FSRA Broadens MGA Licensing in Ontario, Raising Compliance Concerns

The Financial Services Regulatory Authority of Ontario (FSRA) has proposed a revised licensing framework for managing general agents (MGAs) in the life and health insurance sector, broadening the definition of MGAs to include thousands of individual advisors and small entities involved in agent recruiting, screening, and oversight. The new rule introduces three tiers of MGAs, with Tier 1 representing traditional MGAs with direct insurer relationships, Tier 2 involving MGAs contracted by other MGAs, and Tier 3 capturing smaller advisory practices performing regulated activities. This expansion has raised concerns across the industry about its breadth, clarity, and potential compliance burden for entities not traditionally considered MGAs. Industry bodies like Advocis and the Independent Financial Brokers of Canada have urged FSRA to refine the rule to exclude small corporate agencies and individual incorporated advisors who supervise only a few agents, arguing these entities lack the distribution functions typical of true MGAs. They highlight the complexity of self-identification under the principles-based framework and report that many advisors are not yet aware of their potential new licensing obligations. FSRA maintains that licensing requirements depend on the nature of activities performed rather than the size or legal form of the entity, emphasizing the regulatory intent to strengthen consumer protection by improving oversight over agent recruitment, training, and monitoring. The regulator cites supervisory reviews that revealed harmful practices in life and health insurance distribution, justifying the need for enhanced compliance structures across all MGA tiers. The proposed licensing framework mandates designated compliance representatives for all MGAs and requires annual information returns. FSRA also proposed a two-year transition period starting in June 2026, with an MGA license application deadline of November 2027. Fee structures are under consultation, including an initial licensing fee and biennial renewal fees scaled by MGA size. Legal experts note the ambitious scope of FSRA’s proposal, particularly compared to recent MGA regulations in New Brunswick and Saskatchewan. Concerns persist about unintended consequences for advisory practices not previously subject to MGA licensing and the increased regulatory overhead potentially passed on to consumers. Advisors and compliance professionals are advised to enhance documentation, training, and evidence of continuing education to meet new expectations. Contracts between advisors and MGAs may need updating to reflect compliance changes and multiple layers of oversight could emerge under the licensing regime. While the rule aims to clarify MGAs' oversight responsibilities, some uncertainty remains regarding the rule’s practical impact on smaller advisory firms. FSRA’s requirement for MGA licensing regardless of entity size or structure reflects legislative changes to Ontario’s Insurance Act enacted in 2024. The regulator has received approximately 300 comments during the consultation period and is reviewing feedback to possibly adjust the framework. Stakeholders continue to seek legislative and regulatory refinements to better delineate true MGAs from smaller advisory operations, balancing regulatory goals with industry operational realities.