Financial Services Regulatory Authority of Ontario’s new proposed Life and Health Managing General Agents Rule

Since the threats of new and increased U.S tariffs first emerged in the spring, the Ontario government has looked to reduce trade barriers and improve harmonization for licensing standards between provinces. This has been welcome news for the insurance industry after years of provincial de-harmonization. Beginning in April, Premier Ford signed the first of many interprovincial memoranda of understanding aimed at eliminating trade barriers and improving cooperation between provinces. However, the Financial Services Regulatory Authority of Ontario (FSRA) has chosen a different direction with its proposed Rule 2025-001 – Life and Health Managing General Agents (L&H MGA Rule).

What you need to know

• The goal of the new rule is to introduce oversight of managing general agents, specifically in the life and health insurance sector.
• Changes to the L&H MGA Rule include: a new Tier system intended to delineate certain duties and responsibilities among MGAs; and the removal of the “Shared Responsibility for Outcomes” section of the proposed rule, in favour of more explicit delegation of responsibility on insurers and MGAs.
• Concern from industry remains over key areas of the new rule, including delineation of agent roles and the expansive nature of the rule causing confusion and increasing the regulatory burden on FSRA and industry alike.
• The second consultation period was launched October 20 and ends today, November 19. The target effective date for the new rule is June 1, 2026, followed by a two-year transition period.
• At the same time, FSRA is consulting on related amendments to its Rule 2022-001 – Assessments and Fees (Fee Rule). The consultation notice introduces a $1,000 non-refundable licensing fee for any new L&H MGA application, without distinguishing for size or complexity of the MGA despite the new Tier system introduced in the revised L&H MGA Rule proposal. The separate consultation on the Fee Rule closes on December 19, 2025.

On October 20, FSRA launched its second consultation on the L&H MGA Rule. Comments are due November 19, only 30 days after releasing the significantly revised rule. Typically, FSRA is required under its legislation to provide at least 60 days for comments when consulting on proposed rules. However, in this case, because it is a change to a previously proposed rule, FSRA is only obliged to give “a reasonable opportunity” to stakeholders to provide comments in such a period that FSRA considers appropriate. An abridged 30-day comment period was chosen, likely in part due to an ambitious target implementation date of June 1, 2026. A transition period would follow, which would require L&H MGAs to apply by November 30, 2027, to continue operating in Ontario. Given how significant the changes are, we believe 30 days was too short for meaningful consultation, and a “reasonable opportunity” would have been at least 60 days.

Background

Saskatchewan was the first province to introduce a dedicated class of insurance distribution licensing for MGAs, which became effective in 2020. It was followed shortly after by New Brunswick, which included an MGA licence class in its new Rule INS-001, effective in early 2023.

There are differences between the MGA licensing regimes in Saskatchewan and New Brunswick. For example, Saskatchewan issues four types of MGA licenses: life and accident and sickness (A&S); A&S only; crop hail; or any one or more classes of property and casualty (P&C) insurance—all based on a single list of MGA activities that includes among others, soliciting, negotiating or accepting applications for insurance, countersigning contracts of insurance, and underwriting. New Brunswick, on the other hand, issues MGA licences for A&S, general, life, and travel insurance, based on slightly different lists of activities for life and A&S MGAs compared to general and travel MGAs.

However, both regimes are fundamentally similar in that they aim to capture and license the MGA entity in a measured way, based on certain activities that may have previously escaped insurance agent licensing in those provinces. Both regimes require a Designated Representative to be appointed who meets certain experience requirements and is responsible to supervise and ensure compliance with regulatory requirements. Both regimes also impose the same obligations on MGAs as they do for insurers to establish procedures for screening and ongoing monitoring of agencies or agents with whom they do business. These regimes have generally achieved their purpose and filled this void in distributor oversight, without being overly burdensome for the industry.

Given two relatively successful models to draw from in other provinces, in our view, FSRA should consider more closely following those models as opposed to the much more expansive approach to its L&H MGA Rule that has caused some criticism and confusion in the life and health insurance industry.

Changes to the L&H MGA Rule

Some positive changes made in the revised proposal for the L&H MGA Rule are intended to clarify certain obligations and ease compliance burden. For example, the “Shared Responsibility for Outcomes” section has been removed in the most recent version of the proposed rule, in favour of more explicit delegation of responsibility on insurers and MGAs. The removal of this section appears to be in response to concerns raised by stakeholders during the first consultation, which ended on April 30, 2025, over ambiguity and duplication between the roles of insurers, MGAs, corporate agencies, and individual agents, as well as FSRA’s role given that it already licenses and supervises insurers, corporate agencies and individual agents.

Some stakeholders also expressed concerns about the additional burden of the L&H MGA Rule on smaller and mid-size organizations. In response, FSRA introduced a new three-tier sub-classification for MGAs that attempts to delineate certain duties and responsibilities. A Tier 1 MGA is essentially an MGA that contracts with an insurer, while a Tier 2 MGA is one that does not, and contracts with other MGAs or with agents (i.e., a sub-MGA). Otherwise there are no differences in how they are each defined.

