The dramatic collapse of TruStar Underwriting last year has sent shockwaves through Canada’s insurance industry, exposing deep-seated vulnerabilities in governance and oversight, particularly within the managing general agent (MGA) sector, which plays a pivotal role as intermediaries between insurers and brokers. This unsettling event has triggered urgent conversations among industry leaders about the need to strengthen internal controls, enhance transparency, and rebuild trust across the market. At the National Insurance Conference of Canada (NICC) held in Gatineau, a panel of experts delved into the fallout, offering critical insights into how such failures can be prevented moving forward. Moderated by Pete Tessier, president of the Canadian Association of Managing General Agents (CAMGA), the discussion brought together diverse perspectives from insurers, brokers, and MGAs, all united by a common goal: to learn from this debacle and fortify the industry against similar risks. The lessons drawn from this incident are not just warnings but a blueprint for a more resilient future in insurance.
Unpacking the Governance Gap
The core issue spotlighted by the NICC panel was the glaring deficiency in internal governance that contributed to TruStar’s downfall. Stephen Stewart of Stewart Specialty Risk Underwriting articulated a widely shared view that the problem wasn’t an absence of regulations but rather a failure to implement robust internal practices within MGAs. He emphasized that these entities must establish clear, verifiable procedures to ensure accountability at every level of operation. Without such discipline, the partnerships between MGAs, brokers, and insurers remain vulnerable to breakdowns that can ripple across the market. Stewart’s perspective serves as a stark reminder that governance isn’t merely a formality—it’s the bedrock of trust in a high-stakes environment where missteps can have far-reaching consequences. The industry must recognize that external oversight alone cannot substitute for strong internal frameworks designed to prevent lapses before they escalate into crises.
Another key point raised during the discussion was the urgent need for transparency as a cornerstone of effective governance. MGAs are expected to openly share their operational and governance structures with their partners to build and sustain confidence. This isn’t just about meeting minimum standards but about demonstrating reliability in a sector where trust is currency. The panel agreed that transparency must be proactive, not reactive, meaning MGAs should consistently provide evidence of their adherence to best practices rather than waiting for issues to surface. This approach could have potentially mitigated the risks that led to TruStar’s collapse, as partners would have had clearer visibility into operational weaknesses. The focus on openness also extends to how MGAs communicate with insurers and brokers, ensuring that all parties are aligned on expectations and responsibilities. Only through such candid exchanges can the industry hope to prevent the erosion of trust that follows high-profile failures.
Due Diligence: A Non-Negotiable Priority
Turning to the critical role of due diligence, the panel underscored that trust between carriers and MGAs cannot be taken for granted but must be reinforced through rigorous, ongoing processes. Tammy Parris of HSB Canada highlighted that due diligence should never be a one-time exercise but a continuous commitment involving regular audits and structured evaluations to ensure compliance with underwriting guidelines. This persistent scrutiny is vital to identify potential red flags before they evolve into systemic issues, as seen in the TruStar case. Parris’s insights point to a broader industry need for carriers to actively monitor their MGA partners, not just during onboarding but throughout the relationship. Such diligence ensures that operational standards remain high and that any deviations are addressed promptly, safeguarding the integrity of the insurance supply chain against unforeseen disruptions.
Complementing this view, Sean Duggan of KRGinsure brought attention to the shared responsibility of brokers in upholding due diligence standards. He advocated for a standardized protocol to evaluate MGAs, focusing on critical factors like financial solvency and trust account management. By adopting a consistent, defensible process, brokers can better shield themselves and their clients from the risks associated with unreliable partners. Duggan’s call for codification of these practices reflects a growing recognition that all stakeholders in the insurance ecosystem must play an active role in risk mitigation. This isn’t just about protecting individual interests but about strengthening the collective resilience of the market. The panel’s emphasis on due diligence as a collaborative effort suggests that preventing future collapses requires a unified approach, where each party contributes to a culture of vigilance and accountability that leaves no room for complacency.
Navigating the Regulatory Landscape
The topic of regulation sparked a nuanced debate among the panelists, with a general consensus that adding more rules might not be the most effective solution to the challenges exposed by TruStar’s failure. Stephen Stewart noted that existing frameworks, such as OSFI’s Guideline B-10 for carriers, already provide mechanisms for accountability that, if properly utilized, can address many governance concerns. He cautioned against the temptation to over-regulate, arguing that no amount of legislation can fully prevent intentional misconduct. Instead, the industry should focus on leveraging current tools while fostering a culture of self-regulation. This perspective highlights a critical balance: while oversight is necessary, excessive bureaucratic intervention could stifle innovation and burden smaller players without necessarily enhancing protection. The discussion revealed a preference for practical, industry-driven solutions over reactive policy changes.
Further exploring this theme, Tammy Parris pointed to the rapidly evolving regulatory environment at both federal and provincial levels, which adds complexity to compliance efforts. She urged carriers to take a proactive role in supporting MGAs as they adapt to new requirements, emphasizing that collaboration is key to navigating this dynamic landscape. Meanwhile, Sean Duggan raised concerns about inconsistencies in current oversight, such as the lack of uniform licensing standards for underwriters across different segments of the industry. These disparities create uneven playing fields that can undermine trust. The panel’s collective view suggests that while regulation has a place in consumer protection, the immediate priority should be on strengthening internal practices and fostering partnerships. By aligning on shared standards and addressing gaps collaboratively, the industry can build a more robust defense against future vulnerabilities without relying solely on external mandates.
Building a Path to Renewed Trust
Reflecting on the broader implications of TruStar’s collapse, the panel saw it not as an indictment of the entire MGA model but as a wake-up call to reinforce best practices. Many MGAs have already taken steps to reassure brokers and insurers by enhancing transparency and demonstrating their governance capabilities. This proactive response indicates a heightened awareness across the sector about the importance of maintaining credibility in the aftermath of a high-profile failure. The discussion revealed an encouraging trend: rather than pointing fingers, stakeholders are focusing on constructive dialogue to rebuild confidence. Sustained collaboration, where MGAs, brokers, and carriers align on consistent standards, emerged as a critical strategy to restore faith in the system. This collective effort underscores the industry’s capacity to adapt and grow stronger from adversity when guided by a shared commitment to improvement.
Looking ahead, the path to renewed trust lies in actionable reforms that prioritize operational rigor and accountability. The NICC panel’s insights point to a future where transparency isn’t just an ideal but a measurable standard upheld by all parties. Carriers must continue to invest in supporting MGAs through training and resources to meet evolving demands, while brokers should refine their evaluation processes to ensure only reliable partners are engaged. Additionally, industry-wide forums like the NICC can serve as vital platforms for ongoing dialogue, allowing stakeholders to address emerging challenges before they escalate. By embedding these lessons into everyday practices, Canada’s insurance market can transform a moment of crisis into a foundation for long-term stability. The journey forward demands vigilance, partnership, and an unwavering focus on trust as the cornerstone of every transaction and relationship within this vital sector.
