The association representing property and casualty insurance wholesalers in Canada plans to help its members gird for the strong demand for their services in the coming years.

Insurance Portal spoke with Executive Director Steve Masnyk after the recent annual general meeting of the Canadian Association of Managing General Agents (CAMGA).

Elsewhere in the world, particularly in the U.S., U.K. and Australia, the use of wholesalers has grown significantly in recent years. Now it's Canada's turn, Masnyk believes.

Why? Because the same conditions that have stoked the growth of wholesalers elsewhere in the world are now present in Canada. Masnyk adds that P&C insurers greatly appreciate being able to deploy their capital through wholesalers. For one, they no longer have to maintain the underwriting expertise developed over time: That is MGAs’ role.

Masnyk adds that over the past five years, wholesalers have doubled or even tripled their sales in the U.S., U.K. and Australia. However, this is not new business, he points out, but rather a shift in insurance premiums. Insurers have backed away from many risks, which wholesalers have taken over.

There are two reasons for the transfer, Masnyk continues.

First, insurers have been seeing their underwriting activities decline in profitability. Second, low interest rates have driven insurers to shun risks that they view as not worthwhile.

“My colleagues in other countries predict that these risks will not return to insurers once this period is over. These are volumes that will stay with the wholesalers,” Masnyk says.

Can the trend be imported to Canada?  

How can Canadian wholesalers take advantage of this situation? Raising wholesalers’ profile among brokers will be key, the CAMGA executive director says. Education and marketing needs to be done in this area, he adds, because many brokers could use wholesalers’ service more. “We need to give brokers more exposure to the wholesalers’ value-added and product offerings,” he says.

Through its nationwide structure, the CAMGA allows wholesalers to intervene in regulatory matters, particular concerning their status in the market. Currently, wholesalers must contend with a regulatory environment that varies with each Canadian province.

“We would like to see a basic standard of what a wholesaler is,” Masnyk says. He points out that CAMGA has partnered with the Insurance Institute of Canada to build a four-course program leading to a designation for wholesalers, known as CMGA.

CAMGA intends to continue to speak out when there is major news affecting the Canadian P&C insurance market, as it did when Intact Financial Corporation announced that it was acquiring RSA.

Masnyk estimates that wholesalers garner about 10 per cent of the P&C insurance premiums in Canada. However, many of them are growing by 20 to 30 per cent annually, and sometimes as much as 40 to 50 per cent.

Good news for insurers  

Is a clash with insurers inevitable as their premiums migrate to wholesalers? Absolutely not, Masnyk replies. In fact, the opposite is true, he says, pointing out that insurers are very happy to see wholesalers gaining ground because this lets them enhance their own profitability.

“Canadian insurers are increasingly aware that it is more profitable for them to deploy their capital through wholesalers than to do everything themselves in-house or by having a division dedicated to a specific risk class. They put that capital with a wholesaler that knows its market sector well, and find it more profitable at the end of the year. Insurers no longer want to be experts in 200 things. They would rather send those risks to the wholesalers, exposing their capital, but without having to maintain the staff and underwriters that the wholesalers employ.” Masnyk says.