Imminent changes to licensing of insurance intermediaries in New Brunswick

On Nov. 9, 2022, the Financial and Consumer Services Commission of New Brunswick ("FCNB") received Ministerial Approval to adopt Rule INS-001, Insurance Intermediaries Licensing and Obligations, and Rule INS-002, Insurance Fees (collective, "the New Rules"). The Rules will come into force on Feb. 1, 2023 and apply to the licensing of all insurance intermediaries in New Brunswick.

In its Dec. 13, 2022 Notice to the Industry, FCNB calls on current insurance industry licensees to familiarize themselves with the New Rules. FCNB specifies that insurers are expected to communicate with all firms in their distribution networks to ensure the new licensing requirements for agencies, managing general agents, adjusting firms and restricted insurance representatives are understood.

The changes include updates to classes of licenses, a new requirement that adjusting firms, agencies, and managing general agents apply for licenses, and the creation of a new "restricted insurance representative" licence for specified businesses and classes of insurance.

Transition of existing licenses

In its Dec. 14, 2022 Notice to the Industry, FCNB sets out Transition Information for existing and new licensees. All existing General Insurance Licenses are now "agent" licenses. Insurance agent licensees will still be permitted to hold themselves out as a "broker" where the agent is a party to two or more agency contracts with different insurers.

FCNB provides the following information with respect to the transition to new licenses for individuals:

Adjusting firms, agencies, and managing general agents

Rule INS-001 establishes a new licensing regime for insurance agencies (which term includes brokerages), adjusting firms, and managing general agents. Third party administrators are exempted from licensing requirements.

Agencies, adjusting firms, and managing general agents conducting insurance business in New Brunswick have up to 60 days from Feb. 1, 2023 to submit a completed application to obtain a corporate license. To prepare for application for a licence with FCNB, Agencies, Adjusting Firms, and Managing General Agents should familiarize themselves with application criteria set out in Part 8, including:

• Legal name or business name registered with the New Brunswick Corporate Registry;
• Appointment of a designated representative;
  • In the case of a general insurance agency, the designated representative must hold a level 3 general insurance agent licence
  • In the case of a managing general agent, the designated representative must hold one of the following:
    • A level 3 general insurance agent licence;
    • A life insurance agent licence and have been licensed as a life insurance agent for two years;
    • An accident and sickness insurance agent licence and have been licensed as an accident and sickness insurance agent for two years
  • In the case of a life insurance agency, the person shall hold a life insurance agent licence and have been licensed as a life insurance agent for two years;
  • in the case of an accident and sickness insurance agency, the person shall have been licensed for at least two year as either:
    • (i) an accident and sickness insurance agent licence; or
    • (ii) a life insurance agent licence;
  • in the case of an adjusting firm, the person shall hold a level 3 senior adjuster licence
• Errors & omissions insurance in accordance with Part 13 of Rule INS-001.
• A Trust Account in accordance with Part 14 of Rule INS-001.

Restricted insurance representatives

In its Dec. 2019 Consultation Paper on the Incidental Selling of Insurance Restricted Insurance Licensing Regime, FCNB proposed to define "incidental seller of insurance":

"a person that, in the course of selling or providing goods or services to the person's customers or clients, solicits, negotiates, sells or arranges insurance, or offers to sell, negotiate or arrange insurance, that relates to those goods or services."

While the definition of "incidental seller of insurance" does not appear in Rule INS-001, as adopted, the new licensing regime introduces a restricted insurance licence for classes of insurance and businesses that typically engage in the incidental sale of insurance. Part 5 of Rule INS-001 provides that the following applicants may apply for a restricted insurance licence:

1. An automobile dealership, a watercraft dealership, a recreational vehicle dealership, a farm implement dealership or a construction equipment dealership;
2. A customs brokerage;
3. A deposit-taking institution;
4. A freight forwarding business;
5. A funeral provider;
6. A mortgage broker;
7. A sales finance company;
8. A transportation company that provides transportation services for goods;
9. A vehicle rental business;
10. A person engaged on behalf of one of (a) to (i) to solicit, negotiate, sell or arrange insurance.

The fee for a restricted insurance representative licence is based on "the number of employees or other persons acting on behalf of the restricted insurance representative in the business of insurance at the time of the application or renewal." (See, s. 2(4) of Rule INS-002).

A restricted insurance representative must also appoint a designated representative. There is no requirement that the designated representative hold any specific qualifications but FCNB must be satisfied that the designated representative is "suitable."

A restricted insurance representative licence may be issued for any of the following classes or types of insurance:

1. Cargo insurance;
2. Creditor's critical illness insurance;
3. Creditor's disability insurance;
4. Creditor's life insurance;
5. Creditor's loss-of-employment insurance;
6. Creditor's vehicle inventory insurance;
7. Export credit insurance;
8. Funeral expense insurance;
9. Guaranteed asset protection insurance;
10. Mortgage insurance;
11. Rented vehicle accidental injury or death insurance;
12. Rented vehicle contents insurance;
13. Rented vehicle liability insurance;
14. Replacement cost insurance;
15. Travel insurance

Businesses engaged in the incidental sale of insurance should be aware of the new restricted licencing regime. Businesses taking out a new restricted insurance representative licence have 90 days from February 1, 2023 to complete an application with FCNB. Restricted insurance representatives should also familiarize themselves with restrictions with respect to tied selling and disclosure obligations with respect to the sale of insurance products.

With limited exceptions, restricted insurance representatives must take out and maintain errors and omissions insurance in accordance with the minimum limits and terms set out in Part 13 of Rule INS-001. Restricted insurance representatives must also comply with trust account provisions set out in Part 14 of Rule INS-001.

Retailers of portable electronics engaged in the sale of "portable electronics insurance" are exempt from licensing requirements set out in Rule INS-001 so long as specific disclosure obligations are met with respect to the sale of the portable electronics insurance. FCNB may prohibit a person from selling portable electronics insurance if that person otherwise violates the Insurance Act or Rule INS-001 (i.e. engages in tied selling). Portable electronics vendors should familiarize themselves with Rule INS-001.

Applications for insurance intermediary licenses

Applications for licenses pursuant to Rule INS-001 may be made via FCNB's Licensing Portal beginning on Feb. 1, 2023.

Rules INS-001 and INS-002 to replace existing regulations

The New Rules will replace the following existing regulations under New Brunswick's Insurance Act:

• Adjusters Regulation (Regulation 2009-52)
• Agents and Brokers Regulation (Regulation 95-5)
• Licence and Examination Fees for Agents and Brokers Regulation (Regulation 83-197)
• Licence Revival Fee Regulation (Regulation 84-73)
• Life Insurance Agent Licensing Regulation (Regulation 2003-36)

At Gowling WLG, we are committed to monitoring legislative and regulatory developments by industry sector. For any questions you may have about recent changes to licensing of insurance intermediaries in New Brunswick, our Insurance and Professional Liability Practice Group would be pleased to assist.