Notice of Permanent Cease and Desist Order Against Sovereign General Insurance Company

REGARDING the Insurance Act, R.S.O. 1990, Chapter I.8, as amended, in particular section 441

AND REGARDING Sovereign General Insurance Company

NOTICE OF PERMANENT ORDER

On March 8, 2006, the Superintendent of Financial Services ("Superintendent") issued a Notice of Proposed Order as he was of the opinion that Sovereign General Insurance Company ("Sovereign") had committed an unfair or deceptive act or practice by charging rates for coverages and categories of automobile insurance that were not approved or authorized by the Superintendent.

On March 9, 2006, Sovereign was served with a copy of the Notice of Proposed Order. The Insurance Act ("the Act") provides that within 15 days after receiving the Notice, a person may request a hearing before the Financial Services Tribunal. Sovereign did not request a hearing within the 15 days and as a result, the Proposed Order is now permanent.

TAKE NOTICE THAT pursuant to section 441(2) of the Act, the Superintendent orders Sovereign to:

Reimburse all affected policyholders (both current and former policyholders) in a manner acceptable to the Superintendent. The plan for reimbursement shall include the following features:

(i) Sovereign shall reimburse all current and former policyholders who purchased automobile insurance in respect of private buses all monies above the amount approved by the Superintendent for Class 44, including any overpayment of Sales Tax, plus interest of 6% calculated from the time of the payment for the policy.

(ii) Reimbursement shall be by means of a cheque sent to the policyholder’s latest address on file with Sovereign or, if not deliverable to that address, Sovereign shall contact the policyholder’s broker, to determine whether a valid address can be obtained and if not, Sovereign will attempt to locate a new address from publicly available sources. If a valid address can be obtained, the reimbursement cheque will be sent to that address.

(iii) In any case where the address of a policyholder is unavailable,
after reasonable efforts to locate same, or a cheque sent to a policyholder remains uncashed after a specified date, the reimbursement amount shall be donated to a charity acceptable to the Superintendent.

(iv) Sovereign shall provide the Superintendent with written reports
containing details of its compliance with the reimbursement plan.

(v) On or before the next general meeting, Sovereign shall provide to the Superintendent confirmation, in writing, that the board of directors has considered its current written internal control procedures with respect to the insurer’s underwriting rules, rating and risk classification systems and have determined that they are effective in ensuring that any changes to underwriting rules, rates or risk classification systems that will have, or potentially may have an impact, on risk selection and rating applied to policyholders, are reviewed and approved by a management official or committee with management responsibility extending beyond the operational unit proposing the change and that those change management practices are consistent with current industry standards.

TAKE NOTICE THAT section 447(2)(b) of the Act provides that any person who fails to comply with any order made under the Act is guilty of an offence and liable on a first conviction to a fine of not more than $100,000 and on each subsequent conviction to a fine of not more than $200,000.

AND FURTHER TAKE NOTICE THAT section 447(4) of the Act provides that every director, officer and chief agent of a corporation who caused, authorized, permitted or participated in a corporation committing an offence, or who fails to take reasonable care to prevent a corporation from committing an offence, is also guilty of an offence and is liable on a first conviction to a fine of not more than $100,000 and on each subsequent conviction to a fine of not more than $200,000.

ISSUED AT the City of Toronto, March 30, 2006


______________________________________
Robert Christie
Superintendent of Financial Services

TO:

Sovereign General Insurance Company
Sovereign Centre
6700 Macleod Trail SE, Suite 140
Calgary AB T2H 0L3

Attn:

Mr. Brian Speirs
Vice President Insurance Operations

AND TO:

The Sovereign General Insurance Company
4 King Street, W., 17th Floor
Toronto, Ontario M5H 1B6

Attn:

Mr. Dave Broadhurst
Chief Agent