Proposed new broker supervision rules draw mixed reviews

Proposed changes to broker supervision rules in Ontario may expand the pool of people who can regulate junior brokers in any brokerage, but it could also lead to a reduction of investment by new entrants in the province’s P&C insurance market, insurance law firm Dentons cautions.

Registered Insurance Brokers of Ontario (RIBO), the broker self-regulating body in Ontario, proposed new rules for broker supervision in November. The regulator’s public consultation period on the proposals ends Jan. 31, 2026.

Driving these changes is the fact that many brokers work away from the office, meaning principal brokers (PBs) who are ultimately responsible for supervision under current rules may no longer be supervising brokers onsite in the office.

“RIBO’s legislation holds PBs accountable for ensuring compliance of the firm and individual licensees with the [laws and regulations regarding broker supervision],” RIBO’s consultation paper reads. “When the legislation was drafted, it was assumed that PBs would either be owner-operators or full-time employees of their firm and be personally on location.

“This meant that firms and employees would receive direct supervision from their PBs in a monitored environment.

“New technologies, regulatory developments and business models have disrupted this model. While technologies and business models enabled new modes of supervision, it has introduced significant challenges.

“Firms now employ more licensees than ever before, have office locations distributed across the province and operate in a far more complex regulatory environment than when RIBO was first established.”

As a result, RIBO says, “it is becoming difficult for a single PB to manage these risks or provide direct supervision to the employees of the firm.”

To take the pressure off principal brokers, RIBO is proposing to decentralize supervision of junior Level 1 brokers.

What RIBO proposes

Among its changes, RIBO is proposing allowing Level 1 brokers who have been licensed for 36 or more months (along with Level 2 or Level 3 brokers who have been licensed for at least 24 months) to supervise other Level 1 brokers with less tenure. RIBO would develop minimum standards and guidance for these supervisors.

RIBO is proposing one supervisor for every 20 employees in a brokerage. Plus, RIBO wants brokerages to have policies and procedures in place for remote supervision.

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“It must be equivalent to the level of supervision that would have been present if the PB was providing supervision in person,” RIBO’s consultation paper states of remote supervision. “The PB will be required to demonstrate remote supervision policies and procedures they have established when requested by RIBO.”

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Ontario’s brokerages will likely welcome this part of the proposals, according to an email bulletin from the law firm Dentons. But the devil will be in the details about what’s required of the supervising brokers, including the Level 1 and Level 2 supervisors.

“It is not clear from the information published by RIBO to date whether supervising brokers, under the proposed changes, will be subject to the same regulatory obligations and standard of care as a principal broker,” says a Dentons online post authored by Laurie LaPalme, Marisa Coggin, and Jesse Collins-Swartz. “Depending on the obligations placed by RIBO on supervising brokers under the proposed changes, this requirement will necessitate more vigilance from an operational and compliance standpoint to ensure that proper oversight is in place.”

Impact on new entrants

While the industry may welcome the decentralization of supervision, it may not agree with RIBO’s proposal to limit the number of unaffiliated firms a single principal broker can supervise.

RIBO suggests a single principal broker cannot supervise more than three firms, when such firms are unrelated or unaffiliated (i.e., separate legal entities each holding a RIBO licence that do not have common ownership).

The proposal is partly in response to new entrants into the Ontario P&C market that contract RIBO-licensed brokers to help establish a new office in the province.

“A business model has…emerged over time where non-owner qualified principal brokers are offering supervision services on a contractual basis to several unrelated RIBO entities,” RIBO’s consultation paper states. “Such multi-firm PBs fill a much-needed gap in supervision for a firm on a temporary basis or for the purpose of fulfilling registration requirements during the start of phases of the business. In other cases, however, this model of supervision is being employed long term.”

One unintended effect of limiting the number of RIBO-licensed ‘hired guns’ from helping out new entrants may be to discourage investment in the Ontario market, as the Dentons bulletin explains.

“[T]he proposed limitation on the number of unaffiliated entities that can share one principal broker may do more harm than good,” the Dentons notice reads. “It may result in reduced foreign investment and competition in the Ontario property and casualty insurance market.

“New entrants do rely on principal brokers on a short-term, contract basis (when first establishing their respective businesses in Canada), as such new entrants (who generally hold insurance intermediary licensing outside of Canada and have significant insurance experience) are often not entitled to licensing equivalency in Ontario and are required to sit or write examinations, take additional courses, and go through the entire RIBO licensing and seasoning process.”

David Gambrill

David has twice served as Canadian Underwriter’s senior editor, both from 2005 to 2012, and again from 2017 to the present.