How to buy an insurance brokerage in Nova Scotia: licences, ownership rules and what transfers

If you want to buy an insurance brokerage in Nova Scotia, the rules that matter most sit in Part III of the province’s Insurance Act, under which the Superintendent of Insurance issues licences. Part III licenses agents, lets a licence for classes other than life insurance carry the right to act as a broker, lets a partnership or corporation hold a licence in its own name, and ties each licence to an insurer’s sponsorship. This guide stays with Nova Scotia. For the commercial side of the deal, see the national guide to buying an insurance brokerage, and browse professional services businesses for sale.

The licence is in the name of the corporation

Under section 36(2) of Nova Scotia’s Insurance Act, a licence issued to a partnership or corporation is issued in the name of that partnership or corporation. That matters when you choose a deal structure. If you buy the shares, the corporation named on the licence stays the same; ask the Superintendent whether a change in its ownership must be reported. If you buy assets, you are a different person from the licensed entity, and nothing in Part III says a licence moves with the assets. Ask the Superintendent how each structure affects the licence, and in what order the steps must occur, before you settle on one.

Who needs a licence, and for which class

Section 38(2) says that, subject to the exceptions in that section, no person may act or offer to act as an agent or broker for a class of insurance, whether on their own account or as a member or representative of a partnership or corporation, unless they hold a licence in force for that class. Section 38(1) defines a representative as an officer, employee or shareholder. Section 36(5) says a licence for any class other than life insurance entitles the agent to act as a broker. Check that the seller’s licence covers every class the brokerage actually sells, and that the people who will serve clients are licensed too.

Insurer sponsorship can end the licence

The Act ties a licence to an insurer. Under section 36(8)(c), one of the conditions on which the Superintendent may grant a licence is that the application names the insurer that sponsors the applicant, and section 38(5) says every application is signed by a representative of that insurer. Section 38(7) then says that if an insurer withdraws sponsorship, the licence is cancelled. Under section 38(6), the agent or broker must then return the licence to the insurer forthwith, and the insurer must return it to the Superintendent within ten business days of receipt and give the reason for the withdrawal. For a buyer, each carrier relationship is more than a commercial asset, because the licence itself depends on it. Ask each insurer, in writing, whether it will continue to sponsor the licence after closing, and keep the answers with your closing documents.

The three-year term and notices to the Superintendent

Under section 36(6), a licence expires three years after it is issued, or at such time as the Superintendent may determine, and may be renewed on application unless cancelled or suspended. Section 36(7) lets the Superintendent set an earlier expiry date for a particular licence or class of licence, and section 36(3) makes every licence subject to any limitations and conditions the Superintendent prescribes. Look at the expiry date on the seller’s licence so you do not buy a brokerage whose renewal falls just after closing. Section 47 also requires an insurer that stops dealing with an agent or broker to notify the Superintendent in writing within ten business days, with the reason, and it deems the agent or broker authorized to act for that insurer until the Superintendent receives that notice.

The agency licence and the wider approvals

The Department of Finance’s insurance page lists an Insurance Agency Licence separately from the Insurance Agent Licence, which it says is needed to sell insurance contracts. Ask the Superintendent whether your structure needs the agency licence, the agent licences, or both, and what the application will involve. Two federal items also belong on your list. The Competition Bureau says whether a transaction is notifiable depends on whether certain financial thresholds relating to the size of the parties and the transaction are met. And the Canada Revenue Agency says a seller with a GST/HST account must contact its tax services office to close it.

What to ask the seller for

Use these requests to test the Nova Scotia points above against the seller’s actual records.

• The licence issued in the corporation’s or partnership’s name, with its classes and expiry date.
• Each insurer’s sponsorship confirmation or application signature, and any terms on withdrawal.
• Licences for every person who deals with clients, including officers and shareholders who act as representatives.
• Any correspondence with the Superintendent about conditions, limitations or suspensions on the licence.
• Any notice an insurer has given the Superintendent about ceasing to deal with the agency.