3. I. Some of the Challenge of Regulating MCCO’s Area of Regulation/Supervision Challenges Investments Investments may not be professionally managed. Little or no ALM used. Liquidity risk and concentration risk not understood often. Capital Restricted ability to raise capital. Capital adequacy may not be easily calculated when liabilities and catastrophic risk exposure not well analyzed. Actuarial – Reserving & Pricing Pricing of products often done using data from other populations. Lack of good accounting practices may lead to poor accounting records, limiting hisotrical analysis of pricing adequacy. Same issues for reserving adequacy. Market Conduct MCCO’s are highly attentive to member needs, but may impose pressures on members as well given their influential position in the relationship. Governance MCCO’s may not be famiiliar with corporate governance standards.

9. Draft MCCO Paper: Special Considerations ICP’s Special Considerations 1-5: Supervisory arrangements Few differences / Important not to exclude MCCO’s from supervisory regime / May need to coordinate oversight with other government agencies 6: Licesning Important to consider alternatives to allow MCCO’s to participate if current licensing regime prohibits their participation /Consider strength of governance 7: Suitability of persons Professional experience and suitability of board, as well as continuity of directors, may need to be scrutinized / suitabilty of capital subscribers is different 8: Changes in control, portfolio transfers Path to change under demutualization needs to be established in law / Change in “effective control” in MCCO should be considered 9: Corporate Governance Consider seprate rules for C.G. For MCCO’s that are facilitative of access and reflect nature of mutuality / Effective Board is equally expected of MCCO 10: Internal control Same treatment 11 – 17: Ongoing supervision Same, except provision of path to exit through demutualization

10. Draft MCCO Paper: Special Considerations ICP’s Special Considerations 18 – 23: Prudential Same treatment 23: Capital adequacy and solvency Fairness towards existing and future members regarding capital surplus / Callable but unpaid capital not to be relied upon 24 – 28: Markets and consumers Same treatment, except implementation of ICP with respect to AML/CFT may take into account aspects of member relationship 24: Intermediaries If requirements placed on licensing and duties of intermediaries are difficult for MCCO’s, consider modifying / Apex institutions may reduce supervisory burden 25: Consumer protection Credit should be given for built-in mechanisms in MCCO’s that demonstrate high level of consumer awareness and protection may reduce burden on supervisor 26: Information disclosure, Transparency to market Credit should be given for built-in mechanisms for democratic assemblies, meetings, and dissemination of information

17. Parts of the Puzzle

18. Stakeholders

19. THANK YOU