Life and health managing general agents (MGAs) are applauding the Financial Services Regulatory Authority of Ontario (FSRA)’s decision to pause work on its proposed licensing regime for MGAs in Ontario, instead of proceeding with a flawed rule.
“I think they’re just going to take the time to get it right, which I commend, and I think it can be really challenging for regulators to do,” said Andrew Fink, president of MGA HUB Financial. “I believe it’s a pause, though — in no way, shape or form, do I believe that this goes away. I think the importance of the legislation is still evident.”
The licensing rule was supposed to be in place by June 1, followed by a two-year transition period.
The proposed rule revision, released in October, confused and surprised many stakeholders when it included some advisors — those that train or oversee other advisors — in a third-tier MGA licensing category. During the consultation on the proposal, FSRA heard a lot of feedback from the industry on the unintended consequences of subjecting entities that aren’t true MGAs to the licensing requirement, said Kirk McMillan of The Gryphin Advantage, an MGA serving primarily Ontario.
While he’s all for better outcomes for clients and said he was by and large comfortable with the proposal as far as it affected MGAs, McMillan said it would have placed “undue stress” on the industry, insurance companies, advisors, MGAs and FSRA itself. “It would have been really tough.”
He added that Gryphin’s clients weren’t aware of the implications the rule would have for them until they were notified by the MGA.
The province promised to introduce licensing after regulatory reviews found instances of poor training and supervision of life agents, as well as clients being sold universal life insurance policies they didn’t need. FSRA’s rule added oversight of MGAs and outlined distinct compliance and agent monitoring and supervision requirements for each of three MGA tiers.
Nancy Allen, executive director of the Independent Financial Brokers of Canada (IFB), agreed that the step back is a positive, overall.
“It creates space to realign the approach with the underlying policy intent: regulating true distribution-level MGAs (intermediary platforms operating at scale) without imposing disproportionate licensing/compliance burdens on small practices that remain retail advisory businesses,” she wrote in an emailed response to questions.
“That said, the downside is uncertainty and prolonged transition planning for MGAs, insurers and advisors. But if the alternative is moving forward with a rule that mis-scopes and creates unintended consequences, a reset is preferable.”
The pause also means a delay in adding protections for consumers.
In a written response to emailed questions, Sean Downey, president of Financial Horizons said the licensing proposal represents a “once-in-a-generation chance to modernize how Ontario regulates insurance distribution.” He also supports the pause, saying the “complex topic requires further careful consideration and industry involvement.”
“Independent channels have evolved, oversight improvement opportunities are well documented and the Ontario Insurance Act now recognizes MGAs for the first time,” he said. “Decisions we make today will shape consumer protection and market access for decades.”
While FSRA has not stated the reason for the pause, announced last week, it said that the next updates on the proposed licensing framework would come from the provincial government.
For its part, Ontario’s Ministry of Finance confirmed in an emailed statement to Investment Executive that the government is “committed to establishing a successful new licensing framework for life and health [MGAs] to strengthen consumer protection in Ontario while providing regulatory clarity.”
However, Fink said, “I believe that the minister is aware that the definition of an MGA is creating undue constraints and pain in creating a regime that will achieve the outcomes that they’re looking for. I think that they said, ‘OK, yeah, let’s slow down to … get this right.’”
Canadian Association of Independent Life Brokerage Agencies (CAILBA), which represents life and health MGAs, did not respond to a request for an interview, but both McMillan and Andrews are board members. Advisor association Advocis and the Canadian Life & Health Insurance Association, which represents carriers, declined to comment.
The definition of MGA captured in the revised rule is based on the amended Insurance Act, which was revised in 2024 to establish a basis for MGA licensing.
It’s unclear whether the Ontario government will have to go back to the Act before FSRA makes amendments to the rule. When asked for comment on whether it’s planning to do so, the Ministry of Finance did not directly answer the question, instead saying, “The government appreciates the significant stakeholder engagement to date and will communicate next steps regarding the proposed [life and health] MGA licensing framework in due course.”
Tier one MGAs
Fink said he believes the government will have to amend the Insurance Act in order for FSRA to focus the rule more narrowly on tier one MGAs such as HUB, Horizon and Gryphin.
“My preference would be that they include simple language to clarify effectively, that the tier one MGAs — which I don’t think anyone was disputing — are clearly defined and need a licence and overseeing body,” he said.
That would allow tier one MGAs to be onboarded into the licensing regime, while FSRA could later add other mechanisms into the value chain that could further improve outcomes for customers in Ontario. Another possibility could be to enhance expectations and oversight for advisor and corporate advisor licences that already exist, he added.
Allan said a change to the rule or accompanying guidance could address a lot of the concern about the capture of advisors and other entities that aren’t “true” MGAs, including through “carve-outs” for “excluded corporate agencies.”
“The overbreadth concern is largely about how ‘MGA’ is operationalized through the rule (and how it could apply to entities that are not MGAs in substance).”
However, in the longer term, “legislative clarification would provide durable certainty.”
The best-case scenario would be one that eliminates the third tier category “that doesn’t need to exist,” McMillan said. It would also clarify what qualifies as an associate general agent (AGA), an intermediary group between MGAs and advisors that has some monitoring and supervision duties over agents, and distinguish between AGAs and advisor groups, he added.
McMillan noted that beyond the broad definition of MGA, there are still some details pertaining to tier one MGAs that will need to be clarified by FSRA.
“There are still questions around supervision and who’s responsible for what. It really wasn’t laid out in that rule.”
MGAs are responsible for monitoring agents, but rely on the carriers for data, for example. “There’s a lot of work that’s got to get done there.”