What exactly is an MGA in Canada?

CAMGA’s position is that Managing General Agents are neither insurance brokers nor insurance companies. They occupy a distinct role within the insurance ecosystem, with their own responsibilities, expertise and business practices.

In other words, the MGA is a distinct professional discipline within the insurance industry.

Let’s start with a definition

When the Canadian Association of Managing General Agents (CAMGA) engaged Patrick Ballantyne as a consultant to support the Association’s regulatory and compliance efforts, Patrick rightly identified a foundational issue: we first needed to establish a common understanding of what an MGA is.

The CAMGA definition of an MGA was developed by Patrick Ballantyne with the assistance of a working group of MGA professionals. Following the initial draft, the definition was shared with the broader CAMGA membership for discussion, feedback and agreement. After further refinement and membership alignment, it became the Association’s formal definition of an MGA.

That definition is now a cornerstone of CAMGA’s regulatory recommendations and positions.

To view CAMGA’s official definition of an MGA, visit our whitepaper, available here. https://camga.ca/camga-regulatory-undertaking/ .  The definition can be found on page 14.

A clear definition provides the foundation for several outcomes:

• Enhanced public trust. A defined profession can establish tools and standards that help ensure practitioners possess the appropriate knowledge, skills and professional integrity.
• Increased accountability. Regulators and governing bodies can develop guidance and standards that are appropriate to the specific activities, responsibilities and risks associated with profession.
• Recognition of specialized competence. A definition helps identify the body of professionals for their distinct value, knowledge, skills and abilities.

But what about firms whose structure falls outside the definition?

The Canadian insurance marketplace includes firms with increasingly diverse and sophisticated business models.

CAMGA is in no position to tell firms how they should structure their businesses or develop their business strategies.  When it comes to professional standards, however, there needs to be a common understanding of the activities being performed.

We see this happening elsewhere in the insurance sector. For example, a retail brokerage may have a property and casualty brokerage division, a life and health division, and an investment or financial services division. The organization may operate all these businesses under one corporate umbrella, but that does not mean each activity is subject to the same regulatory framework or professional standards.

The point is that the presence of other activities should not prevent us from clearly identifying the MGA activities being performed in Canada.  It allows all industry participants (brokers, regulators, capacity providers and other stakeholders) to understand when they are dealing with an MGA and what that role entails.

As the MGA sector continues to grow in Canada, clarity becomes increasingly important and now - a definition is here.

Managing General Agents (“MGA”s) act as delegated extensions of an insurer’s underwriting, distribution and administration functions.

In Canada, a Property & Casualty (“P&C”) MGA is an intermediary that operates under delegated underwriting authority vetted and approved by one or more licensed general insurers. An MGA facilitates insurance transactions between their insurer(s) and licensed insurance brokers or agents within the scope of its delegated underwriting authority.

MGA activities may include some or all of the following activities within their delegated authority:

• underwriting risks in accordance with insurer-approved guidelines;
• designing insurance products and establishing pricing frameworks;
• soliciting, negotiating, and binding contracts of insurance;
• issuing and countersigning policy documentation, and;
• collecting premiums and remitting them in a timely fashion to insurers in accordance with contractual arrangements;
• adjusting or administering claims on behalf of said insurer(s).

MGAs do not generally transact directly with P&C insurance customers and do not typically assume capital risk. The general insurer continues to bear the capital risk.

This definition of a P&C MGA excludes licensed retail insurance brokers and insurance agents whose activities are limited to dealing directly with the customer and who may be authorized to:

• accept and bind insurance policies on behalf of an insurer, in some cases under similar delegated authority;
• service policies on behalf of an insurer, and/or;
• collect premiums on behalf of an insurer, but who are not authorized to act on behalf of an insurer in any broader delegated authority capacity.