How to buy an insurance brokerage in British Columbia: licences, ownership rules and what transfers

In British Columbia, insurance sales are licensed under the Financial Institutions Act, and the body that issues the licences is the Insurance Council of British Columbia. The Act speaks of insurance agents and salespersons rather than brokerages, so a business you would call a brokerage is, for legal purposes, a licensed agency. What follows applies only in British Columbia. This guide covers what BC requires of a licensed agency, how the nominee works, what the Act says about transfers, and what to confirm with the seller. For the national picture, see buying an insurance brokerage in Canada.

Who licenses insurance agents in British Columbia

The Financial Institutions Act provides that a person must not act in British Columbia as an insurance agent or insurance salesperson unless licensed as such, subject to a person or class of persons the regulations exempt. The Act establishes the Insurance Council of British Columbia, constituted as a corporation under that name. The Council’s website sets out the qualifications and requirements for individuals, partnerships and corporations applying for a licence. Its licensing pages list corporate or partnership agency licences by class of insurance, and general insurance has its own section. Check which class the target agency holds, because a licence is issued for one or more prescribed classes and states the class it covers. The Act also provides that an applicant delivers to the council an application that fulfills the requirements of the council’s rules, and that a licence is issued in accordance with those rules. A buyer who needs a new licence, or a change to an existing one, should read the council’s rules for the class in question, not only the Act.

The nominee who exercises the licence

When the licensee is a corporation or partnership, the Act requires it to nominate an individual who is a licensed insurance agent or licensed insurance adjuster approved by the council. That individual exercises, on the entity’s behalf, the rights and privileges the licence confers. The Act also provides that no one other than the licensee, a person named in the licence as a nominee, or an individual to whom the rights have been delegated under the Act’s delegation provision may exercise them. If the seller is the nominee and will leave at closing, ask the council and your lawyer what that means for the licence. Ask who is nominated now, who would be nominated afterward, and whether the council has approved that person. Because the nominee must be a licensed insurance agent or licensed insurance adjuster approved by the council, a buyer who is not licensed cannot fill the role.

What the Act says about transfers

The Act defines an applicant to include a person applying for a transfer of a licence, and it contemplates the council consenting to one. Before issuing a licence or consenting to a transfer, the council may conduct an investigation and may require the applicant to provide additional information, documents or verification that the council considers necessary to evaluate the application. Whether the council does either is a matter for its discretion under the Act. Whether a given deal needs a transfer, a change to the nominee, or something else turns on its structure, so put that question to the council and to your lawyer before the agreement is signed. Ask your lawyer whether the agreement should make closing conditional on the council’s decision, since the Act lets the council investigate and ask for further documents before it consents.

Commissions and unlicensed people

The Act has a rule to check if any payment to the seller after closing is tied to commissions. An insurer, officer, agent or employee of an insurer, insurance agent or insurance salesperson must not pay or allow to be paid, or offer or promise, a commission or compensation to a person who is not an insurance agent licensee or insurance salesperson licensee for acting as an insurance agent or salesperson in British Columbia, or for the other purposes the section lists. The section has exceptions: an insurance agent licensee may pay a fee or a portion of a commission to another insurance agent licensee for business referred to it, and, despite the prohibition, a commission or compensation may be paid to a person or class of persons prescribed by regulation. If the seller will stop being licensed on closing, have your lawyer check how any ongoing payment to that seller fits within the section.

What to ask the seller for

• The agency’s licence from the Insurance Council of BC, showing the classes of insurance it is licensed for.
• The name of the current nominee and the council’s approval of that person.
• The licences of every salesperson and adjuster who works in the agency, to see who would stay and who would need new licences.
• Any correspondence with the council, including conditions on the licence or discipline involving the agency or its people.
• The draft terms for payments to the seller after closing, so they can be reviewed against the Act’s commission rule.

If the business also holds other kinds of professional or corporate permissions, licences and permits in a BC business sale covers the wider checklist.