How to buy an insurance brokerage in New Brunswick: licences, ownership rules and what transfers

An insurance brokerage is not a business you can simply buy and start operating, because the right to place insurance in New Brunswick sits in a licence. The Financial and Consumer Services Commission of New Brunswick (FCNB) states that any person who carries on the business of an insurance intermediary in the province must hold a valid licence issued under the province’s Insurance Act; under section 352 of that Act, the Superintendent of Insurance issues it. For a brokerage the licence that matters is the agency licence, held by the firm, alongside separate licences for the people who sell. This guide covers what that means when you buy. For the national picture, see buying an insurance brokerage in Canada.

Who regulates insurance brokerages in New Brunswick

The Insurance Act of New Brunswick defines the Superintendent as the Superintendent of Insurance appointed under the Financial and Consumer Services Commission Act, and FCNB publishes the licensing process. FCNB says a licence is required for all insurance business the intermediary conducts, whether in person, in writing, over the telephone or online, and whether or not the intermediary lives in the province. FCNB lists firm licence types, including agency and managing general agent, separately from individual licence types, and it keeps searchable databases of agencies and of individual agents. Check the seller’s agency on that database before you go further.

Firm licence and individual licences are different things

Section 352(6) of the Act says the officers, partners or employees of an agency who act as agents must each hold an agent licence, separate from the licence held by the agency. In a purchase, then, you are dealing with at least two layers: the firm’s agency licence and the licences of the people who serve its clients. Ask for a list of everyone who sells or services accounts, the class of licence each holds and when each expires. Section 352(29) says that, subject to section 352(25), a licence expires at a time fixed by regulation unless it is cancelled automatically under section 352(9), (14) or (24) or is revoked or suspended first, so renewal dates are worth knowing before closing.

What the agency licence is tied to

Under section 352(10), the licence is issued in the name of the partnership, corporation or sole proprietorship that applied. Section 352(9) says that if a licensed partnership terminates before the licence expires, the licence is cancelled, and section 352(14) says that if a licensed corporation’s charter is dissolved or revoked, the licence is cancelled. The sections read do not set out a procedure for moving an agency licence to a different entity. FCNB’s Rule INS-001, which FCNB says came into effect on 1 February 2023, requires the designated representative of a licensed agency to notify the Superintendent, in a form the Superintendent provides, within 10 days of a change of ownership of the firm and of the departure of any licensed individual. So whether you buy shares in the licensed corporation or assets from it, confirm with FCNB, before signing, how the licence and its terms and conditions will be dealt with.

Insurer sponsorship decides whether the licence survives

Section 352(21) says the holder of an agency licence shall be sponsored, for the term of the licence, by an insurance company that holds a valid licence for the same class of insurance. FCNB repeats that agent and broker applications must be sponsored by an insurer licensed to conduct the same type of insurance business in the province. Under section 352(24), if an insurer terminates the sponsorship, the licence is immediately cancelled. A brokerage’s relationships with its insurers therefore matter to its licence, not only to its business. Section 351.06 adds that an agency shall not hold itself out as a brokerage unless it is a party to two or more subsisting agency contracts with different insurers and none of those contracts requires it to sell only one insurer’s insurance. Ask the seller for each insurer agreement, check whether any of them is exclusive, and ask each insurer whether it would continue sponsoring the firm under your ownership.

Who may hold an agency licence, and conditions on it

Section 352(2) says the Superintendent shall issue or renew an agency licence to a partnership, corporation or sole proprietorship that, among other requirements, has satisfied the Superintendent that it is suitable to hold a licence and that the proposed licence is not for any reason objectionable. Section 352(12) says an agency licence shall not be issued to a corporation if it appears to the Superintendent that the application is made to act as agent wholly or chiefly in the insurance of property owned by the corporation or its shareholders or members, or in placing insurance for one person, firm, corporation, estate or family. If you plan to hold the brokerage through your own corporation, keep that provision in mind when you design the structure. Section 352(17) lets the Superintendent restrict a licence at any time by imposing terms and conditions, after giving the holder an opportunity to be heard under section 352(19), and section 352(18) requires the holder to comply, so ask the seller whether any apply.

The designated representative and other firm requirements

Section 70 of Rule INS-001 says an agency shall have a designated representative, maintain errors and omissions insurance as the Rule requires, and have an agency contract with at least one insurance company licensed to carry on business in New Brunswick. Under section 73, a corporation’s designated representative must be a director, officer or management employee of the firm, and under section 74 the designated representative of a general insurance agency must hold a level 3 general insurance agent licence. Section 75 says the firm shall satisfy the Superintendent that the person it nominates is suitable. Section 71 says that if an agency licence lapses or is revoked or suspended, the licence of any agent acting on its behalf is automatically suspended. Ask the seller who the designated representative is, and whether that person will stay with the firm after the sale.

What to ask the seller for

• The current agency licence, any terms and conditions on it, and the FCNB record showing its status and expiry.
• The list of individual agents and their licence classes, so you can confirm each is separately licensed under section 352(6).
• Every agreement with a sponsoring insurer, and the insurer’s written position on continuing sponsorship after the sale.
• Corporate records and the ownership history of the licensed entity, to see which entity holds the licence and to test its business against section 352(12).
• The name of the designated representative and evidence of the errors and omissions insurance the firm maintains under Rule INS-001.
• Any correspondence with FCNB, including undertakings, hearings or notices about the licence.

Once those documents are in hand, speak to FCNB about the sale before you sign, and compare the brokerage with other professional services businesses for sale only after the licence question is answered.