1987 Legislative Session: 1st Session, 34th Parliament

HANSARD

The following electronic version is for informational purposes only.

The printed version remains the official version.

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

FRIDAY, MAY 15, 1987

Morning Sitting

[ Page

1189 ]

CONTENTS

Routine Proceedings

Private Members' Statements

Funding of university programs. Mr. Mercier –– 1189

Ms. Marzari

Hon. Mr. Strachan

West Kootenay Power and Light Co. Ltd. Mr. Clark –– 1191

Hon. Mr. Davis

Policing. Mr. Rabbitt –– 1192

Mr. Sihota

B.C. science and technology policy. Mr. Lovick –– 1194

Hon. Mr. Strachan

Tabling Documents –– 1196

Insurance (Captive Company) Act (Bill 21). Second reading

Hon. Mr. Couvelier –– 1196

Mr. Stupich –– 1196

Mr. Mercier –– 1197

Mr. Sihota –– 1198

Mr. Vant –– 1202

Mr. D'Arcy –– 1202

Mr. Clark –– 1203

Mr. Williams –– 1204

Mr. Blencoe –– 1206

Hon. Mr. Couvelier –– 1207

The House met at 10:05 a.m.

Prayers.

HON. MR. STRACHAN: Mr. Speaker, it gives me great pleasure

this morning to introduce a close personal friend and his family. I'd

like the House to welcome Henry Novak, his wife Mary Novak, and his

mother Terezija Novak; and visiting with the Novak family from

Yugoslavia are relatives Antoine Hrovat and Anna Hrovat. Would the

Legislative Assembly please bid them a nice British Columbia welcome.

MR. VANT: Mr. Speaker, it gives me a great deal of pleasure

to welcome, from Rick Hansen's home town, 32 students from Williams

Lake Junior Secondary School. Accompanying them in the gallery behind

me is their teacher, Mr. Redding. This group of students and chaperones

are hosted by Shoreline Junior Secondary School here in Victoria and

their teacher, Mr. Ham. I know the House will join me in welcoming them.

MR. BLENCOE: Mr. Speaker, every now and again if we happen to

sit during the summer months — but I hope we won't have to sit too long

— I try to welcome the many visitors to this city, and I know there are

many people in the galleries today who are visiting our beautiful

Victoria on this beautiful day. So I would like to ask all my

colleagues — hopefully this is the only time I have to do it this

summer — to join with me in welcoming our many visitors to the city of

Victoria. Please join me.

Pri v ate Members' Statements

FUNDING OF UNIVERSITY PROGRAMS

MR. MERCIER: Mr. Speaker, I'd like to speak briefly on

industry and commerce funding university programs, and to promote

increased cooperation between post-secondary institutions and business

corporations, mainly in the area of scientific research and development

of high-technology products. Then I'd like to take a moment to mention

a funding source for students: namely, a perpetual revolving

scholarship fund.

Dealing with business funding, I would like to use Simon Fraser

University as a focal point, although I would say that my comments

would apply to virtually all provincial universities, colleges and

other post-secondary institutions. I've followed the growth of SFU

since its inception, through my terms as alderman and mayor of Burnaby.

Like the cooperative efforts between SFU and the corporation of

Burnaby, it has been a real pleasure to witness the tremendous growth

in research programs conducted jointly by Simon Fraser University and

its business partners.

I speak to endorse and promote the concept, because it is critical

that the community at large, and the small business community in

particular, be made aware that such cooperative research and

development programs are available. We can all benefit greatly from

expansion of those joint efforts.

There was a time not too long ago when such programs did not receive the support

of all British Columbians. Without being overly critical of the NDP, it is noteworthy

that there was a void, a lack of direction, in the university and business cooperation

when they were government after 1972. To illustrate, in March 1974 the NDP Minister

of Education stated a lengthy list — what amounted to a policy statement — of

programs recommended for our students. The list made no mention of scientific

research or technology, notwithstanding advances in those areas in other centres

in the world.

Also, when I was mayor of Burnaby in 1980, the NDP led the

resistance at a public hearing for the establishment of a discovery

park facility at the SFU and Willingdon locations. It is interesting to

note that Microtel Pacific Research Ltd., one of the largest research

and development companies in western Canada, is now a tenant in the

Simon Fraser University research park. We must continue our commitment

and make an even greater commitment to research development and

technical programs in universities, colleges and other post-secondary

institutions.

It's appropriate in this context to mention the recent appointment

of Mr. Samuel Belzberg, a prominent Vancouver businessman, as chairman

of the Simon Fraser University Bridge to the Future fund-raising

campaign for research and other programs. I would ask every member of

this House to encourage persons and businesses in their communities to

support this ambitious fund-raising campaign.

My purpose today is to emphasize our Social Credit government's

resolve and commitment to the joint venture concept. Secondly, I

encourage the business community to get itself involved by committing

larger and larger sums to joint projects with Simon Fraser University

and other post-secondary educational institutions in this province. The

president of Simon Fraser University, William Saywell, is justifiably

proud of the programs he has initiated or advanced at his university to

meet the needs of business, industry and government for access to new

knowledge — programs such as a research centre for all computer-based

research, an energy research institute, a chemical ecology research

group and more. The heads of other institutions of higher learning in

B.C. are, I am sure, equally proud of their similar programs.

It has been evident in the past few years that many areas in North

America are trying to duplicate the developments which have taken place

in Massachusetts and in the Silicon Valley of California. The evidence

is that research developments in these and similar areas benefited

significantly from university-industry ties when accompanied by

availability of venture capital and a capable workforce. President

Saywell has rightly stated:

"Traditional industries operating in sheltered environments

are yielding, they are yielding to a new wave of advanced manufacturing, information

services and high-tech processes. We must compete in a rapidly changing market

with rapidly changing technology and intense international competition."

It is the position of Simon Fraser University and many other such

institutions that now, more than ever before, they must play a key role

by commercialization of university research. Mr. Saywell has noted that

many studies show a high standard of living correlates directly with a

well-educated population. It is even more evident that the standard of

living is even better where human resources are employed in

technological research.

Another important facet of university and industry joint projects is

job creation. The Social Credit government recognizes the importance of

the achievements of innovative companies and the ideas of enterprising

British Columbians. And to accelerate the economic diversification, we

have

[ Page 1190 ]

many programs in place. Since the benefits to all

concerned are becoming increasingly obvious, I urge businesses to take

an even more active role. I urge them to contact their universities,

colleges and other educational institutions, and back those

institutions with ideas, participation and dollars.

[10:15]

MS. MARZARI: Mr. Speaker, no one could be more concerned

about the cooperation between the private sector and post-secondary

institutions than this side of the House. Our concern takes a number of

turns here. We are very proud of what has happened up to this point in

this province, in terms of our ability, through our post-secondary

institutions, to pull in federal research dollars. And this is where

most of those dollars come from: the national science and research

council, the national medical council and some other national research

bodies basically generate more than half of the money that comes into

this province; national and provincial foundations also contribute.

In the last number of years, however, the national research and

science council has basically stipulated that money will not be

forthcoming to our post-secondary institutions unless it is cost-shared

by corporations in the private sector. So, although we are very proud

of how far we've come in this province, this cooperation has not

happened, shall we say, organically. Rather, it has been mandated. This

in itself can play some havoc for pure research priorities. Happily, in

this province we don't have any pure research priorities, so that

doesn't seem to bother us any.

Nonetheless, I think what should be said here is that although we

are proud of our universities and their ability to pull in these

dollars, we must start developing our own plans, our own systems of

accountability and our own rationalizations for ensuring that these

dollars are properly used.

UBC, for example, attracts more than half of these dollars. Of the

$150 million that pours into this province every year, UBC attracts $65

million to $70 million, mostly in the medicine, science, engineering

and research faculties. In fact, UBC proudly boasts 52 companies that

have been spinoffs of this activity, where faculty, students and

related individuals and professionals have set up their own companies

and have generated in the 1985-86 economy $88 million in profits or in

money brought into the province because of these spinoff businesses.

They have created no less than 1,000 jobs at UBC alone.

What has to be said now, now that we have built this space, are a

couple of things; one, we have been concentrating in an unplanned way

on high-tech generation. This has led us, without planning and proper

development, into areas such as CART at New Caledonia College. Because

of lack of good contracts developed, there is a lot of confusion about

who actually owns CART. Between interlocking directorships on CART,

which stands for, by the way, Centre for Advanced Resource

Technologies.... It is a subsidiary of North Western Technology Ltd., a

private company.

CART, in its relationship with the College of New Caledonia, is

basically running its own show. There does not seem to be any real

responsibility or accountability back to the community or to the

college. This is a problem of what we can run into when we throw

ourselves into the high-tech business without proper planning.

I would go on to suggest that we would applaud on this side of the

House, the new Premier's Science and Technology Advisory Council, which

I gather is going to be reporting now to the Advanced Education

department. It is through this mechanism that we hope the province does

develop a sense of accountability and a sense of planning, so that we

can do better with science and research dollars that are coming into

this province.

HON. MR. STRACHAN: I'll be brief. CART hardware is owned by

the province of British Columbia. The board of directors are a majority

of local residents and they are seeking an active president at this

point. Just put that on the record.

MR. MERCIER: Mr. Speaker, I didn't hear much that I could

disagree with in the previous comments. It's nice that the opposition

when in government didn't display the resolve and the support for the

programs that I referred to, so I'm happy to see the change of

direction indicated by the member from Vancouver-Point Grey.

I'd like to close by saying that the second part of what I wanted to

talk about was to address briefly the student assistance programs. Over

the years millions of dollars of grants and scholarships have been

awarded by government to students at post-secondary institutes. I

suggest that all students who have benefited from grants or

scholarships over the years be encouraged, when they are in an

income-earning position, to repay of their own free will those amounts

as a perpetual scholarship fund. This would create a multimillion

dollar pool of capital for future student grants and scholarships. With

such a plan, those who have received the benefits of higher education

could show gratitude to the other people of this province by supporting

the perpetual scholarship fund.

Thank you, Mr. Speaker, for the opportunity of leaving these thoughts with the members today.

MR. HARCOURT: Mr. Speaker, I would like to ask leave to make an introduction.

Leave granted.

MR. HARCOURT: Mr. Speaker, in the gallery today is a young

British Columbian, who is here observing this Legislature and the

decorum of this very fine body, and his mother. I'm very proud to

introduce my wife Becky and son Justin, who are just up there.

MR. BARNES: Mr. Speaker, I'd like to make an introduction, if I may.

Leave granted.

MR. BARNES: First, I'd like to associate myself with the

first member for Vancouver Centre, who has just asked us to welcome his

son Justin and wife Becky, soon to be first lady of the province of

British Columbia.

As well, I would like the House to join me in welcoming Mr. James

Kirk, who is in Victoria this week as a member who will be

participating in the third Western Canada Youth Parliament out at the

University of Victoria over the weekend. I am very pleased and honoured

to have been invited to read the throne speech at this event.

[ Page

1191 ]

WEST KOOTENAY POWER AND LIGHT CO. LTD.

MR. CLARK: Mr. Speaker, I want to begin my remarks by stating

very clearly that on the NDP side of the House we are unequivocally and

unalterably opposed to the proposed sale of West Kootenay Power and

Light to the American company, UtiliCorp United Ltd.

We believe that it is quite simply not in the public interest and is

not in British Columbia's interest to allow the sale of a hydroelectric

utility to a foreign company. We say this essentially for two reasons.

