The fallout from the collapse of TruStar Underwriting last year continues to reverberate across Canada’s insurance industry, sparking renewed debate about governance, due diligence, and the need for – or limits of – regulation.
The topic took centre stage during a panel of managing general agent (MGA) and broker leaders at the National Insurance Conference of Canada (NICC) in Gatineau, where participants reflected on what the industry should take away from one of its most unsettling recent failures.
Pete Tessier (pictured left), president of the Canadian Association of Managing General Agents (CAMGA), set the tone with a wry reference to the insurer’s downfall. “Last year we had a major disturbance in the insurance force and problems coming from TruStar Underwriting,” he told the audience. “What do you think the insurance industry should be considering in the aftermath of this event?”
Stephen Stewart (pictured centre right), president and CEO of Stewart Specialty Risk Underwriting, argued that the central issue was not the absence of regulatory guardrails, but the lack of rigor within organizations themselves.
“What needs to be considered is the internal governance procedures and due diligence procedures of anyone who’s dealing with an MGA,” Stewart said. “MGAs themselves need to have rigorous internal governance procedures that are transparent and can be shown to their partners, brokers and carriers alike.”
In his view, the sector should start with discipline at operational level. “All of the stakeholders in this segment need to know what the others are doing. And they really need to be diligent about it,” he added.
HSB Canada’s Tammy Parris (pictured centre left), agreed, stressing that trust between carriers and MGAs cannot be taken for granted. “We have a fully documented process where we have forms that we fill in, we sit down, we talk,” she said. “Sometimes, if you know a player on the other side and it’s not a right fit, then it’s not a right fit. You don’t have to go ahead with that deal.”
But Parris cautioned that diligence does not end once an MGA is onboarded. “We can’t take [MGAs] for granted. We’ve got to keep in touch with them. We have to do constant due diligence checks. We need to do our underwriting audits to make sure they’re staying within their guidelines.”
According to Sean Duggan (pictured right), senior vice president of special risks and claims at KRGinsure, brokers must also hold themselves accountable. The TruStar episode, he said, underlined the need for a standardized framework for evaluating MGA partners.
“You need a codified due diligence protocol that’s defensible, that’s multifaceted,” Duggan said. “Are there any solvency issues? How is the trust account managed? Who are the carriers providing capacity support?”
He noted that many MGAs have proactively reached out to brokers since the collapse to reassure them about governance and capacity. “Speaking from our perspective, it’s being taken more seriously and more obviously than ever before,” Duggan added.
The TruStar case inevitably raised questions about whether MGAs are subject to sufficient oversight, or whether new rules are needed to prevent a repeat. Stewart pushed back against the idea that regulation is a cure-all.
“The question really is, what are you looking to regulate, and why are you?” he said. “Regulations need to be in place to protect the stakeholders, ultimately the consumer of the product, which is the public.”
He noted that MGAs are already indirectly regulated through carrier obligations, citing OSFI’s Guideline B-10 as one example. Fraud, meanwhile, falls squarely under the Criminal Code. “No amount of regulation is going to stop somebody from breaking the law,” Stewart said.
Duggan highlighted inconsistencies in oversight. “We have large national brokers who run their own programs with underwriting authorities. Yet their underwriters are not regulated, while MGAs are being required to license across the way,” he said. “How do we manage that sort of conflict of who’s licensed and who isn’t?”
For him, the better answer lies in stronger, industry-led diligence rather than new layers of bureaucracy. “We can’t judge the entire MGA landscape by one failure. We need to be mindful about overreach and overreaction,” Duggan said. “Maybe a more rigorous due diligence protocol from all stakeholders is a better initial answer.”
Parris noted that compliance is a moving target, with new rules arriving quickly at both the federal and provincial level. That reality, she said, puts added responsibility on insurers to work alongside MGA partners. “We’re still trying to track all the regulatory changes – there are so many coming so fast,” she said. “Once we’ve signed the agreement, we also want to say, okay, how are you adapting to this? What do you need from us to be compliant with new regulations? How can we help you do that?”
Taken together, the panelists suggested that the TruStar collapse should not be seen as evidence of systemic weakness in the MGA model. Instead, it was a wake-up call for the sector to double down on transparency, enforce diligence throughout the life of partnerships, and ensure consistent treatment across the industry.
For Stewart, the lesson is that rules alone cannot guarantee good conduct. For Duggan, it is that brokers must be as vigilant as carriers in evaluating partners. And for Parris, it is that trust and compliance require constant work and collaboration.
