Brokers and carriers react to MGA self-regulation

Property and casualty insurance carriers and brokers have embraced the Canadian Association of Managing General Agents’ (CAMGA) self-regulatory regime, the association’s managing director tells Canadian Underwriter.

Late last year, CAMGA’s board and membership approved and adopted the undertaking as a condition of membership beginning Jan. 1. The voluntary measures and membership requirements include three pillars. At a high level, the pillars are:

A requirement that the MGA carries errors & omissions (E&O) insurance that meets or exceeds the mandated minimum standards in every jurisdiction in which the member carries on business (as applicable to insurance intermediaries)
Every MGA has an operating trust account for insurance premiums that will be audited by provincial insurance regulators (currently, rate can be co-mingled within operating budgets)
At the quote stage, the MGA provides an explicit list and names of carriers and whether they are licensed or not (to provide transparency about the carrier).

Since the self-regulatory regime was unveiled in November, Masnyk says the association has received a handful of calls from carriers asking if a specific MGA was a member and following the code.

“So, the first one or two calls I just said yes or no,” Masnyk says in an interview. “But then after I discovered the reason they were calling is because they’ve adopted that code as one of their points of due diligence in vetting an MGA when they trade with them and offer up capacity.”

To date, about five or six insurers have implemented the code adoption as part of their vetting process, for both new and renewal of delegated authority capacity agreements, Masnyk reports. “Their question was, ‘Is this X MGA following this code/a member of your organization?” he says, adding that most times he responded in the affirmative.

In addition, Masnyk says he’s received several calls from different mid-sized commercial brokerages who “have told me that they’re in the process of moving their entire books to MGAs who are following the code.

“So, that’s quite significant, I think,” Masnyk says. “The reason they give is that they just feel more comfortable in dealing with companies that are following this code, [and] basic minimum standards of operating. In the next year… who knows? It could be dozens and dozens of brokerages switching. It could be dozens of carriers using this as a guideline for their vetting process.”

Masnyk adds the code is a “living document” that’s not static and will be improved. “We are open to changing it if somebody has a good idea and there’s good reason to change it,” he says, adding that there have been no changes to date.

In addition to the undertaking’s three main pillars, it also requires MGAs in the P&C sector to:

Agree to be licensed as an insurance intermediary in those jurisdictions that mandate it
Ensure that the MGA obtains from the broker/agent a copy of the required Consent & Acknowledgement of Risk Form for all insurance placed with a non-licensed carrier signed by the consumer prior to binding the risk
Endeavour to notify the broker of all non-renewals a minimum of 45 days prior to renewal date
Explicitly inform the broker at the quoting stage of the carrier(s) relied upon for the quote
Notify CAMGA within 30 days of the breach of any of the foregoing undertakings in every jurisdiction in which the member carries on business.

Feature image by iStock.com/andrei_r