-based Swell Private Wealth Ltd. Manulife’s decision could be based on considerations such as the increased difficultly in adjusting disability claims for people working from home, he added.

Meldrum said that non-cancellable policies are particularly attractive to professionals such as doctors, dentists and engineers who invested considerable amounts in their education and credentials.

“If you’re a doctor, you want to make sure that if you break your legs or hands or get sick or hurt, that you still have money coming in because you spent eight years in school making no money and then you get disabled and you also get no money,” Meldrum said.

Sun Life Financial Inc. has signed a deal to buy DentaQuest, a provider of dental benefits in the United States, for $3.1 billion.

The company said DentaQuest will become part of its Sun Life U.S. business, which offers dental benefits through employers for employee benefit plans.

Sun Life said DentaQuest will more than double the size of its U.S. employee benefits business by revenue.

DentaQuest has more than 33 million members in 36 states and about 2,400 employees.

Sun Life CEO Kevin Strain said the acquisition of DentaQuest is consistent with its strategy of focusing on health and group benefits in the United States.

The transaction is expected to close in the first half of next year, subject to regulatory approvals and customary closing conditions.

An increase in extreme weather events may threaten the availability of property insurance in Canada, warns DBRS Morningstar in a new report.

The rating agency said that Canadian property and casualty (P&C) insurers have, so far, proven resilient in the face of rising weather-related losses.

“However, as climate risk increases and severe weather events become more correlated around the world, insurance and reinsurance companies may opt to withdraw property insurance coverage in regions they deem too costly to insure, or they may avoid insuring certain risks altogether,” the report warned.

The report noted that average annual weather-related losses are rising more quickly in Canada than in the rest of the world.

“This is consistent with the notion that the warming of Canada’s climate is happening at about twice the rate of the global average, according to scientific evidence provided by the Canadian government,” DBRS Morningstar said.

“With the increase in temperature comes climate change — changes in rainfall patterns and increased frequency and intensity of extreme weather-related events such as floods, droughts, heat waves, wildfires, and storms and the resulting higher insured losses,” the report noted.

Ultimately, these events may make acquiring insurance tougher.

“Under an extreme scenario, global reinsurance companies may reduce their appetite for insuring some property risks in Canada, creating additional challenges for primary insurance companies that rely on reinsurance as a risk management strategy,” said Nadja Dreff, senior vice-president, insurance, with DBRS Morningstar, in a release.

“As such, we are closely monitoring the consequences of climate change and the P&C insurance industry’s response as part of our credit rating analysis,” she added.

Despite a recent string hurricanes, floods, wildfires and other natural disasters, the outlook for the global reinsurance sector is improving, according to rating agencies Moody’s Investors Service and Fitch Ratings.

In a new report, Moody’s said the outlook for the reinsurance industry has shifted from negative to stable amid expectations of higher profits and solid capital over the next couple of years.

“Healthy price increases will drive stronger earnings through 2022 as the post-pandemic economic recovery and recent significant catastrophe losses fuel fresh demand for reinsurance,” said Helena Kingsley-Tomkins, vice-president and senior analyst with Moody’s, in a release.

Moody’s reported that property reinsurance prices are climbing, driven by recent losses due to natural catastrophes.

Fitch noted that higher prices, along with the ongoing economic recovery and lower pandemic-related losses, have also boosted the sector’s outlook.

“These positive factors should outweigh the negative effects of declining investment returns, increasing natural catastrophe claims due to climate change, and a temporary pick-up in inflation,” Fitch noted.

Additionally, Fitch said that rising vaccination rates, particularly in Europe and North America, have “reduced the risk of excess mortality claims in life reinsurance, despite the spread of the Delta variant.”

Looking ahead, tougher reinsurance terms and conditions “have mostly eliminated the risk of new pandemic-related claims” for business-interruption losses, Fitch said.

“The pandemic has caused reinsurers to take a more prudent stance towards systemic risk management, including communicable disease, cyber events and climate change,” Moody’s noted.