Broker regulator outlines approach to MGA licensing

Ontario’s broker self-regulatory body is looking at its licensing exams with a stronger focus on commercial lines and MGAs, Registered Insurance Brokers of Ontario (RIBO) CEO Patrick Ballantyne said last week during an industry event. 

“Those exams are currently under active review with a new blueprint set to be implemented this fall,” Ballantyne said during the Canadian Association of Managing General Agents (CAMGA) conference in downtown Toronto. “There will likely be in this new exam a higher commercial component, including ensuring brokers know about MGAs, their expertise, and the capacity they offer for specialty products.” 

While he didn’t elaborate on details about the commercial focus, Ballantyne said RIBO has also put in a place for MGAs a qualifying exam specific to RIBO requirements. This includes RIBO’s code of conduct, financial reporting and continuing education requirements, minimum E&O and fidelity law requirements (same for MGAs as they are for brokerages — the holding of trust accounts together with the holding of minimum equity positions) and ongoing monitoring of financial reporting.  

For its part, CAMGA has its own voluntary regulatory undertaking that is a condition of association membership. Unveiled in November 2021, the undertaking requires MGAs to: 

• Carry E&O insurance meeting or exceeding the mandated minimum standard in every jurisdiction in which the MGA carries on business (as applicable to insurance intermediaries) 
• Have an operating trust account for premiums that will be audited by provincial insurance regulators 
• At the quote stage, provide an explicit list and names of carriers and whether they are licensed or not (to provide transparency on the carrier).

Earlier this year, CAMGA appointed Barb Szychta as the independent ombudservice to act as an adjudicator of queries and allegations made against association members. Since launching its code of conduct and business operating standards, CAMGA has not received any complaints, association executive director Steve Masnyk told CU in March.  

Ballantyne told conference attendees that RIBO audits MGAs as part of its spot check program. “And we’ve audited about 50 MGAs in the last five years,” he said during the regulatory update session. “We treat them as any other licensee with the organization…  

“We’ve heard consistently, for example, that our spot check program is about as an effective outreach tool, an education tool, as we can design…” 

In addition, RIBO will be looking at “what changes, if any, do we need to make in our own policies and procedures to make us a more effective regulator of the MGA sector,” Ballantyne reported. 

RIBO has been licensing MGAs voluntarily for about 20 years. Currently, about 70 entities are registered as either an MGA or a wholesaler.  

Some MGAs voluntarily choose RIBO to demonstrate to clients (brokers) that they could meet the same standards of conduct that the broker meets; other MGAs need to be licensed in their home jurisdictions.  

Unlike a brokerage, an MGA firm can be licensed with only a single designated individual, Ballantyne added. A brokerage, however, requires every individual person dealing with the public to be registered. “The reason for that is MGAs are not dealing directly with the public, and they also sign an undertaking to that effect when they’re getting licensed,” he said. 

“Our framework, which is 100% voluntary on your part, has evolved over time,” Ballantyne said. “And we still aim, as we are developing new rules, requirements, approaches and policies, to recognize the unique nature of the MGA.” 

 

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