First, American control — foreign control — of this resource will

mean higher rates to the consumers in the region. Dividends will flow

out of British Columbia and out of Canada.

More importantly, complex intercompany transactions are exceedingly

difficult for regulators to monitor. That means that the head office in

the United States can pass on to subsidiaries in B.C. inflated costs

for goods and services — and we have seen that historically in this

country. How will the Utilities Commission determine precisely whether

those costs are justified, when they're passed on to the subsidiary?

The answer is that they can't. All of the academic literature shows the

difficulty of regulating private utilities. Milton Friedman has written

books about the difficulty of regulating private utilities. Those

inflated costs will be recovered from people buying their electricity

from the company.

That's very important in this particular case, because UtiliCorp has

bid $20 million more than the company is worth. A $20 million dollar

premium — higher than any other bidder. They've stated that they won't

pass that $20 million on to the consumers. Does anybody here believe

that this big American company is really giving a $20 million dollar

gift to Cominco? Do they really believe that they're not going to get a

return on their investment? UtiliCorp, like any other business, wants a

return on their investment. They will — indeed they must, to succeed in

business — find a way of recovering that investment from the people in

the region. So power rates will go up at least 8 percent if UtiliCorp

buys West Kootenay Power and Light. And who knows how much more in the

future, with the erosion of effective regulatory control?

The second reason we oppose the sale is that energy is a strategic

sector of the economy and should be controlled locally, preferably by

some organization not solely committed to profit maximization. Electric

power plays a vital role in economic development, and control of this

sector automatically involves a degree of control over the structure

and future direction of the regional economy as a whole.

How can we allow this monopoly resource to be controlled by foreign

interests? Will a foreign company use their resources to subsidize or

otherwise promote or pursue economic development in the region? Of

course not. American companies come to Canada to make a buck. They come

to make a return on their investment, not to advance the cause of the

community.

Most importantly, that region, Mr. Speaker, has been devastated by the recession

in British Columbia. The Kootenays, Boundary and the Okanagan have been devastated.

To quote the remarks of Corky Evans, before the Utilities Commission: "In

a couple of years, we've lost a sawmill in Brilliant, the sawmill in Creston,

the sawmill in Kaslo; we've lost the plywood plant in Nelson, the sawmill

in Nelson; we've lost the university. This community, this economy right

here, is somewhat in shock in these times." And the list goes on: Alcan

Manufacturing in Kelowna shut down; sawmill in Salmo shut down; centralization

of B.C. Tel has reduced 90 jobs in Nelson alone. This region needs economic

help. Will this do it? Of course not.

We believe that the sale of West Kootenay Power and Light could be

an exciting opportunity, a dramatic and significant force for community

economic development. If local people owned and controlled their

hydroelectric power, they could use it to generate jobs; they could use

it to generate economic development and employment in the region.

We subscribe, on this side of the House, to a view that Quebeckers call maitres chez nous ,

which means "masters in our own house." We don't rely on foreigners,

foreign investment or foreign companies to develop British Columbia. We

can do it with local people, with local talent and with local resources.

There are other qualified bidders for this, like the regional

district and the operating engineers' union pension plan, which have

put forward a bid recently.

The sale of West Kootenay Power and Light, Mr. Speaker, will not add

a single job. This foreign investment is not going to put more people

to work; it's simply buying a Canadian going concern. It's

Mulroney-style, begging American investment. This government should be

ashamed of itself for their silent approval of this sale. And those

members in the region, like that member there.... He should be ashamed

of himself. He's not going to get into cabinet, so speak out against

this sale that's going to affect this region. And the member for

Nelson-Creston (Mr. Dirks) — where has he been? Silent. Silent approval

of the sale of that monopoly resource to a foreign owner, which doesn't

benefit the region.

Mr. Speaker, I have moved a private member's bill on this question

to outlaw foreign ownership of hydroelectric utilities. Many American

states have similar statutes and don't allow their hydroelectric

utilities to be owned by foreigners. We should do the same. Those

members, particularly backbench members from the region who aren't

going to get into cabinet anyway, should speak out on this sale. The

NDP is unequivocally opposed to foreign ownership of hydroelectric

utilities. We are opposed to the sale of West Kootenay Power and Light

to an American company, and we will do everything — if that side won't

— to stop this sale.

[10:30]

HON. MR. DAVIS: I must congratulate the hon. member on a good

speech. Power is always an important topic, especially monopoly power.

He said that private utilities are difficult to control, and I agree

with that. There's only one entity that's more difficult to control,

and it's a Crown corporation.

Over the years I've listened to many speeches delivered eloquently

from the other side of the House, and none are more eloquent than those

attacking B.C. Hydro, or the management of B.C. Hydro, or how it runs

its affairs. Hydro looked at West Kootenay Power. Hydro, which might

have been interested in taking over West Kootenay Power, had several

problems, not the least of which was that its rates were twice as high

as the private utility's rates. So there was a problem as to how to

phase n B.C. Hydro's operations in a significant area of the

province, doubling the rates over a period of time. So Hydro obviously

is a higher-cost operation than West Kootenay has been.

[ Page 1192 ]

West Kootenay serves a market roughly one-third the size of

Vancouver Island, just to give an idea of scale. West Kootenay Power

has two very small power plants, 2 to 3 percent of the capacity of

hydroelectric plants in this province; so it's small. Being a private

utility, West Kootenay is controlled in several ways. One is that it

cannot generate more power from its two small plants without the water

controller of the province allocating more water. All of the water is

allocated under two international treaties and under the rules and

regulations of the water controller. So there's no ability of West

Kootenay to expand its operations. It will expand by buying more

expensive energy from B.C. Hydro.

There's the question of rates. The Utilities Commission rates are

tied to historic cost; and only demonstrated historic cost, or

demonstrated current or future cost, is a basis for increasing rates.

It doesn't matter what the shares trade for. Share price or the cost of

the takeover don't matter at all; it's the cost of building those

plants, which happen to have been built many years ago. That's why the

rates are relatively low. There is no way that West Kootenay Power, if

it's taken over, will be able to raise rates without installing or

updating or modernizing or expanding the system.

Foreign ownership is explicitly covered by federal legislation.

Federal legislation covers communications and banking; it doesn't cover

power utilities. Investment Canada, when it looked at this proposed

takeover, agreed with it. We do not have provincial law that stipulates

that foreign ownership is not permitted in any industry. We would have

to legislate in order to prevent a takeover in any area, let alone in

this area. So the hon. member is proposing legislation. Frankly, I

think West Kootenay's takeover is only warranted if Utilicorp can

market better than its predecessor, which means more new industry, more

jobs. Whether they can do that or not remains to be seen. But the hon.

member can't blame past problems on Utilicorp; he can only conjecture

about future ones.

Finally, I think this is partly a matter of confidence. I'm sure

Canadians can run operations like this, can develop industry as

effectively as Americans. It doesn't bother me at all that Americans

own shares; they won't be the management.

Interjections.

HON. MR. DAVIS: The members opposite have been fond of saying

that the Columbia treaty was a sellout. They don't talk now about the

Site C equivalent power about to be repatriated at no cost forever as a

bonus to the treaty. We did well negotiating with the Americans. Be

confident we can do a job, so let's not be worried about a few

Americans owning some shares in a small utility in this province. It'll

be regulated, regulated well, and if they don't do a job, we'll be on

to it again.

MR. SPEAKER: The second member for Vancouver East. I'm sorry,

to the first member for Boundary-Similkameen (Mr. Hewitt) ; the time is

up for the response, and the second member for Vancouver East will wrap

up the debate.

MR. CLARK: I want to thank the minister first for his serious

response, but I want to make a couple of final remarks. First, B.C.

Hydro is your responsibility. It's been created by Socred governments,

and Socred governments have been responsible for its growth and its

uncontrollability, not this side of the House. Our position clearly is

local public ownership — local ownership first and then public

ownership — and we believe that Hydro should be busted up, that there

should be regional control of B.C. Hydro all across this province.

Secondly, I want to say that the rates will go up. The minister said

that current costs influence rates. The fact is that this company needs

$100 million in investment regardless of who buys it. That's the

information before the Utilities Commission. There are going to be rate

increases, and this company will have an opportunity to pass on the

costs from their head office to the utility that are very, very

difficult, I think impossible, to regulate. I think this company has to

get a return on that $20 million, and they will get it, and it's very

difficult to control.

Finally, on foreign ownership, it's a leap of faith that the

minister asks us to take. He says: "I have confidence that the

Americans will do a good job." Well, I don't, and I don't think we

should take that kind of leap of faith. Foreign ownership of a

provincial resource, of a monopoly provincial resource, is provincial

responsibility at least as much as, and I think more so than, that of

the federal government. We have every right and every power to

intervene to disallow the sale of hydroelectric utilities to foreign

companies, and we should do so; we shouldn't have blind faith in the

kind of free market system that that government opposite talks about so

much.

POLICING

MR. RABBITT: I welcome this opportunity today to address the

topic of policing within our beautiful province. Presently B.C. is

policed either by independent municipal police forces or the RCMP,

either employed by the province or by municipalities. I wish to address

the policing policies in B.C. and specifically what I consider to be

unfair hiring practices by that agency in relation to our B.C. youth

that are applying for jobs.

I would firstly like to preface my remarks by saying that I think

the RCMP is a first-class police organization, and I don't want these

remarks to be considered a negative response towards the organization

in any way other than their hiring policy. Due to the time restraint, I

will only speak to a very narrow

section of that, and that is the

policy of hiring recruits in B.C.

To look at a bit of the history, policing in our province has gone

back to the early days prior to Confederation. We started off in the

early days with the Northwest Mounted Police. We went through the era

of a provincial police force. In 1950 we re-established a contract with

the federal government with the RCMP, and we're presently now partway

through a ten-year contract which will terminate in March 1991. The

present training facilities for the RCMP are in Regina and there are no

plans at the present to establish any of these facilities in B.C.

I'd like to take a moment to discuss some of the stats over the last

few years. For example, going back to the year 1983-84, at that

particular time recruits from B.C. represented 3.57 percent. It

increased the following year to a little under 5 percent. Presently we

are approximately 12.8 percent. When we look at those specific numbers

going back to 1984, that represented six youths; the following year,

97; last year, 82. We are, in effect, employing over 3,700 at the

present time; 3,700 employees of the RCMP, regular constables, are

employed in the province of British Columbia,

[ Page 1193 ]

representing almost 30 percent of the national

figure of that police force. When we consider that only slightly over

12 percent are being hired from this province, there's a serious

imbalance which we have to address.

I've looked up the hiring policy which I mentioned earlier. It's

based on four main factors. One is that they’re looking for a

university degree; second, they're looking for females; third, they're

looking for bilingualism; and fourth, they're looking for native

applicants. I'm not suggesting for a moment that there's anything wrong

with any of those four categories. What I am suggesting is this: let's

hire graduates from B.C. universities. Let's hire female applicants

from British Columbia. Let's hire native applicants from British

Columbia. And if we have to teach them a second language in order to

qualify as a member of this force, then let us teach them that as well.

I suggest very strongly that we carry this message to Ottawa, that

we carry the message to the federal government that we want a better

balance and we want to see a better opportunity for B.C. youth. We're

talking right now about a budget in this province of approximately

$250,000 in RCMP policing. I think that our youth should have an equal

opportunity, and at the present time they're not getting that equal

opportunity. There are many imbalances. One of the imbalances, for

example, is in the unemployment figures: B.C. at 12.6 percent as

compared to the Canadian average of 9.3 percent.

