MGA conference talks trust following TruStar’s receivership

Good corporate governance and compliance controls can help ensure trust in the MGA channel following the fallout from the TruStar Underwriting legal case, speakers suggested last week at an industry conference.

In December 2024, MGA TruStar accused its former CEO, two unnamed defendants and two unnamed corporations of jointly scheming to defraud the company and its clients of $6 million. The MGA accused the former chief executive of selling policies to policyholders without placing those policies with any insurance company.

The allegations have not been proven in court.  

At the Canadian Association for Managing General Agents (CAMGA) conference in Toronto June 12, speakers discussed a variety of topics affecting the MGA space, including regulation, carrier and broker perspectives, and ‘hot topics’ such as the TruStar case.

In the broker panel discussion, moderator Pete Tessier, CAMGA president and co-founder of MGA Taycon Risk, asked what MGAs can expect from brokers in terms of due diligence and information-sharing to ensure trust in MGAs.

Dual authority

“Do you have compliance and governance controls and dual authority on the trust account?” asked Charles Quenneville, CEO at Platform Insurance. He questioned whether single person authority on TruStar’s trust accounts could’ve been a problem.

Quenneville said there are numerous compliance “checks and balances,” including basic information such as who’s on your delegated underwriting authority binders.

“Just who are the insurers?” he asked. “What percentage are they subscribing, and what limit are they going to do.

“Just so we can put a box around it and then we can actually communicate that to our team and say, ‘Hey, here’s what ABC MGA is doing. Here’s the product they have.’ It’s helpful to us to know that information, ownership structure at least.”

Neil Mitchell, formerly with Marsh, and now an MGA and insurtech advisor, said it’s incumbent on the broker to know exactly who the insurer on record is, and the percentage of the risk they are ceding, along with their AM Best rating. This isn’t from a regulatory compliance standpoint; it’s a principle of good corporate governance, he said.

“That broker also needs to know who owns that MGA,” Mitchell said. “It doesn’t need to know the financials, it doesn’t need to know the share structure, but it needs to know who the owner of that business is. It could be a global insurance broker, it could be an insurance company, it could be a [private equity] firm, but that knowledge is important.”

CAIB New Edition 1.0 – a New Standard for Broker Education Image

Insights Paid Content

CAIB New Edition 1.0 – a New Standard for Broker Education

Preparing brokers to navigate an increasingly complex insurance landscape.

By 

Sponsor Image

E&O, fraud protection

It’s also important to understand what E&O protection is in place, as well as “the fraud protection that is holding that transaction firm and true,” Mitchell said.

Quenneville agreed about not asking about financials, but said the broker does need to know who owns the MGA.

“It’s basic stuff we actually get from insurance companies,” he said. “We get it all. We sign a contract; a lot of information is already built in.”

Quenneville and panellist Sean Duggan, senior vice president of special risks and claims at KRGinsure, are both on the Toronto Insurance Council (TIC) board. Quenneville estimated fallout from the TruStar incident directly impacted three-quarters of the board and prompted “a lot of good dialog and discussion.”

Consideration around, for example, the delegated underwriting authority on binder was always there, but “it’s just been a reminder to us now that we need to be trickling down our efforts for good corporate governance as brokers,” Quenneville said. “Who was on that casualty binder? Who were the three or four markets? And you have proper files on that,” he said as an example. “This is all sort of now coming to the forefront for brokers.”

TIC is about to launch a survey to the MGA community that will outline what’s needed for compliance, Quenneville said. “So, rather than having 12 different brokers ask all the MGAs in the Canada the same information, we’ve decided at TIC…to launch…questions that we need for compliance,” he said. “We need that information to move forward and continue to do business with MGAs.

“The idea is to be efficient about it…All we’re trying to do is make it a little more streamlined.”

Duggan said MGAs “should probably expect more rigorous, ongoing, proactive due diligence, [and] more transparency as much as possible. We don’t want to be in a reactive situation again.”

Editor’s note: An earlier version of this article included a quotation from Charles Quenneville, CEO at Platform Insurance that has since been updated to clarify details about single authority on trust accounts. The article has been amended accordingly.

Jason Contant

Jason has been an award-winning journalist with Canadian Underwriter for more than a decade, including the past three years as associate editor and, before that, as digital editor for seven years.