Not a Broker, Not an Insurer: Welcome to the world of MGAs

• Manisha Ghosh and Abhishek Kumar Namdev | finserv@vinodkothari.com 

Introduction

The insurance industry globally has witnessed the emergence of several hybrid operating models that do not fit neatly within traditional regulatory classifications. One such model is that of the Managing General Agent (‘MGA’), an entity that performs significant insurance functions such as underwriting and risk assessment, pricing of insurance products, binding of policies, etc on behalf of the insurer.

While MGAs are well-recognised in mature insurance markets such as the USA, UK and Canada, their position under Indian insurance law has recently begun to take shape. An MGA typically acts as a middleman between the insurer and the insured.

In this article, we dive into the functioning of an MGA and how it differentiates from the existing insurance intermediaries, prevalent in the insurance sector in India. 

Concept and nature of a Managing General Agent (MGA)

Under Indian insurance law, until December 2025, there was no explicit recognition of MGAs as a distinct category of insurance intermediary, however, with the enactment of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 (‘Amendment Act’), which seeks to modernise the regulatory framework for the Indian insurance industry. The Amendment Act explicitly includes MGAs within the definition of “insurance intermediary”. Refer our article titled: ‘The Sabka Bima Sabki Raksha Insurance Bill: The 2047 Vision in action’

While the Amendment Act includes MGAs under the definition of intermediaries, it does not outline the scope of functions that may be undertaken by an MGA in India. 

Generally in the global market, MGA is an insurance intermediary that operates pursuant to delegated authority granted by an insurer. The Managing General Agents Act (‘MGA Act’) adopted by National Association of Insurance Commissioners, USA defines MGA as, 

1. “Negotiates and binds ceding reinsurance contracts on behalf of an insurer or manages all or part of the insurance business of an insurer—including the management of a separate division, department or underwriting office—and who acts as an agent for such insurer whether known as a managing general agent, manager or other similar term or title. 
2. With or without authority and either separately or together with affiliates, directly or indirectly produces and underwrites an amount of gross direct written premium equal to or greater than 5% of the policyholder surplus in any one quarter or year, as reported in the last annual statement of the insurer. 
3. Adjusts or pays claims in excess of $10,000 per claim on behalf of the insurer.”

European Union’s Insurance Distribution Directive (‘IDD’):

Under the EU’s IDD a Managing General Agent (MGA) is not defined by a unique, separate legislative term. Instead, they are categorized under the broader legal definition of an insurance intermediary. 

Insurance Intermediary as defined under Article 2(1)(3) of IDD: 

XXX

‘insurance intermediary’ means any natural or legal person, other than an insurance or reinsurance undertaking or their employees and other than an ancillary insurance intermediary, who, for remuneration, takes up or pursues the activity of insurance distribution;

XXX 

Unlike conventional agents or brokers whose role is primarily limited to solicitation or marketing, placement of insurance business, an MGA is authorised to perform functions that are traditionally within the domain of the insurer. Such functions typically include:

• underwriting and risk selection,
• pricing of insurance products,
• binding of policies,
• issuance of policy documentation and endorsements, and
• claims handling, subject to specified limits.

In mature markets like the United States, MGAs typically perform underwriting, pricing, binding coverage, and often claims management on behalf of insurers under delegated authority, but do not hold the insurance risk on their own balance sheet, that risk remains with the insurer. In these mainstream models, MGAs earn underwriting commissions and contingent/ profit commissions for performance. However, Section 31A of the Insurance Act, 1938 restricts the payment of any commission or bonus or a share in the valuation surplus in respect of the life insurance business of the insurer to any officer, manager or person. Having said that, it will have to be seen how IRDAI addresses this issue, whether by way of an exemption or through some other mechanism, so that this particular provision does not affect the functioning of the MGA. 

Having said that, the functions of MGA and extent of the same, at its core, are governed by the authority delegated to the MGA by the Insurer. In our understanding, even where an MGA bears underwriting risk, it may at best be allowed limited flexibility to adjust pricing or terms within an agreed bandwidth to reflect its risk exposure, but any material deviation from approved products or pricing frameworks would still require the insurer’s approval.

However, the assumption of insurance risk continues to vest solely with the insurer. The MGA does not carry risk on its own and operates strictly within the contours of authority contractually delegated to it.

Position under Indian insurance regulation

While MGAs are a new concept for the Indian insurers, MGAs, as insurance sector participants for foreign insurers or reinsurers, have already been recognized in the International Financial Services Centres (IFSC) to register as an insurer jointly with a foreign insurer. Under the International Financial Services Centres Authority (Registration of Insurance Business) Regulations, 2021 (‘IFSC Insurance Regulations’), MGAs are permitted to register with IFSCA to carry out insurance business in the region. 

According to IFSC Insurance Regulations, MGAs refer to:

1. a body corporate incorporated outside India that is authorized to undertake insurance or re-insurance or both pursuant to a binding agreement with a Foreign Insurer or Foreign Re-insurer; or 

2. a company incorporated under the Companies Act, 2013 that is authorized to undertake business of insurance or re-insurance or both pursuant to a binding agreement with a Foreign Insurer or Foreign Reinsurer. 