Interjection.

MR. RABBIT: Listen up, my friend. I'm going to ask the

Premier and the Attorney-General (Hon. B.R. Smith) to make this a

priority, to put it on the priority list for the first ministers'

conference, and to see that this be addressed. I think if we work

cooperatively with the federal government, we can create more

opportunity for our youth in British Columbia and we can bring a better

balance in the hiring practices of this first-class police force. I

don't want to have to look at the alternatives. The alternatives are

varied, and I don't think they are beneficial. So I would like to see

that we have a fair and honest representation for B.C. youth on that

force.

MR. SIHOTA: Well, it's always delightful to hear members on

the opposite side talk a little bit about youth, because I wish to

remind the member that it was this government, when it introduced its

throne speech in the first week of March this year, that failed to

mention the word "youth" in that throne speech; that failed to outline

any type of youth employment programs in its throne speech; that has

been totally negligent in terms of trying to deal with the 24 percent

level of unemployment for young people in this province.

[10:45]

And now the proposal is that, well, the feds should do something

about it with respect to the RCMP. We on this side have been looking

for a comprehensive youth employment strategy from the other side, and

it has been lacking. There's absolutely nothing flowing from the

government with respect to dealing with the serious problem of youth

employment. That's the first point.

The second point is simply this: we do have a real need within the

RCMP for all sorts of additional services. We have a real need for

greater representation not only from British Columbia but from various

ethnic communities in this province within that police force. Mr.

Speaker, the member opposite who spoke should know that nine out of ten

native people in downtown Vancouver are arrested — nine out of ten. The

member opposite should know that there are restrictions — technical,

indirect restrictions — on people from my community being able to enter

the RCMP. There is an under-representation of Chinese, Japanese,

Oriental and Asian individuals in the RCMP, and that's something that

should be addressed as well.

The third point is that there is indeed a need within the RCMP for

additional recruits in additional areas, and I want to lay out some of

those areas. First of all there's the commercial crime division.

There's a total lack of enforcement in the commercial crime division.

We have in this province a $400 million trade — if you want to call it

that — in narcotics, and a limited amount of enforcement in the RCMP.

We have in this province about a $100 million — on the conservative

side — illegal trade in sports gambling in this province, and we have

one person from the RCMP who's attached to investigate that. One

person. We should be putting more resources in there — of course,

unless this government is intent now on legalizing that type of

gambling activity in B.C. If that's their intent, to secure some of the

funds from it, I guess that's a different story.

We have in this province a lack of enforcement within the stock

market, and of course I've been talking about that in the last week or

so in terms of the commercial crime divisions, both provincially and

federally. They're looking at the manipulations that are going on in

the stock market. There's a total lack of RCMP coverage in those areas.

There is a lack of RCMP coverage in unincorporated municipalities, the

larger of which are in my riding. We have, for example, the inability

of the RCMP in ridings like mine in uncorporated areas to do simple

things like delivering documents; just serving people with documents

requiring them to appear in court, subpoenas and the like. So there is

a tremendous lack. But I have a large concern about where this

government is headed. It always seems to point the finger at the

federal government, to say it's a federal problem, to say that the feds

should do something about this, that, or the other thing; the feds

should rectify the problem about the RCMP; the feds should rectify the

problems with youth unemployment; the feds should be putting money into

this or that, and that there is an imbalance one way or the other.

This government, in my view, Mr. Speaker, cannot behave like an

ostrich and pretend that it has no responsibility in matters of

policing, in matters of youth employment and in matters of correcting

those imbalances that we talked about earlier on. I would say to the

member opposite that instead of simply trying to encourage the first

ministers to make this an agenda item in their discussions, perhaps he

should be lobbying his own government to make employment, to make

policing, to make crime investigation an agenda item and a top-priority

item within this provincial government.

MR. RABBITT: Thank you, Mr. Speaker, I take it you were

telling me something. I appreciate the support I think I've got from

the hon. member. I realize that we do have a very wide range within the

topic I put on the agenda today that we could have addressed, but as I

mentioned, with the limiting factor of time, I wanted to address one

which I thought was very pertinent.

[ Page 1194 ]

Yes, I do have concerns about the ethnic minorities in their

representation, but I think that in addressing the problem of youth, if

we can establish getting criteria based on an equal representation to

the amount of numbers that we have employed, then the next step is

exactly as you say, to see that the people within our community are

represented. I understand some of the problems that you've discussed

today — and they are problems — which I don't think I'm trying to

unload onto the federal government. I'm not standing here to bash the

federal government. I'm saying yes, we do have a problem. But we have

the power to sit down and negotiate this particular item with the

federal government. I might be able to make some points on bashing the

feds, but this isn't the reason of the discussion today. The discussion

today is to address the problem of getting more young people jobs

within this province which we are paying for. I'll rest my case.

B.C. SCIENCE AND TECHNOLOGY POLICY

MR. LOVICK: Mr. Speaker, on the order paper it says that I'm

going to talk about a science and technology policy for British

Columbia. More appropriately I think my remarks ought to be titled "In

search of a science and technology policy for British Columbia,"

because certainly that's part of our problem.

Before I do that, Mr. Speaker, I'd like to respond to a couple of

other comments that have been made today that directly connect with the

area of science and technology. My colleague, the second member from

Vancouver-Point Grey, made reference to CART, the Centre for Advanced

Resource Technologies that is located in Prince George. If you'll

pardon me an outrageous pun, Mr. Speaker, I would like to put the CART

before this House. I want to do so for a very particular reason. I want

to start my remarks by suggesting that when we talk about a science and

technology policy in B.C., or for that matter in Canada, part of our

problem is credibility. We don't have much. We don't have much simply

because of a confusion surrounding what ought to be done in the name of

science and technology

I was delighted to hear The hon. Minister of Environment, the

Government House Leader, respond to the comments about CART and tell us

that the provincial government does indeed own part of it, that there's

a local community board and so forth. What I want to suggest, however,

to the minister through you, Mr. Speaker, is that there is also

considerable confusion in the community of Prince George regarding just

what that thing called CART actually is and does, who the players are,

the potential for conflict of interest, which has been referred to in

the local papers in Prince George, and, moreover, the suggestion that

in fact there was a considerable amount of money spent by the college,

given to CART to keep it in operation — some $300,000.

All I want to suggest — and I'm not for a moment intimating any kind

of impropriety, necessarily — is that those concerns are still alive

and well and causing people some anguish in that community. I

understand that there has been a report prepared for the Premier, the

result of an independent investigation into CART. I would like to

suggest to the minister that the appropriate thing to do, if we want a

meaningful, coherent, accountable and credible science policy in this

province, is to release that report. Make it public so we get some

sense of exactly what the problem was there, so we can learn from that.

So much, then, for this CART before this House.

The second point I'd like to refer to, albeit briefly again, is in

response to the member for Burnaby-Edmonds (Mr. Mercier) talking about

science policy and the direct connection with industry. The member made

reference to discovery parks. Unfortunately the member's comments

seemed to suggest that the discovery park had been an unqualified

success. Let me remind the hon. member that that is not the case. I

don't think anybody who has examined the concept or studied the

literature would come to that conclusion. Indeed, there are some

serious questions and reservations about the discovery park as a method

of encouraging the development of science policy. Some will argue that

the discovery park, as we've seen the American model, and as we've seen

it in Canada, is in fact incompatible with good community development.

So I want to remind the member opposite that we should not for a moment

assume that discovery parks have somehow come as a marvellous panacea

or solution to our problem. That's not the case.

The third area, just to touch on it very briefly, raised by members

opposite is the connection between industry and the universities —

between business and the universities. To be sure, there is a place for

that, but I want to remind the members opposite why a number of us were

concerned in the early seventies about that too-close connection. We

had that abomination and atrocity in South-East Asia still going on,

thank you very much. We had a clear connection that had been

demonstrated for 30 years about a military-industrial-academic complex.

We knew that stuff, and we wanted to be very careful that the

universities and the domain of research were not co-opted and corrupted

by the wrong kind of research and connections. So let's have a little

sense of history before we suggest that we on this side of the House

are somehow anti-science. That's not the case at all.

Mr. Speaker, I suspect I've used rather more time than I had

originally anticipated. I want to turn very briefly to the search for a

meaningful science policy. Let me change my tack and approach by

commending the government first. I want to commend the Premier for

establishing what is called the Premier's council on science and

research. It's overdue, but a marvellous step in the right direction.

Also, I want to commend the Premier on the throne speech in terms of

the decision to establish what is called a strategic or common strategy

for the players in the game: namely, the universities, the private

sector and governments. The point, of course, is that that statement,

understandably, indicates to us that we have not had that kind of

coordination and coherence; Lord knows we need it. Our predicament has

been that we have had a policy that, to put it not too uncharitably,

has been uncoordinated and incoherent. There is, in fact, no obvious

coordination between the players. There is no recognizable and coherent

policy governing science in this province: namely, what are our plans

and our objectives, what do we want to accomplish? Instead, all we have

is rhetoric.

Finally, neither is there a strict accounting for how those dollars

are spent. You can get into a heated argument on the University of B.C.

campus, for example, by simply pointing at that whole area in the

health sciences

section of the campus, where most of the research

dollars are going, and saying: "What's going on there?" Because you

will find senior professors at the university who say: "I do not know."

That's our predicament, Mr. Speaker.

[ Page 1195 ]

HON. MR. STRACHAN: Mr. Speaker, I wasn't planning on

commenting today, but it seems that the members have put the CART

before the House. As I indicated when I spoke to this earlier after

other members' statements, I think it's appropriate, as the MLA for

Prince George, for me to address the CART questions that have been

placed before the House today.

I don't think there's any question that, with respect to CART, we

could assume maybe a checkered past, in terms of its direction, in

terms of its accomplishments, and in terms of the expectations from the

science, business and development community of Prince George and the

province of British Columbia. However, the province recognized those

concerns, partially from concern from the members themselves, partially

from the academic community, partially from the report that the member

referred to, and we recognized that we would have to address the whole

management situation in CART and put it on the right track.

[11:00]

With that in mind, in December 1986 we agreed that CART would

receive continued provincial government spending, in conjunction with

federal government spending, which was part of a federal

government/provincial government agreement. Our conditions were that

CART would have a majority of their board of directors from the Prince

George area; that they would seek an active recruitment of a full-time

president, to be not associated with the College of New Caledonia but

with CART itself; and that we would ask the National Research Council,

under the auspices of our Member of Parliament, the Hon. Frank Oberle,

to assist us in this direction. All those conditions have been met; and

on the basis of that, the government continued its funding, which is

$2.8 million for CART.

I don't disagree, as I said earlier, that the situation of CART had

to be addressed. But I want to impress upon all members that there's a

remarkable computing capacity there; there's a lot of horsepower. It's

one of the bigger computing facilities, or has the potential to be one

of the biggest computing facilities and research facilities in the

province of British Columbia. So we felt there was a need there and, of

course, as the member I was pleased to have that money continue to flow

into my riding and continue to benefit the government of British

Columbia.

