MGAs: AMF puts off regulatory reform for nowBy Alain Thériault | June 21 2012 02:46PM
The Quebec securities regulator, the Autorité des marchés financiers (AMF), says it welcomes Quebec Managing General Agencies’ proposals that they be granted legal status that would allow them to supervise their advisors more closely (see article in The Insurance and Investment Journal, May 2012, p. 16). For the moment, however, the regulator has dismissed the idea of any regulatory reform.
A Working Group of MGAs in Quebec submitted its proposal on how MGAs should be regulated on May 10. The document was presented simultaneously to the AMF, the Chambre de la sécurité financière and the Canadian Life and Health Insurance Association (CLHIA).
However, the reforms sought by the working group are not going to be put into effect anytime soon. In an interview, the AMF’s superintendent of client services, compensation and distribution, Patrick Déry, said he welcomed the initiative. But he stated that he did not want to fix what is not broken.
“People in the industry, serious people, have taken the trouble to submit a well fleshed-out document with a genuine desire to improve supervision and public protection. However, it should be noted that at the moment, the regulations are not deficient. MGAs are all registered in Quebec. It is not as if an entire section of the distribution chain was escaping supervision.”
Single agent firm
In their brief, the Quebec MGA working group suggested that their companies be recognized legally as “agent firms”. This status would allow them, among other things, to better supervise each of their advisors. It would, in effect, flow all of an advisor’s individual insurance business through a single agent firm.
What the working group is proposing is a different method of regulation...a way that consists of significant reforms, not just minor adjustments – the kind of adjustments that require a great deal of thought and several consultations,” observes Mr. Déry.
However, harmonization is a major challenge for the AMF and other Canadian regulators. “People say that there are a lot of supervisory frameworks, different systems and approaches. With each new approach, we open ourselves up to this criticism,” comments Mr. Déry “We do not feel that changes to supervisory regulations for MGAs in Quebec are called for in the near future.”
Instead, he believes that the working group’s proposals on MGA supervision should be included as part of the Canadian Council of Insurance Regulators (CCIR) consultation process. “It is important to know what other Canadian regulators think,” says Mr. Déry.
He does not, however, rule out the Quebec MGAs’ recommendations. “There are certainly facts to consider in their brief, but time is required to do so.”
In its document, the MGA working group emphasizes self-regulation. They also believe that the AMF should delegate the responsibility of supervising agent firms to the Chambre de la sécurité financière and focus on policy making instead.
Luc Labelle, president and CEO of the Chambre, says he applauds the MGAs’ desire to clarify their role as the eyes and ears of insurers and regulators, something they are doing with consumer protection in mind. “The fact that the managing general agents want to be supervised and recognized by the law gives them rights but also obligations to the public. I see nothing in this proposal that runs counter to the interests of the consumer,” he said in an interview.
As for the working group’s proposal that MGAs fall under the Chambre’s jurisdiction, Mr. Labelle recognizes the value of self-regulation. “It is a system that has proven itself in Quebec and elsewhere. It allows the regulator to exercise broader supervision, as is done elsewhere in Canada in securities and in mutual funds,” he comments.
Mr. Labelle, however, notes that the next move is not the Chambre’s to make. “If the AMF wants to hold a discussion on the subject, the Chambre will be happy to participate,” he said.