In July 2021, the Financial Services Regulatory Authority of Ontario (FSRA) released its Life & Health Insurance Sector Review Report, which highlighted that the dominant distribution model among the insurers reviewed was through independent agents placing business via managing general agencies (MGAs). This finding underscores the role that MGAs play in Ontario’s life and health insurance sector, raising important questions about oversight, accountability and how insurers manage conduct risk across extended distribution chains. To address these concerns, FSRA has since proposed a new rule aimed at clarifying responsibilities and closing regulatory gaps.
Overview of FSRA Rule 2025-001
FSRA’s Proposed Rule 2025-001 (the Rule) was published for consultation on January 28, 2025, and the submission period closed on April 30, 2025. The Rule applies to MGAs performing what it defines as “MGA licensed activities,” including contracting with agents, onboarding and screening them, training and supervising agents on behalf of insurers. It applies to both licensed and unlicensed MGAs, insurers licensed for life insurance in Ontario and individual insurance agents associated with MGAs and insurers who sell or solicit life and health products. The purpose of the Rule is to address the findings of the 2021 review, as well as a rise in cases of agent misconduct. It forms part of FSRA’s broader six-point action plan aimed at closing regulatory gaps and tackling concerning conduct in the life and health insurance sector.
At the core of the Rule are five regulatory themes:
- Licensing: Establishes a formal framework for MGAs, placing them directly under FSRA’s regulatory oversight as distribution intermediaries.
- Governance and controls: Requires MGAs to maintain strong internal oversight, formal processes and comprehensive compliance frameworks.
- Supervision of agents: Obligates MGAs to actively screen, monitor and assess the agents they contract with, ensuring suitability and adherence to regulatory standards.
- Product suitability: Holds MGAs accountable for fostering a compliant sales environment, even if they do not provide advice directly to clients.
- Documentation and reporting: Requires MGAs to maintain detailed records demonstrating how they meet all obligations under the Rule.
Requirements for MGAs under the Rule
The licensing framework introduced by FSRA is a central element of the Rule. MGAs operating in the life and health insurance sector must now obtain an MGA license, which formalizes their role and subjects them to regulatory oversight beyond their contractual relationships with insurers. A key component of this licensing requirement is the appointment of a Designated Compliance Representative (DCR). The DCR must be an officer or partner of the MGA and possess the education and experience necessary to oversee compliance throughout the organization. In addition, MGAs must maintain general liability insurance and either a surety bond to protect the insurer or errors and omissions insurance to cover potential liability.
Governance frameworks are another critical focus of the Rule. MGAs are required to demonstrate that they have robust internal controls, including compliance frameworks, escalation protocols and risk oversight procedures that are appropriate to the size, complexity and risk profile of their operations. Oversight extends not only to contracted agents but also to sub-MGAs. This includes assessing sub-MGAs for financial condition, the competence of senior management, adequacy of independent compliance systems and compliance of their agents with applicable laws. MGAs must report non-compliance by agents or sub-MGAs to FSRA and the insurers they support, and they must conduct formal assessments of sub-MGAs at least once per year. The Rule also requires MGAs to maintain a client service continuity plan, ensuring uninterrupted service in the event that an agent or sub-MGA can no longer operate.
Supervision of agents is another area emphasized by the Rule. MGAs are expected to actively manage the suitability and conduct of the agents within their distribution network. They must assess agents based on risk profiles, track complaints and disciplinary flags, verify regulatory compliance and maintain thorough records of onboarding, approval rationale and any conditions imposed. Recruitment practices must manage conflicts of interest and ensure that no agent begins work until they are properly licensed, trained and authorized by the insurer.
The Rule also highlights the importance of product suitability. MGAs are expected to foster a compliant sales environment in which agents recommend products that meet the client’s best interests. This responsibility includes ensuring that agents have the appropriate product knowledge, confirming that products sold are suitable for clients and preventing indirect encouragement of poor recommendations, such as through inappropriate sales incentives. MGAs must support systems that promote suitability through training, compliance support and monitoring for patterns that suggest inappropriate sales practices.
Documentation and reporting obligations require MGAs to maintain detailed records demonstrating compliance with the Rule. These records include agent screening, contracts, training logs, audits, complaint management and supervisory actions. FSRA encourages the sharing of information between MGAs, sub-MGAs, and insurers to show that all participants in the distribution chain are fulfilling their regulatory obligations.
The role of insurers
Insurers retain independent regulatory obligations even when working with MGAs. While collaboration between insurers and MGAs is encouraged to avoid duplication of effort, delegation of functions does not relieve insurers of ultimate responsibility. Insurers must continue to screen and assess agents and MGAs for suitability, monitor conduct, take corrective action when necessary, report issues to FSRA and ensure continuity plans are in place if an agent or MGA can no longer serve clients. Comprehensive agreements, oversight processes and regular performance reviews are essential, as the delegation of tasks does not absolve the insurer of accountability.
Preparing for the Rule
MGAs should begin preparing for compliance with the Rule by reviewing and strengthening agent onboarding processes and contracts. It is critical to ensure that contracts address compliance, suitability and reporting obligations. MGAs should formalize and document their oversight frameworks, including escalation protocols and accountabilities, and implement risk-based monitoring of agents and sub-MGAs based on various factors. Targeted training for compliance, distribution and onboarding teams ensures that all staff understand their responsibilities under the Rule. Conducting readiness assessments or gap analyses will help MGAs identify areas requiring improvement and to prioritize remediation efforts.
Implications and final takeaways
This Rule marks the first time an Ontario regulator has issued dedicated guidance for life and health MGAs, signaling an increased focus on the distribution layer and establishing a precedent for formal licensing frameworks.
The guidance also raises considerations for property and casualty (P&C) MGAs, signaling a potential shift toward enhanced regulatory oversight of distribution. In P&C insurance, regulators may scrutinize MGAs with delegated underwriting authority, focusing on governance, consumer outcomes and agent supervision. By establishing a formal licensing framework in the life and health sector, the Rule prompts consideration of whether similar measures may be warranted for P&C MGAs, especially those operating with broad authority.
The principles of fair treatment of customers could extend through delegated sales in P&C insurance, reinforcing expectations for ethical and compliant conduct. Additionally, unsupervised agent platforms, including aggregators or digital networks interfacing with brokers and agents, may attract greater regulatory attention where robust oversight mechanisms are not in place.
Overall, FSRA’s new Rule marks a pivotal shift, bringing MGAs squarely into the regulatory spotlight and setting the tone for a more accountable, transparent and consumer-focused distribution model in Ontario. Although the effective date of the Rule has not yet been confirmed, life and health MGAs should begin considering the potential implications for their business operations.
For further details, legal advice or questions, please reach out to Taschina Ashmeade or a member of Dentons’ Corporate and Regulatory Insurance group and we would be happy to assist.