I understand that the recruitment drive is in place now for the

full-time president of CART. The president will be given the mandate of

listening and reacting to the business and development community —

firstly, within the central interior region, or actually seeking and

soliciting business from all parts of the province, or from outside of

the province. I think that's healthy. Really, we are on the right track

now. I will commend it to all members that I see CART as being a

remarkable institution for the riding, for the benefit of British

Columbia business and development. I would commend that to the members.

It's going to be a good thing, and that's why the government of the

province of British Columbia has continued....

AN HON. MEMBER: Will you release the report?

HON. MR. STRACHAN: No, I'm not prepared to release the

report. That's old news. I don't think it would do any of us any good

at this point. The board of directors and the president are aware of

the new direction they have to take. I'm convinced that they can react

to the concerns of the province as addressed to the board, and I'm sure

they'll react in a responsible manner, and CART will continue to be of

benefit to Prince George and all of British Columbia.

MR. LOVICK: I thank the minister for his response. I am

sorry, however, that the minister apparently didn't hear my central

thesis. My central thesis in my remarks is that we have a problem with

credibility in the scientific enterprise. I was suggesting therefore

that the best thing this government could do, if it wants to begin the

work of repairing our lost credibility, is to release that report;

otherwise, what we're being asked to do is to simply accept the fact

that everything has been solved and it's old news, it doesn't really

matter.

For heaven's sake, don't we recognize that what we've got to do is

somehow put an end to the sniping and the quarrelling that's going on?

All we have to do is use the truth to set ourselves free. Why is it

that this government simply has to stonewall? Why won't you release the

report? I don't, however, want to devote all my remarks to that part of

the discussion, Mr. Speaker, but I do want to go on record as

imploring, importuning this government to release that report. I

suggest it would serve all of our interests well.

What I want instead to do is to touch briefly on what we might do

with a coherent and credible science policy. Our predicament, as I

hinted very briefly in my earlier remarks, Mr. Speaker, is that it is

not coordinated. We have a whole bunch of different players, all

competing for funds, all of whom apparently do not know what one

another is doing — I think there's a grammatical error somewhere in

there, Mr. Speaker, but I won't try to save that sentence. The people

simply don't understand what other people in the field are doing. The

University of B.C. points very proudly, for example, to a steady

increase in funding from federal grants, and so forth, I think

totalling some $63 million in the past year — exclusive of the TRIUMF

facility and the kaon factory and all of that, by the way, which is

another $420 million. The predicament is, however, that we have various

departments at UBC all competing with one another for those dollars,

because nobody knows who is doing what on the other side of the campus.

I'm suggesting that we have an opportunity here if we accept the

premise — and it's a good one, I think — that science has a tremendous

economic generation capacity. If we accept that premise, then surely it

follows that we ought to set up a coherent and coordinated strategy so

that all of the players who are applying for funds indeed know the

rules governing the appropriation of funds. Now that's not a big

request; I think it's a small one, and I hope it's one of the things

the new science council that has been established in this province will

do.

I'm a little worried, however, because on the basis of half a dozen

or more phone calls yesterday afternoon, nobody in the appropriate

ministries could tell me the terms of reference for the new council. I

hope we get those terms of reference quickly. I don't think we can

afford to wait much longer. Science provides us a marvellous

opportunity to do wonderful things in this province; let's take the

opportunity.

HON. MR. STRACHAN: At the outset, I'd like to ask leave for

the Minister of Finance to table amendments to Bill 17 and Bill 11

prior to completion of second reading stage of these bills. This may be

a diversion from standard parliamentary practice, but we believe that

tabling these amendments

[ Page 1196 ]

now will clearly be in the interest of Her Majesty's opposition and clearly in the interests of the public in general.

Leave granted.

Hon. Mr. Couvelier tabled amendments to Bill 17, Property Purchase Tax Act, and Bill 11, Social Service Tax Amendment Act, 1987.

HON. MR. STRACHAN: Second reading of Bill 21.

INSURANCE (CAPTIVE COMPANY) ACT

HON. MR. COUVELIER: The principle of Bill 21 is very simple.

Insurance companies now licensed to operate in British Columbia are

subject to the regulatory provisions imposed by the Insurance Act. Many

of these provisions are in place because of the government's

responsibility to oversee the interests of consumers who deal with

these companies. There is, however, another class of insurance company

that does not deal with the general public. This is the so-called

captive insurance company.

Captive insurance companies are insurance companies formed by

corporate groups, industry associations or other groups of

sophisticated companies to insure only their own risks. At present,

activity resulting from the use of this valid and rational business

management tool is being forced offshore by over-regulation in Canada.

This bill will provide a balanced and reasonable regulatory framework

which will make it feasible for captive insurance companies to be

located within Canada. Captive insurance companies are useful to some

companies for a number of reasons: improved cash flow; more control

over policy wording and administration; potential direct access to

reinsurance; the provision of otherwise unavailable insurance; and

savings due to lower costs for some insurance. Although captive

insurers will not be useful to all businesses, for some they will

provide a way to improve efficiency.

[Mr. Pelton in the chair.]

The bill provides for three types of captive insurance companies.

None of these will be permitted to deal with the general public — none

of them. They will be permitted to insure only their owners, related

companies and people operating on their behalf. The types of companies

contemplated by the legislation are: first, pure captive insurance

companies which will insure a single corporation or group of related

corporations — the owners of these captives will generally be quite

large businesses; secondly, association captive insurance companies

which will insure the members of associations — usually trade or

industry associations, but potentially also professional associations

and others; and thirdly, a sophisticated captive insurance company

designed to allow the banding together of moderate-sized companies

which are not necessarily related. Each sophisticated insured will have

to demonstrate sophistication in insurance matters to satisfy the

superintendent that they know exactly what they are committing

themselves to.

The regulatory environment established for captives by Bill 21

differs in a number of important ways from that imposed by the

Insurance Act for regular insurance companies. Captive insurance

companies may be smaller than regular insurance companies in terms of

capital. However, their capital and reserves will have to be sufficient

to support their insurance activities. Reporting requirements will be

less onerous than the extensive forms required of regular insurers, but

captive insurers will have to file annual audited financial statements

and annual actuarial reports. There will be no direct control of

investments or reinsurance for captive insurance companies, but they

will be required to behave prudently. If their solvency is in question,

the Minister of Finance and Corporate Relations will have the authority

to revoke or suspend their registration.

There are no tax or other incentives or subsidies being offered to

encourage the creation of captive insurance companies. These companies

will be subject to the same income taxes and insurance premium taxes as

any other insurance company.

Captives are often located in offshore tax havens to take advantage

of both regulatory and tax benefits. Nevertheless, I believe there will

be other factors which make B.C. an attractive location for captive

insurance companies, as long as British Columbia offers a competitive

regulatory climate. These factors include British Columbia's relative

physical attractiveness of this province, the existence of an

extensive, well-trained professional community and our world-class

communications and travel infrastructure. In addition, a federal excise

tax imposes considerable costs on offshore captives, but not on

companies located in Canada.

With this bill, British Columbia is providing a competitive and

appropriate regulatory regime. Given the interest which has already

been generated, I am sure that significant benefits will accrue to

British Columbia as a result. Mr. Speaker, I commend Bill 21, the

Insurance (Captive Company) Act to Members of the Legislative Assembly,

and move that this bill be now read a second time.

MR. STUPICH: Mr. Speaker, the opposition will be opposing

this legislation. For one thing, we feel that we don't know enough

about it yet. For another thing, I'd like to know just who's asking for

it and in whose interest they're asking. I would think it's pretty

selfish interests on the part of large corporations; and if there's

something in it for them, then it's costing us something. What the cost

will be I can only speculate.

The government seems to be following in the tracks of Social Credit

governments over the past 12 or 13 years. They've been trying to find

some panacea for our economic ills, when the answers are in front of

them and they refuse to see them, to hear them, to act on them. There

have been many schemes. First, there was the one that was going to make

every person in British Columbia a shareholder in a successful giant

corporation. I don't think I have to name it as BCRIC. Everyone knows

what happened to that. Assets that were worth.... When the share value

went up to $9, that was still less than the book value of the assets.

Today those shares are trading at something like $1.10 — once they were

turned over to the private sector to operate. That was an opportunity.

Those assets were owned by the government, and they were annually

producing dividends that were being used to pay for services for the

people of British Columbia. It was thrown away. It was supposed to be a

way to progress, but it turned into exactly the opposite.

I remember the Minister of Finance standing up on one of his budgets

in the late seventies and talking about the new solution to our

economic woes in British Columbia, which

[ Page 1197 ]

would be to establish special enterprise zones all

over British Columbia, or at least on the coast. We didn't hear much

more about that for a while. In the next budget, I think it was, the

emphasis was on a Pacific banking centre. We had forgotten about the

special enterprise zones. In the meantime nothing had happened. Now

we're going to have an international bank in Vancouver which is going

to produce prosperity for the province of British Columbia. The next

thing was that we changed the name of the special enterprise zones — as

I recall, this was the order — and all of a sudden they were free

enterprise zones. Once again, this was going to be the economic

salvation for the province of British Columbia, and once again we heard

very little about it after the initial announcements and publicity.

Then a brand-new scheme came up, which was so hot and had to be

dealt with so promptly that in the dying days of one fall session the

Minister of Finance got permission to rush this bill through because

people were standing in line to take

part in the program. Some members

have been here long enough to recall the Equity Investment Plan. The

Minister of Finance was actually going to give people who wanted to

start playing around in the stock market as much as $2,500 if they

would simply take advantage of this great opportunity. I haven't heard

a thing about it since it was passed in the House. So nothing came of

that.

Of course, there was another get-rich-quick scheme for the people of

British Columbia — the ALRT-financing plan that cost us I'm not sure

how many millions of dollars. We'll hear more about that later;

there'll be opportunities to ask.... That was another plan that was

going to be great for the people of British Columbia.

[11:15]

The latest whizzo scheme, if you like, is captive insurance companies. We're

told it isn't really going to cost us anything — there are going to be no

tax benefits. If it isn't going to cost us anything and if there are no

benefits to the people wanting to set up these companies, why are they doing

it? We're not going to have any control at all over the spending of these

reserves. Listen to that word "reserves," Mr. Speaker. How are those

reserves built up in the first place? They're built up by the companies

paying large premiums, and it's proper that insurance companies have to

build up reserves. But in so doing, the large companies paying those large premiums

to the companies they own are lowering their income tax. That's costing

the taxpayers of British Columbia something, because those companies are operating

here, and they would be paying more income tax to B.C. If they weren't

paying fantastically large premiums to companies they own themselves and companies

that will be able to write off their income to a large extent by setting up

reserves that they can show by calculations are proper reserves for the risks

that they're running in those particular insurance endeavours.

It is going to cost us something, or nobody would be interested in

doing it. Nobody would be interested in asking the minister to give

them the legal authority to undertake this kind of activity. It's going

to cost us, and what are going to be the benefits? Maybe, if the offer

is good enough, some of the large corporations in B.C. will set up

their captive insurance companies here in the province of B.C. Well, it

was said at one time that the Pacific banking centre was going to

provide employment for as many as three people, and I would think those

three people in their spare time would be able to conduct all the work

that's really necessary to keep these captive insurance companies going

— all of them.