A Tier 3 MGA is essentially defined by exclusion: being an MGA that does not qualify as either a Tier 1 or a Tier 2 MGA. This may capture many entities involved in life and A&S insurance distribution that would not typically be considered an MGA, given how broadly “managing general agent” is defined in the new section 407.2 of the Insurance Act (Ontario). A Tier 3 MGA could include any entity that recruits, screens or provides training to agents, supervises or monitors agents, enters into written agreements with agents, recommends agents to insurers, transmits an insurance application or a policy of insurance between an insurer and an agent, and, as further prescribed by the L&H MGA Rule, also includes supervising, training or monitoring the activities of prospective agents.

In a response given during FSRA’s L&H MGA Rule webinar held on November 5, FSRA conceded that entities may be caught by both the L&H MGA Rule and other licensing regimes as well—namely, the existing FSRA insurance agent licensing regime—and would be expected to comply with, and be licensed under, both overlapping regimes.

While FSRA may have intended this change to respond to certain criticisms, it will likely add more complexity to the already expansive L&H MGA Rule. MGAs attempting to comply with the L&H MGA Rule will now also have to determine which tier they fall within to determine their responsibilities. However, MGAs can also be both a Tier 1 and a Tier 2 MGA at the same time with respect to different products or insurers. Consequently, MGAs will have to differentiate business arrangements depending on which tier each particular arrangement may fall within in order to understand what their requirements are vis-à-vis each arrangement. For example, there are significant differences in the compliance system expectations for Tier 1 MGAs compared to Tier 2 and Tier 3 MGAs.

Other issues with the L&H MGA Rule

As currently drafted, the L&H MGA Rule only applies to entities distributing life or A&S products underwritten by life insurers. It does not include in its scope entities distributing A&S products underwritten by P&C insurers. For example, entities distributing group benefits products, emergency medical travel insurance, and other A&S-only products, which can be underwritten by both life and P&C insurers, will only be caught by the L&H MGA Rule if they contract with and distribute on behalf of life insurers.

The result is that an MGA that only distributes A&S products will be able to avoid the application of the L&H MGA Rule simply by choosing to distribute exclusively for P&C insurers instead of life insurers. This may very well result is an unintended disadvantage to life insurers with respect to A&S-only products, as well as a reduction of competition and access to those products for consumers. Notably, this issue was raised during the first consultation on the L&H MGA Rule earlier this year, but it was not addressed by FSRA in its revised rule or commentary.

Saskatchewan and New Brunswick have captured life and health MGAs, travel insurance MGAs, and P&C MGAs in singular MGA licensing regimes, with criteria and requirements to properly reflect the differences between distribution models. By contrast, FSRA’s goal is to introduce oversight, specifically in the life and health insurance sector. However, in creating such a wide-ranging and complex rule, it risks unintended consequences with respect to parties and insurance products that were never the subject of FSRA’s Insurer-MGA Relationship Review Report published on July 28, 2021, or the CCIR cooperative MGA-focused thematic review that preceded the Ministry of Finance’s consultation and amendments to the Insurance Act in 2024 and the current proposed L&H MGA Rule.

The complexity of the L&H MGA Rule has caused significant concern and confusion in the life and health insurance industry, as well as other A&S industries such as travel insurance. FSRA will likely have to manage thousands of licensing inquiries and applications from various entities that it may not have intended to capture with the L&H MGA Rule, and this may in fact hinder and delay FSRA’s ability to effectively introduce clear and consistent oversight of MGAs involved in the individual life insurance distribution environment. Both FSRA and consumers may be best served by scaling back the complexity of the L&H MGA Rule, and instead taking a similar approach to Saskatchewan and New Brunswick, where the focus is on the MGA itself and clearly delineates MGAs from corporate and individual insurance agents.

The consultation period for the L&H MGA Rule closes on November 19, 2025. As noted above, we believe that the consultation period should have been longer given how significant the changes were to the initial proposal. FSRA had committed in its webinar on November 5 to post responses to questions it had received from stakeholders on its consultation website, however, at the time of writing this article, no questions or responses have been posted.

FSRA Fee Rule Consultation

At the same time, FSRA is consulting on related amendments to its Rule 2022-001 – Assessments and Fees (Fee Rule). The consultation notice introduces a $1,000 non-refundable licensing fee for any new L&H MGA application, without distinguishing for size or complexity of the MGA despite the new tier system introduced in the revised L&H MGA Rule proposal.

The $1,000 licensing fee is what FSRA calls “Phase 1” of its cost recovery for the creation and implementation of the L&H MGA Rule. FSRA has decided to delay its reveal of Phase 2 of the fee structure until 2027-28 in order to gather more information. This means that a L&H MGA, regardless of size and resources, will have to pay a $1,000 non-refundable fee to apply to be licensed, but will likely have to wait to be informed of the balance of FSRA’s costs incurred in developing and implementing this licensing regime.

In addition, the consultation notice refers to a licensing renewal fee to be paid every two years to cover costs associated with renewal application review, and a separate regulatory fee proportionate to the MGA’s size and sophistication to cover the cost of FSRA’s supervisory work. Of course, this is in addition to any existing corporate agency and individual agent licensing fees that may also apply, since, as noted above, FSRA will require entities caught by both the new MGA licensing regime and the existing agent licensing framework to comply with both regimes.

The separate consultation on the Fee Rule closes on December 19, 2025.