If I thought that this was one scheme of the many that have been

tried by the party opposite over the past 12 years to do anything

positive economically for the province of British Columbia, I'd be

supporting it. But I think it's one more attempt to divert the

attention of the people of the province from the kinds of things that

we talked about in statement period today. Both sides of the House

talked about the importance of education, about the potential for B.C.

as a world centre for research and development. I think it was the

government House Leader who said that we have the climate here to

attract the kind of people who will do this kind of work. We have three

universities. We have everything it takes for B.C. to be a real centre

— a world centre. We have the geographical location: B.C., the gateway

for Canada and for the United States to the Orient, to the developing

nations in many parts of the world. There are just so many

opportunities, if we'd look to the assets that we have and develop them

rather than fooling around with these crazy ideas that come from

somewhere else.

I can see nothing from this for the people of British Columbia other

than another attempt, as I say, to divert our attention from our real

problems and to suggest phony ways of answering them. I'm tempted to

say — I haven't checked their biographies lately, but certainly in the

previous parliament I would have said — why don't you go back to the

business you know best? Most of you have done well in selling used

cars; why not try that? I think it would be better than the schemes

that have been announced by the government over the past 12 years for

helping B.C. economically.

Mr. Speaker, the minister said nothing to convince me that this is

going to help B.C. in any way. I'm satisfied from what he said and from

my own knowledge of it that it's going to cost us something or nobody

would be wanting to do it. On that basis I oppose the legislation.

MR. MERCIER: Well, I'm very surprised, Mr. Speaker, that the

opposition member would oppose such a simple and straightforward

proposition. I think that it's a case of the old adage of ignorance

being bliss. The companies involved would simply be talking about the

management of their own affairs. The reserve requirements aren't

relevant, because they're talking about effectively being self-insured.

And it's something that.... Before the opposition goes running off,

they should consider what the municipalities may be asking as time

comes.... They may be asking for the right to self-insure and set up

their own central self-insurance corporation. Those are related issues;

they aren't directly within what the bill is talking about.

I think the opposition has taken the position that anything

corporate is bad. It brings to mind the view I used to have of that

party when people were calling it the dinosaur party. If they hadn't

heard of it, then they automatically assumed that whatever was being

proposed was not good for the public. If this last speaker had been

listening to the minister.... It's quite clear that the captive

insurance companies will be permitted only to insure the owners of such

companies, related companies and people operating on their behalf. In

other words, it's very much a closed circuit. The class of insurance

companies being talked about does not deal with the general public.

This is an example of permissive legislation which allows a particular

group in our business community to be facilitated to handle their own

insurance needs.

The income tax, for example, payable by such a corporation would be payable under the terms of the federal Income

[ Page 1198 ]

Tax Act, and the provincial government would

receive their share. If a captive insurance corporation operated at a

profit through the fees they charge themselves, then they would be

taxed on that profit.

One of the most important points made was that some of these

companies have the ability to set up such corporations in other

countries in the world. When they set up in other countries in the

world, that means there may be five or ten or 15 employees working in

those other countries on corporations that are dealing strictly with

insurance that's placed in B.C.

I don't understand how there can be opposition to something that's

permissive, that does not affect the general public one bit, that would

be leading the way in a rather sophisticated field. So before the

opposition goes off and opposes this bill, they should try to determine

the significance of it. A number of major corporations are going to be

insuring their own affairs. The losses they have to cover are losses

they're suffering on their own.

MR. WILLIAMS: And if they're sued for damages?

MR. MERCIER: The insurance that they're carrying would have

to have a reserve base the same as some of the insurance companies that

are already operating. You have regulated insurance companies now that

file their reserve statements, and they probably have less capital than

most of these self-insured corporations will have.

Mr. Speaker, I really believe it's a typical case of opposing

something for the sake of opposing it, of being obstinate about things

that are not contrary to public interest and of not coming up with

ideas of their own to facilitate this particular business need. It

seems that the opposition thinks anything to do with business is bad. I

thought your new leader was a little more sophisticated; that he

understood a little more of the technicalities of these endeavours. I

thought they would have absolutely stepped behind this legislation and

supported it. I'm really disappointed that they haven't.

MR. SIHOTA: I want to respond to the comments made by the member opposite with respect to our position on this bill.

It's certainly not my view that our policy is simply to criticize

anything that has a corporate label to it. Nor is our position on this

matter simply one of saying: "Well, it's being presented by the

government; hence we should oppose it." I think over the first few

weeks and months of this session we have demonstrated clearly that

we're quite prepared to support initiatives that we think will foster

increased economic development in this province and result in the type

of economic development that takes advantage of the

particular talents of the people of British Columbia. We have some

concerns about this legislation which get us to the position of

opposing it. These are sophisticated concerns based upon the

regulations, the statements and the specific terms of the legislation.

I would invite the member who made those rather frivolous comments to

spend a little bit of time reading the legislation and listening to

what we've got to say about it to understand that there is in fact a

lot of merit in what we say.

I want to start off on this point: I think part of what the

government is saying when introducing this legislation is that jobs are

going to be created in British Columbia as a function of this

legislation, much as with the international banking centre. The first

member for Nanaimo (Mr. Stupich) has already pointed out the rather

lacklustre performance in that regard, and I can point out the rather

lacklustre performance in other areas where the government tried to

lure offshore enterprise to the province through various forms of tax

havens, relaxed regulations, tax-free zones, enterprise zones, or

whatever we've called them in the past. All of them have failed, and

they failed for basically the same reason: the philosophy is flawed.

The philosophy ought to be that we try to tap the entrepreneurial

talents of the people who live in this province, not relax the rules to

try to secure something from offshore which is questionable, first in

terms of an enterprise, and secondly, which is unlikely to come here in

any event.

Let's talk about the basic premise as to why the government thinks

jobs are going to be created in this situation. The reason captives

exist in places like the Caribbean, Bermuda and some of the other

havens in that part of the world is because of the generous tax

incentives that are offered. Nothing in this legislation really deals

with that problem. There's nothing in this legislation that relaxes the

taxation regulations, that in itself creates a relaxed tax haven

equivalent to what's down there in the Caribbean. I appreciate that it

does deal with the matter of fronting fees, with the matter of having

to cycle the premiums through a regulated or accepted Canadian

insurance company. That's one thing. And there's 7 percent to 12

percent in terms of fees paid in that regard. I understand that, having

worked a little bit in this matter as a solicitor. But I must also say

that the 7 to 12 percent break, if it indeed is that high, is not

enough to encourage someone to come over here to British Columbia. In

fact, there are other tax reasons as to why these companies want to

remain in the Caribbean, and will. Therefore I think there is a serious

question as to whether or not this legislation will create the type of

jobs this government is forecasting. It's not going to happen, because

we haven't dealt with the reason why they're down there. The reason is

relaxed tax regulations, and rightfully, in my view, we haven't created

a situation here that tends to make those tax regulations the

equivalent of what they are in the Caribbean. Nor is there an income

tax advantage.

Without going into any detail, I was reading recently an

article in the Financial Post .

It was interesting to read what one of the vice-presidents of Sedgewick

Tomenson Inc. had to say. For those members of the House that are not

familiar with that company, it is a large stock brokerage firm located

in Toronto. They were looking at the proposed B.C. legislation in terms

of captive insurance. For the reference of the members, the

article

appeared on May 4, 1987. The vice-president of that brokerage firm

said: "There's clearly no income tax advantage, but it does allow

anyone already planning a capture to save 10 percent federal excise tax

on premiums paid to offshore insurance companies." But as the

representative said, there is no clear income tax advantage to it to

have these people come to British Columbia. Therefore it seems to me

that the opening premise is flawed, in the sense that it is going to

create jobs here in B.C. It is flawed because of the lack of the tax

regulations, because we are not matching those and because we

rightfully should not match those.

In my view, the sole purpose of this legislation, when you begin to

look at it, is simply propaganda to get people to think that something

is being done about the serious unemployment problems that we have in

this province. If you reject that submission, which my good friend from

Yale-Lillooet does right away, the next question to ask yourself is,

okay, if I'm

[ Page 1199 ]

wrong in that regard, who is going to benefit from the jobs, if they are created under this legislation?

[11:30]

Well, the minister actually answered that question in his press

release and the accompanying documents to the legislation. It is clear

from those documents that the only people who are going to benefit, to

use the minister's own words, are lawyers, accountants and actuaries.

We have, in this province, clearly a significant problem when it comes

to unemployment. However, the levels of unemployment among lawyers,

actuaries and accountants is nowhere near the depth of the problems of

unemployment in other sectors of our economy, like forestry and mining.

On this side of the House, we've laid out a strategy that's designed

to create jobs in those areas. We don't necessarily have an

unemployment problem in the specialized areas of insurance litigation,

particularly from a solicitor's perspective. We don't have a major

unemployment problem in this province in respect to actuaries and the

issue of captive insurance companies, and we don't have an unemployment

problem in relation to accountants specializing in captive insurance.

What I'm saying is that if, indeed, this legislation is intended to

create jobs and to deal with the severe problems of unemployment that

we all know we have in this province, it's targeted in the wrong way.

It's targeted to try to create employment in areas where we don't have

high levels of unemployment. Probably in areas with a level of

specialization required, we don't really have people out looking for

work in those areas. So the points are that, firstly, there is no

evidence to suggest that it will create jobs; in fact, the evidence is

to the contrary, simply because the same relaxed taxation regulations

that are available in the Caribbean are not going to be available here

in Canada. The saving of the 7 to 12 percent fronting fee that they're

paying right now, if indeed they're paying it.... I must say that there

is a way to get around the regulations to prevent having to pay that

fee. That in itself, according to one of the largest brokerage firms in

Canada, is not enough to encourage these people to come here. Thirdly,

if there are going to be jobs, those jobs are going to be in areas that

require a high level of specialization, in which I'm not convinced

there is a high level of unemployment.

So (

a) you're not going to make a significant impact in terms of

unemployment; and (

b) the government's assumption that there is going

to be unemployment generated out of this is not well founded, if one

begins to understand why it is that these companies are located in the

Caribbean. We on this side of the House believe in fair taxation. We

believe in taxation that attaches to the wealth of some of these

corporations. We don't think that one ought to be introducing taxation

legislation to encourage.... Well, I won't say "encourage," but relaxed

to the point that it is in the Caribbean. I would like to think that

members opposite don't agree with that either. So in terms of an

employment generator, it's not going to make sense.

I want to turn now to another aspect of this legislation, Mr.

Speaker, that also causes me a fair bit of concern. The minister has

said that the system that is being proposed under this legislation is

going to be well regulated, and that there are going to be some very

stringent regulations in place here in British Columbia to ensure that

the system works and that those who have to deal with captive insurance

companies are going to be protected. Before I launch into my

explanation on that point, I must say that I take great exception to

the point made by the speaker who spoke before me on the matter of the

general public not being affected, as if in some way the general public

is immune and isolated from the provisions of this legislation. That's

simply not true. The general public is going to be affected; let me

explain how.

Let's take the example of a large corporation. In fact, most

recently before I got elected, I was dealing with a civil litigation

case that involved Canadian Pacific, which also self-insures, as do

MacMillan Bloedel and several other large corporations in this

province. We commenced legal action against Canadian Pacific, which we

were successful in. But that aside, the point was that they had a

captive insurance company and there was a claim made by my client, who

was injured as a result of the negligence of that corporation. A simple

matter: a corporate entity owned a truck; the truck collided with my

client's vehicle, resulting in very serious injuries to my client at

that time, injuries that required compensation in excess of $300,000 or

$400,000.

In that case, this person — a member of the general public —

obviously had to sue this corporation in order to recover damages, and

that will be true again under the provisions of this captive insurance

if indeed there are negligent acts of employees of these large

corporations. The member of the general public will, of course, have

the ability, the opportunity and the right to take legal action against

the company, which is then protected by this captive insurance. So to

say that the general public is immune to this legislation is

misleading. The general public is involved directly with this

insurance. It will not be immune, and it will have to take actions

against companies that have secured insurance through captives.

I said at the outset that I wanted to talk a little bit about the

regulations. I want to tie in the regulations, as I understand them. I

agree that they haven't been passed by order-in council and so on, so I

am just relying on the material that the minister provided in his notes

and his press release on the issue. One that causes me a fair bit of

concern is the regulation that says that when looking at capital

requirements and reserves, a minimum being considered is $200,000 in

capital and $100,000 in reserves. There are a lot of problems with

that. Let's go back again now to the instance of the person whom I was

representing against a large corporation that had secured insurance for

a captive insurance company. That individual had a claim of $300,000 or

$400,000.

Let's take, for example, a situation that's a little more extreme

than that, that an individual, through the negligent actions of an

employee of one of these companies — let's say through a motor vehicle

accident — is rendered a quadriplegic. Under the law that we have in

this country right now, the corporate entity would be required to cover

this person's health expenses between now and the time he dies. We have

seen in the past, Mr. Speaker, insurance settlements in this country in

excess of $1 million for those types of instances.

If indeed the capital requirements of these captive insurance

companies are to be $200,000 capital and $100,000 in reserves, and if

indeed a judgment by the courts is handed down in the case of a

quadriplegic of $1 million — or in the case of the type of client I was

representing, where because of the negligent actions of another driver

he could not work again in his chosen field and was going to suffer an

income loss because he was unable to work for the rest of his life, and

they were looking at $300,000 or $400,000 income loss, then

[ Page 1200 ]

I say that's underinsurance. Those regulations are

clearly lax and ought to be expanded to allow for the same level of

insurance coverage that we require now, and to take it up to the limit

of $5 million, which now the Insurance Corporation of British Columbia

is advising people, when they buy their automobile insurance, to

acquire. Yet we have within the capital requirements and reserves for

captives here a $200,000 capital and $100,000 reserve. Those

regulations are weak.

Interjection.

MR. SIHOTA: The member says it's called "self-insurance." I

agree it is called self-insurance, but what does that person do? Take

the person who's rendered a quadriplegic, or the person who has

suffered a loss of income and will not be able to work again, and

suffers a loss of, let's say, $400,000. He takes judgment and receives

a payment out from the captive of $300,000, and he's $100,000 minimum,

on that example, out of pocket; or $700,000 in the case of a

quadriplegic, which of course he would then have to recover against the

principal company. I'm not denying that point, but I'm saying that if

you want to talk about self-insurance, and if you want to ensure that

there's an adequate level of insurance coverage under these

regulations, then you should be doing what everybody else is required

to do and what the Insurance Corporation of British Columbia is

recommending now to most people, and that is getting a total of $5

million in coverage, not the $300,000 that's required in terms of these

regulations.

Interjection.

MR. SIHOTA: The member says "recommend amendments." I'm not

sure if this matter is dealt with in the bill, if it's part of the

regulations. But the point is that it is underinsurance, that it ought

to be increased, that it ought to be at a higher level. The point is,

if the members opposite are going to argue during the course of this

debate that the general public is not affected by these regulations or

by this act, they're wrong — they're dead wrong. They're going to be

affected by it. Certainly I don't think it's appropriate to make that

argument, and I want to remind the member who spoke before me that he

was off the track in making that suggestion.

I'm only reading what the minister put out. Of course, if he changed it, we'll deal with it later.

Interjection.

MR. SIHOTA: The member opposite.... Let's deal with that. I

was going to make another point in terms of investments, but let me

deal with that.

Interjection.

MR. SIHOTA: "Be negative," says the member opposite. We're not being negative.

I said at the outset that it's not our policy on this side of the

House to criticize for the sake of criticism. I think I've made a

constructive point. That constructive point is that the general public

is going to be affected; you're wrong on that. Secondly, there's

underinsurance. If that's not constructive.... That's not criticism for

the sake of criticism; that's a constructive, valid point that deserves

consideration and merit. I remind the members opposite that some of

them a minute ago were saying,"Well, amend the legislation." And now,

all of a sudden....

Interjection.

MR. SIHOTA: The member for Yale-Lillooet (Mr. Rabbitt), I

believe, was saying "amend the legislation." If I'm wrong, Mr. Speaker,

I apologize, but it was coming from that comer. I certainly heard

someone say that it ought to be amended. If they saw the value in the

argument to the point that they agreed that perhaps an amendment should

be forthcoming, then clearly they should understand the value of the

point that I'm making and should not be sort of harping away on the

other side of the House, saying: "Well, it's just criticism for the

sake of criticism." It's a bona fide point.

Another bona fide point that causes those of us on this side of the

House a fair bit of concern again relates to the general sphere of the

regulatory framework that encompasses or accompanies this legislation.

Really, that sort of raises the whole issue of investment. The minister

himself has talked about prudent behaviour in dealing with the matters

of investment and reinsurance. I'm not satisfied with that. If indeed

the strategy is to encourage expanded economic development and economic

activity in this province, then it seems to me that you want to prevent

leakages of funds from this province to other jurisdictions in the case

of this legislation. Here is where it goes wrong, because what you're

saying here is that the government does not want to put any

restrictions on investment. Perhaps it should give some thought, if

indeed its intentions are to generate economic activity in British

Columbia.... It should begin, perhaps, to put on some restrictions to

ensure that some of those premiums which are paid here in British

Columbia remain here and are invested here, instead of allowing for

leakages abroad.

[11:45]

The legislation talks about prudent behaviour. I don't know if that

term captures the point that we're making or not, but the fact is that

there is no restriction, no encumbrance and no overview, as far as I

can see, other than these loose terms of prudent behaviour on the

matter of investment of these funds here in this province. Certainly if

the members opposite think they're going to be coming here, perhaps

they should be talking a little bit in the legislation about the

investment policies.

The third point I want to raise is one that also causes me some

concern; that is, insolvency and bankruptcy. What do you do when one of

these firms goes insolvent, or declares bankruptcy, or winds up, and

you have an outstanding claim against both the parent and, hence, the

insurance company? What I'm talking about here are large cases

involving, say, product liability — large instances of negligent

actions on the part of a captive insurance.... We've seen instances of

disaster in the world caused by negligence on the part of corporations.

We've heard of situations elsewhere in the world about chemicals, and

the effect that chemicals have had in India or in the United States — I

believe it was outside Buffalo, at Love Canal. We've heard of cases

that have involved contraceptive products in the United States and part

of Canada, where the products have proven to be defective, and we've

seen large class-action suits launched in those instances against these

corporate interests.

[Mrs. Gran in the chair.]

[ Page 1201 ]

My concern is that it will become easier under this legislation for

corporations involved in product liability cases simply to underinsure,

given the capital requirements under the legislation, and to wind up,

to declare themselves insolvent and, hence, to allow those people who

are holding judgments in their hands due to the negligence of these

corporate entities and the negligence flowing from the products that

they produce.... That would reduce, diminish and indeed prevent the

opportunity for these people to collect on their judgments — to take

appropriate actions against these self-insured captives for product

liability negligence.

I think that's a serious problem, We've been fortunate in this

province. We haven't seen any large product liability cases. Most of

them have been in the United States and in Canada. But certainly that

is a fear of legal litigation that I'm aware of, and we've seen more

and more product liability cases coming on stream here in British

Columbia.

What do you do in the case of a large class action involving a

corporation that has captive coverage? In those instances it's going to

be quite easy, particularly given the nominal reserves, for the

corporation to wind up and declare itself bankrupt or insolvent, and

for the captive to do the same. Then you have the general public

standing out there exposed to the risk, affected by the risk, and not

able to seek compensation for economic loss flowing from being exposed

to that risk. That raises a serious question. I hate to sound

lawyerish, but it's something that is of concern to those of us who

practise in the personal injury field and for those of us who want to

see some stringent regulations in this province dealing with captive

insurance, if indeed it's the government's will to bring them here.

There are other regulations that cause me some concern. I'll

highlight them very quickly, but I won't talk about them in any depth.

There is, of course, the role of the superintendent in terms of being

able to enforce. When we get into committee stage on this bill, I want

to put the minister on notice that I'll certainly be asking several

questions with respect to the ability of the superintendent to enforce

the regulations and to ensure that captives abide by the regulations.

Mr. Speaker, I also want to point out that there are indeed some

differences right at the outset that distinguish these captive

insurance companies from normal insurance companies that are governed

under the provisions of the Insurance Act. One of the things that

causes me concern, of course, is the level of documentation and backup

required by these companies before they start up here in British

Columbia. The level of documentation required for them to set up is

less than that required for reporting and startup purposes for

companies governed under the provisions of the Insurance Act.

It is my understanding that, for normal insurance companies,

appointments of receivers and liquidators, notification of insured

persons, bankruptcy, winding up and so on are matters that have to be

dealt with when dealing with the startup of these companies falling

under the purview of the Insurance Act. Those matters are not covered

under the captive act. That in itself raises a lot of questions. It

seems to me that if you relax the regulations too much, in trying to

encourage these people to come here and set up, and you reduce the

level of reporting they have to do and the level of documentation that

they have to provide to ensure that they are solvent, then you're

making it easier for shell companies, relatively insolvent companies,

to start up here in British Columbia.

I don't think anybody on either side of the House wants to see, at

the end of the day, insolvent shell companies set up here to provide

captive insurance. It seems to me that if it's indeed the intention of

the government to maintain its lower capital reserves, it has to make

sure that when these companies are making applications to set up here

in British Columbia, on the front end we have substantial documentation

that proves that the net worth of these companies is significant enough

to withstand major claims. The way I read the regulations and the

exemptions from the provisions of the Insurance Act, that is simply not

going to happen.

In addition, there are some questions I would have — maybe it is

better to refer this to committee stage, but I'll lay out the broad

concern at this point — in terms of the breadth of the coverage, the

type of coverage and the type of responsibilities that are going to be

provided to those who are making claims under that insurance scheme.

Once again, if we were to use the model of the Insurance Corporation of

British Columbia, I think that what the corporation has done with

respect to

part 7 no-fault benefits provided under their scheme is

commendable. In some areas they should be improved, and I think that

the experiences in Manitoba and Saskatchewan on the equivalent

part 7

benefits are areas that we should moving in with respect to ICBC.

The question still remains whether or not the breadth of coverage

that these capitals will be providing will be to what I think has now

become accepted practice both in the public and the private sector in

British Columbia. That, of course, is kind of a technical debate,

perhaps better left to committee stage. I think the government has a

responsibility to ensure that regulation on the breadth of coverage is

firm and clear.

I also notice that under the provisions of this legislation it is

quite possible to provide for professionals to join with themselves and

engage in professional liability insurance. In some ways that is a

positive move, in light of the scandalous premiums that the private

sector is requiring, and certainly an argument that we should be moving

more towards public regulation and public interference with the

operations of insurance companies.

I see I have a limited amount of time, but I will be raising the

matters later on in terms of the breadth of coverage for professional

organizations that pool their resources together: for example, in

liability governing lawyers. Certainly all of us would like to see

lower premiums, but there also must be an assurance of adequate

coverage for members of the general public who are going to be making

claims against negligent professionals.

To wrap up, Madam Speaker — because I see that my time is up — I

want to first of all say that it is most unlikely that there will be

additional employment generated out of this legislation. Secondly, if

employment is to be generated by this legislation, it will be targeted

towards a specified group of professionals — lawyers, accountants and

actuaries — who aren't facing any real problems with unemployment. The

legislation misses out, as a target, the areas of unemployment we have

in this province in other sectors.

On top of that, as I said, the regulations are weak and the capital

reserves are low. The general public will be affected by these

regulations. There are questions about the level of coverage. It's for

those reasons — constructive, positive criticism from this side — that

we're standing up to speak against this legislation.

[ Page 1202 ]

MR. VANT: Madam Speaker, I'm very pleased to rise in support

of second reading of Bill 21. I will speak to the principle and the

spirit of this bill. I think the Insurance (Captive Company) Act adds

to the ability of specialty risks in this province to get coverage that

they currently cannot get under the Insurance Act. I don't believe

there is any provision in any statute under the Insurance Act that I'm

aware of that an insurance company has to insure any risk.

Let me give you an example of how this new captive insurance act can

help specialty groups and indirectly be of great benefit to citizens of

our province. Right now there are a number of Sikh temples in B.C.

which, under the Insurance Act, are unable to get insurance as their

insurance expires. There is a Sikh temple in Quesnel right now that

has, under the Insurance Act, approached 11 insurance companies and for

some reason or another has been turned down by all of them, so they

cannot renew their insurance. So sophisticated companies or associates

of groups with specialty needs under this captive insurance act would

be able to get coverage.

Another example I can think of is in my own riding of Cariboo — and

I'm not an expert on the Caribbean like the hon. member for

Esquimalt-Port Renfrew (Mr. Sihota) — where a number of years ago the

operator of the stagecoach in the Barkerville Historic Park was unable

to get insurance. He tried all over the place, and he couldn't get any

insurance. So a group of heritage-site operators could, under this

proposed captive insurance act, under Bill 21, arrange suitable

specialty coverage right within this province. So this certainly would

be of benefit to groups of citizens with specialty coverages. Also,

these groups would have the potential to always have the ability to

reinsure themselves on a regular basis, because right now as I speak in

this House there are a number of Sikh temples in this province that

have absolutely no insurance.

These captive insurance companies will, of course, be able to insure

their own owners. Of course, those who are providing a very

specialized, sophisticated insurance — and this is one of the big

positives in this bill....

Interjections.

MR. VANT: I realize it's Friday and it's not quite afternoon.

There are a few here in the socialist comer of the House, and it's

keeping the debate interesting.

Any specialized or sophisticated insurance company under Bill 21

would of course have to demonstrate its specialized needs in order to

satisfy the superintendent of insurance, so that these companies would

know exactly what they are committing themselves to in terms of details

of the coverage, which would be tailor-made to meet these specialized

needs. Of course, the premiums and so on could be in accordance with

the risk taken.

[12:00]

MR. BLENCOE: Which

section is that?

MR. VANT: I'm speaking to the principle of the bill. We're not into Committee of the Whole, hon. second member for Victoria.

It has been mentioned that there might be a flight of capital from

the province in terms of the premiums paid. Well, if these are

companies or associate groups within our province, I sincerely believe

that 98 percent of the capital would stay in the province. The reserve

funds would be invested in our province to create employment.

If solvency of these captive insurance companies is a question, the

superintendent of insurance always monitors the level of their reserves

and looks after the shareholders' equity. So if these shareholders are

in British Columbia, I am sure that those funds would be used to

benefit the citizens of our province — if not directly, at least

indirectly. I don't want the people who would be interested in insuring

themselves through a captive insurance company to have to go all the

way to the Caribbean to seek insurance if under the present Insurance

Act they are unable to get coverage.

As I said earlier, there are people out there who, for some reason

or another, cannot get insurance under the Insurance Act, so this

presents a very positive way of enabling people and groups and

companies to get insurance which they don't currently have. In the

liability sense, that can be of great benefit to citizens in our

province. I'm certainly in favour of Bill 2l.

MR. D'ARCY:

Madam Speaker, I'm delighted to be able to follow my colleagues from

Nanaimo and Esquimalt-Port Renfrew in offering cogent and constructive

discussion on this particular bill. I'm also pleased to see so many of

my colleagues gathered around today, as compared to the tiny corporal's

guard of government members who chose to come to work today.

I see Bill 21 as an attempt by the government, perhaps well

intentioned, to improve British Columbia's not too favourable

reputation as a secure depository and a secure place for individuals,

both here and interprovincially and internationally, to do business and

put their money. One of the most important things we need to do in

British Columbia is remove any uncertainty as to rules and the moving

of goalposts by the present government or any future government. Not

too long ago the then Minister of Finance, the former member for

Saanich and the Islands, introduced changes affecting insurance

companies in British Columbia that provided a tax incentive for them to

be in British Columbia, especially if they were of the smaller sort. At

the same time, a tax break was also given to smaller regional banks to

locate in British Columbia, in the sense that they were given a break

in corporation capital tax — something that was not provided for the

larger banks.

What has happened now.... By the way, I'd like to point out that I'm

advised that it usually takes about ten years for companies in the

financial field, whether trust or insurance companies, to make a

head-office decision to move. That really is what the Minister of

Finance is aiming for here. He wants companies presently headquartered

somewhere else in Canada — probably in Toronto, perhaps in Montreal or

Winnipeg — or somewhere else in the world to come to Vancouver

presumably, or somewhere in British Columbia. I give him credit for

aiming for that. But, Madam Speaker, are we talking ten years down the

road, when the rules are being changed now, were changed in the budget,

and were changed a few years ago under the Finance minister's

predecessor? There must be some stability and there must be some

assurance that things are not going to change depending on a sort of

back-of-the-envelope ad hockery in terms of financial regulation.

It is not news to this House or anywhere else in Canada that there

have been financial institutions in Canada which have got into trouble

in recent years, and I include a couple of

[ Page 1203 ]

regional banks, some trust companies and some

insurance companies. I don't believe any of them were from British

Columbia, fortunately. We have even had the occasional credit union run

into difficulty in recent years. We know what has happened in many of

these things. In order to protect the credibility of our financial

community at large, governments and the institutions themselves have in

many cases moved through deposit insurance and sometimes, as we saw

with the federal government, through special legislation to protect

depositors who, in some cases perhaps, shouldn't have received that

kind of protection. We have also seen a great many things which I will

perhaps politely call shotgun marriages — called, I think, in the

corporate vernacular of the press release, a rationalizing of assets or

efficiency reorganizations — which are really hiding mergers based on

the fact that the junior partner in the merger has gone belly-up — I'm

sorry, bankrupt. But they don't use that term; they use these other

nice terms.

Madam Speaker, we do not want an insurance-company crap-shoot

reputation for British Columbia. That is our concern on this side of

the House. I'm not one of those who suggests that the Vancouver Stock

Exchange's reputation as a haven for some responsible companies but

also some rather fast-operating, junior, under-the-counter companies is

justly — or unjustly — deserved. The fact is that in many financial

circles we in British Columbia have that reputation. I do not want to

see that spread to insurance companies.

To give the minister his due, he has perhaps looked at legislation

in another jurisdiction, Quebec, in recent years and noticed that there

is somewhat similar legislation to this — not precisely similar, but

something the same. And he may well have noticed that Montreal, because

of it, has managed to pry some business away from Toronto. I really

have no idea whether this is going to work for British Columbia.

However, if on the one hand you change the tax rules — which were

changed a few years ago anyway — and at the same time say you're going

to eliminate regulation in order to appeal to some financial business

that you hope is going to be footloose enough to locate here, I do not

think it bodes well for establishing British Columbia as a place with a

stable reputation to receive deposits and to channel investment

through. That really is the bottom line for all of British Columbia,

not just for this side of the House.

An enormous amount of investment that's generated in British

Columbia doesn't end up here, whether it be through pension funds,

insurance company assets.... The last time I looked, there was even a

large amount of deposits and investment controlled by the provincial

government which was not channelled through British Columbia investment

houses; it was channelled through investment houses in other

jurisdictions. If we're going to establish that reputation, we cannot

have this kind of uncertainty or this kind of special atmosphere

hanging over what I think is a very important part of the total

financial community that we need to stabilize and give a credible

reputation to in British Columbia. We not only need depositors from

elsewhere; we need depositors from British Columbia to keep their

business here.

With this absence of regulation that the minister proposes here,

what assurance would either the insured or the shareholders have that

the first time there was a major claim on an insurance company, whether

it was captive or otherwise, the same thing wouldn't happen as has

happened to several other insurance companies in Canada — and

internationally — in recent years? The first time they had a major

disaster or a major claim, they filed for

chapter 11, to use an

American term. How is that going to lead to the credibility of B.C. as

a place to do business? That's a question which neither the minister

nor either of the speakers on the government side has addressed.

What we need in British Columbia — and the kind of legislation that

this side would seriously consider supporting — is legislation that

makes it preferable for stable companies founded on a sound, actuarial

basis to come and locate here, and that is predicated on a good and

solid asset base. If the government was going to ensure that, you

wouldn't need careful regulation. We know what has happened with some

of our financial institutions in British Columbia, in western Canada.

We know that deposit insurance and financial institution insurance is

kind of a hodgepodge in B.C.

I hope you don't consider this outside the scope of the bill, Madam

Speaker — you've allowed a fair degree of latitude on this bill — but I

think we need a common set of rules and a common set of deposit

insurance schemes to cover provincially chartered banks, trust

companies, credit unions and insurance companies so that everybody,

internationally and nationally, knows the rules in British Columbia and

knows that everybody is going to be required to operate on sound,

insurance company business principles. So since I do not see any of

those provisions — or even any of those concerns — expressed in this

bill or by the minister, I have to say that I will not be supporting it

on second reading.

MR. CLARK: I want briefly to register my opposition to this

legislation. I have some concerns about it. The minister's statement

that we're overregulated in the insurance field in Canada really

concerns me. The regulations are there for a reason, and in the drive

for deregulation we sometimes forget why those regulations were put

there in the first place. As the member before me indicated, the

difference in the regulatory regimes between different insurance

companies is I think cause for concern.

The minister stated that he wanted to make it a competitive

regulatory environment to attract captive insurance industries. That

means competitive, I assume, with Bermuda, Bahamas and the Cayman

districts — areas known for their tough regulations and concern for

those industries. I think there are some real concerns, particularly

with respect to the weakening or the easing of regulations.

Applications now, as I understand it, need only include a business

plan, details on captive owners, managers, operating plans and

financial projections, considerably less documentation than for

property casualty insurers. The minimum capital requirement is very

low: a few hundred thousand compared with $5 million for a regular

company. Reporting requirements are limited to an annual audited

statement and the actuarial report. There are no specific rules

governing investments or reinsurance, as the minister said. There will

be no direct control of investments or reinsurance by captive insurance

companies, but they will be required to behave prudently.

[12:15]

The bill sets out in

section 8 that shareholders' equity and

reserves will be calculated in accordance with the regulations, or the

direction. In normal insurance companies, the following topics are

covered in the act, not by regulation: deposits, appointments of a

receiver or liquidator, notifications of insured persons of bankruptcy,

winding up, etc. So why are these matters left to be defined by

regulation? I think that's a serious error, I guess for two reasons

that I want to

[ Page 1204 ]

raise. First, I think there are some very serious

tax implications to it, because if there's a problem with taxation or

income tax, then a company would transfer, it seems to me.... Increase

the capital assets of the captive insurance company as a way of

avoiding income tax on earnings. I think that's a very real

possibility. So even though the minister said that it's not going to

impact on revenues, I think it may well have; that's in fact one of the

ways in which large corporations now funnel money through the Caymans

and other areas, in order to avoid those kinds of things.

Secondly, the potential for bankruptcy in corporations, and

therefore for the insurance system itself not to work; in fact, to

defeat the very purpose of insurance. As an example, Mentor Insurance

in Bermuda went bankrupt in 1986 — and Bermuda is, I think,

specifically referred to as an area that we're trying to emulate — so

the liquidators had to sue the parent company for $50 million to cover

the insolvency. With these kinds of very loose regulations which don't

require significant capitalization, it means that the potential for

bankruptcy is significantly higher. The potential for bankruptcy, and

not to recover through the insurance mechanism, could really be quite

significant because of all the relaxations of the regulations, and I

think most importantly because of the relaxation with respect to

capitalization.

So for all of these reasons, Madam Speaker, we have some very

serious concerns about this legislation, and I wanted to register them

here before you today. We will be voting against this, I think, flawed

legislation.

MR. WILLIAMS: Well, Madam Speaker, the minister said that the

principle with respect to this is to allow these captives to carry on

outside the regulatory framework that exists for insurance companies.

It begs the question, Madam Speaker, about those regulations. If there

are problems with the regulations, deal with them. But they're there

for a reason; there's a framework there for a reason. What you're doing

is avoiding a reasonable regulatory framework by establishing this

legislation.

The minister says it won't deal with the general public. That's not

so. Certainly the people who want to pursue their situation in the

court with respect to this captive insurance company are going to be

impacted. They're part of the general public. The member for

Esquimalt-Port Renfrew (Mr. Sihota) made that very clear. So to say

that it doesn't involve the general public doesn't wash at all. It of

course involves the general public, insofar as they're impacted when

they want to go after claims against the captive insurance company.

With respect to investments, no control over investments; but he

says "they must act prudently." What does that mean? And what is the

history of this minister and this government in terms of prudent

action, in terms of protecting the investments of various citizens in

this province?

Interjection.

MR. WILLIAMS: You want to talk about the Vancouver Stock

Exchange today? Do you want to talk about the credit unions today? Do

you want to talk about the teachers' co-op today? Do you want to talk

about any of the many scams you've let happen in this province, day in,

day out? No, you don't want to talk about that. This is just one more

to add to your little list, which is growing. It's not a little list;

it's growing and rightly should be attacked.

HON. MR. COUVELIER: Don't get excited.

MR. WILLIAMS: No, no, not at all. I think the member for

Nanaimo made a really significant point. You people on the other side,

this minister included, and the Minister of Economic Development (Hon.

Mrs. McCarthy) especially, chase every little glitzy item that comes

down the pike — every little item that you say will create jobs. How

many people in the Grand Caymans are walking around with briefcases,

white shirts and old school ties? Not many that I'm aware of. How many

in the Bahamas? Not many that I'm aware of. What are the unemployment

rates in these castaway locations for tax barriers and the various

fraudulent outfits that operate in those sunny climates? You end up

chasing every glitzy item, and it's not very encouraging.

This is a province with great resources, and a tremendous human

resource, much of it misapplied, improperly and inadequately, with

heavy unemployment. If you addressed the real issues, instead of these

little glitzy items that some corporate lawyer puts onto your desk,

we'd all be better off.

The member for Burnaby-Edmonds (Mr. Mercier) said: "It won't affect

anybody else. What is the opposition talking about? They're just being

anticorporate." Well, that's not so, as the member for Esquimalt-Port

Renfrew (Mr. Sihota) said.

AN HON. MEMBER: Jobs.

MR. WILLIAMS: What are the jobs? Give us an estimate of the

jobs out of this legislation, Mr. Minister. Is it like they said about

the other stuff, the Love Boat strategy, in terms of the new provincial

economy? As somebody in Ottawa said, there might be two jobs and one

French waiter out of the exercise — that's about the size of it.

The member for Esquimalt-Port Renfrew raised this whole question of

product liability, which is a new insurance reality in the world. The

IUD devices in the United States. Major issues, really. The whole

question of Johns-Manville Corp. in the United States and asbestos

poisoning across North America, the games that were played there with

legitimate claims against asbestos poisoning, and all of the rest.

Those are real concerns. You're moving out of the existing regulatory

climate and opening up greater areas of vulnerability in terms of those

major issues.

I really find it troublesome if you say the existing rules are a

problem in terms of the investment climate. We went through a world

depression in the thirties and built up a whole regulatory base that

dealt with the kind of intercorporate games of the thirties that were

part of the problems that led to the Depression. Now the new right —

the conservative right — is doing the whole deregulatory game and

setting the world up for the next big depression, in terms of allowing

interrelationships between corporations, in terms of the banks getting

involved in insurance and in stocks and bonds and a whole range of

things. The rules were established for good reason, Mr. Minister,

because of terrible, upsetting times in the past where the so-called

unfettered marketplace had to be dealt with, monitored and regulated.

All of these new things that are coming on stream out of the radical

right and out of this government are setting us up for the next big

fall. And make no bones about it.

Let's think about, say, one example in terms of the history of

regulation by this government. Let's think about the teachers' co-op.

This ministry was responsible for the teachers' coop. Oh, yes, it was.

[ Page 1205 ]

HON. MR. COUVELIER: Oh, come on!

MR. WILLIAMS: No "Oh, come on."

Interjection.

MR. WILLIAMS: Oh, that's the line we're going to get. When

some corporation has an inadequate captive insurance company, you're

going to say: "Well, our hands are clean. Why, it was the captive

insurance company that was the problem." Of course. But you have

regulators in all of these fields, and you have a terrible, miserable

record in terms of your regulatory activities, even where we spell out

the regulations more tightly than you are doing in this statute. How

much has been lost by investors in British Columbia under the B.C.

teachers' co-op scheme?

Interjections.

DEPUTY SPEAKER: Order, hon. members.

MR. WILLIAMS: Oh, well. The loss to date is $100 million. The

member for Prince George, the Minister of Environment (Hon. Mr.

Strachan), says,"Well, they had the right to go to CUDIC." Well, Mr.

Minister....

Interjection.

MR. WILLIAMS: Oh, it's a little bit of quicksand, isn't it? It's a little bit of quicksand.

HON. MR. STRACHAN: Well, actually, it was a federal thing....

Interjections.

MR. WILLIAMS: It's a little bit of quicksand, isn't it? Let's

talk about CUDIC. CUDIC, your regulatory agency, was responsible for

monitoring Westcoast Savings. What were the losses, which have lately

been tallied up, by your CEO, your Social Credit nominee? What are the

losses in that operation? Eighteen million dollars in the last couple

of years had to be picked up by the prudent credit unions of British

Columbia. The prudent, careful credit unions of British Columbia had to

pick up those bills that your friends in Westcoast created because of

imprudent investments in parts of the province and elsewhere that they

knew nothing or very little about.

Interjections.

MR. WILLIAMS: You know the problems. They're with your

friends in outfits like Westcoast. The real challenge is that you were

asleep at the switch again, just as you've been.... This ministry has

been asleep with respect to the Vancouver Stock Exchange. There's

scandalous nonsense going on there on Howe Street. You've been asleep

at the switch with respect to the B.C. teachers' co-op — great losses

for the citizens of British Columbia, some 32,000 of them that thought

their money was protected, but it was not.

You've been asleep at the switch with respect to some of the credit

unions in this province in terms of inadequate investment, inadequate

policing, inadequate enforcement and all of the rest of it. The signals

were out there in all of these cases at an earlier stage, and never did

you respond. The bells were ringing. People in various industries and

movements were aware of it. Your staff had to be aware of it but did

nothing in all of these cases.

HON. MR. COUVELIER: Relevancy.

MR. WILLIAMS: Relevancy indeed. You're the one who is talking

about an excessive regulatory climate in this province and elsewhere.

There is absolutely every evidence that there is a totally inadequate

regulatory process in this province under existing statutes and under

your administration, and you're coming in with a statute that would

make it far worse. So you're opening up the opportunity for all kinds

of abuses.

What about the reserves? You're not going to monitor the investments

carefully. Reserves could go up and down at corporate will, in terms of

their own corporate situation, their own corporate tax problems. It's a

neat way to deal with corporate tax problems, if that was the problem

this year, and so on. So it's a neat kind of loophole game that the

corporate group can go back and forth through. That's what this

legislation represents.

You talk about being prudent — this administration has not been

prudent so far with respect to so many of these other issues in this

province. You're setting up a thing that allows less prudence by this

statute. The second member for Cariboo (Mr. Vant) talked about insuring

some of the people who aren't getting insured in this province now. But

let's not forget that we had a general insurance company in this

province owned by the people of British Columbia. ICBC General was set

up to deal with the very problems that you cry about today: the little

municipalities, the little villages of British Columbia that had to in

the past pay through the nose for their insurance.

Once ICBC General was sold off — for pretzels, I might say — they

got into trouble — monstrous insurance rates that were totally

unreasonable, based on American experience, made no sense whatsoever.

Some members on the opposition side nod. They know that's been the

case. You sold it off for $9 million: a company that had been developed

over a dozen years or more, with significant assets far in excess of $9

million and with reserves that were probably more than adequate.

The evidence is there. This government has not done the job of

monitoring the existing financial institutions and the like in British

Columbia. This opens the door to worse things happening in the future.

It's most distressing that we've gone through the whole exercise of

issues like the teachers' co-op, and the loss of $100 million.

Currently they only have 50 cents on the dollar out of the teacher's

co-op in this province.

You have credit unions in this province like Westcoast, with an $18

million loss because your regulatory people were asleep at the switch.

You have First Pacific here and its predecessor with an $11 million

loss because your people were asleep at the switch. You've got the Fort

St. John credit unions and others that I will not name in trouble

because your regulatory people were asleep at the switch. You've got

the issues raised by the member for Esquimalt-Port Renfrew (Mr. Sihota)

regarding that incredible casino called the stock exchange on Howe

Street in Vancouver, because your regulators were asleep at the switch

or were removed from the switch.

That's been the reality of the last few months under this minister. We are not encouraged by your record to date, Mr.

[ Page 1206 ]

Minister, and your proposals in this legislation are equally disturbing.

[12:30]

MR. BLENCOE: Madam Speaker, I want to reflect on a little bit

of history in terms of the lack of regulations in the province of

British Columbia, which the first member for Vancouver East (Mr.

Williams) has mentioned in his debate this morning.

A little over a year ago, when I was critic of the consumer affairs

section, the Teachers' Investment and Housing Co-op got itself into

serious trouble, and the evidence is in on why that happened: because

of the lack of monitoring, the lack of proper regulation, and the lack

of competency in terms of this government and its ability to protect

the 32,000 members who invested in that corporation in good faith.

Madam Speaker, we have legislation before us that continues to

weaken and deregulate, rather than this government starting to deal

with the issues of financial institutions that do business in the

province, creating faith in those institutions. Instead of having

proper regulations, liquidity requirements, reserve requirements and

monitoring