Further, As per Third Schedule of the IFSC Insurance Regulations, MGAs shall set up a company with the following norms: 

1. The MGA may establish a private or a public company registered with Registrar of Companies in India, with a minimum paid up capital of INR five lakh;
2. The main objects of Memorandum of Association and Article of Association shall be to provide all technical, underwriting, binding risks, settling claims, administrative, accounting, investment, regulatory and other assistance to the foreign insurer or foreign re-insurer to whom they represent;
3. The MGA shall be responsible for all statutory & regulatory filings and compliances on behalf of the foreign insurer or foreign re-insurer it represents;
4. Any other requirement that may be specified by the Authority from time to time.

Considering the definition provided by IFSCA under the IFSC Insurance Regulations, it can be said that MGAs in the IFSC region are essentially insurance companies registered with IRDAI. 

Operational framework of an MGA

The functioning of an MGA is governed by a ‘Delegated Authority Agreement’ or “Binding Agreement” as referred under the IFSC Insurance Regulations, entered into with the insurer. Further, MGA shall submit to IFSCA, a certified copy of Binging Agreement which provides detailed information on the proposed MGA, including but not limited to the following: 

1. The level of underwriting and claims authority granted to the MGA, 
2. the business strategy for the MGA, 
3. details relating to principal staff operating in the MGA, 
4. financial information, 
5. professional indemnity details, 
6. classes of business to be underwritten by the MGA, 
7. the approach the MGA will take to ensure compliance with registration requirements 

other requirements as may specified by relevant foreign insurer or foreign re-insurer.

The US MGA Act, does not provide a detailed outline of the agreement to be executed between the insurer and the MGA, it does however list down few clauses that shall mandatorily be a part of such binding agreement: 

1. Termination Clause.
2. Render accounts to the insurer detailing all transactions and remit all funds due under the contract to the insurer on not less than a monthly basis.
3. All funds collected for the account of an insurer will be held by the MGA in a fiduciary capacity. The MGA may retain no more than three months estimated claims payments and allocated loss adjustment expenses.
4. Separate records of business written by the MGA will be maintained and the insurer shall have access to all such records and books of the MGA. 

Some clauses that shall be included in the binding agreement other than the clauses mentioned above include 1) proper accounting of transactions and remission of funds; 2) deposit of funds; 3) business records; 4) reassignment of the contract (this is prohibited); 5) underwriting guidelines; 6) claims settlement; 7) sharing of interim profits; 8) loss reserving; and 9) reinsurance transactions.

The MGA Act also establishes duties of the insurer, including 1) financial examinations of the MGA; 2) loss-reserve opinions; 3) on-site review of MGA underwriting and claims processing operations; 4) binding authority for reinsurance contracts; and 5) notification to the insurance commissioner of MGA contracts.

Whether MGAs can assign their duties to sub-contractors?

Under the MGA Act, it has been made clear that the whole or any part of the Binding agreement shall not be assigned by the MGA to any other person.  

MGAs vis-à-vis Existing Insurance Intermediaries

While examining the positioning of MGAs within the existing intermediary framework, a comparison can be drawn with ‘Corporate Agents’. Corporate agents are entities that represent an insurance company and sell its policies, particularly large, institutionally-backed entities. Such corporate agents exhibit several features that make them comparable to MGAs. The basic functions of Corporate Agents as prescribed through Para 2(f) of IRDAI (Registration Of Corporate Agents) Regulations, 2015 is of solicitation and servicing of insurance business for an insurer.

Servicing includes assisting in payment of premium and providing necessary assistance and guidance in the event of a claim, providing all other services and guidance on issues which arise during the course of an insurance contract. 

The defining characteristic of an MGA lies here, in the delegation of underwriting authority and settlement of claims, pursuant to which the MGA is empowered to assess risk, determine pricing and terms, and bind coverage on behalf of the insurer within prescribed limits along with accepting and settling claims on behalf of the insurer. Corporate agents, notwithstanding their scale or technological sophistication, remain distribution intermediaries under Indian insurance law and are not vested with discretion over risk acceptance or pricing, in the settlement aspect also they are only permitted to guide the customers in the event of a claim. Their role, therefore,  is not decisional, unlike MGAs.

To better understand the distinction between MGAs and other insurance intermediaries, the following table provides a comparative overview:

Parameter	Managing General Agent (MGA)	Corporate Agent	ISNP (Insurance Self-Network Platform)	Insurance Broker
Legal status	Insurance intermediary with delegated authority from insurer.	Insurance intermediary acting as agent of insurer.	Digital distribution platform owned/operated by insurers.	An insurance broker is a licensed intermediary representing clients to arrange and advise on insurance policies.
Governing framework	No specific regulation for MGAs has been enacted yet.	IRDAI (Registration of Corporate Agents) Regulations, 2015	Guidelines on insurance e-commerce	IRDAI (Insurance Brokers) Regulations, 2018
Relationship with insurer	Acts on behalf of insurer under binding authority	Principal–agent relationship	Extension of insurer’s own distribution network	Acts on behalf of policyholders
Underwriting authority	✔(within delegated limits)	✖	✖	✖
Policy binding authority	✔	✖	✖	✖
Pricing/terms flexibility	Limited, within insurer-approved parameters.	None	None	None
Risk bearing	Generally, no (unless risk participation via re-insurance)	No	No	No
Claims handling	May be delegated	Assistance only	Assistance only	Assistance/advisory only
Revenue model	Commission and/or performance/profit-based fees	Commission	Distribution cost centre	Commission/brokerage

Who can act as an MGA?

From a regulatory perspective, the MGA model is not linked to any specific legal form of the entity but to the nature of authority delegated by the insurer. Among existing intermediaries, ‘insurance broker’, as defined under regulation 2(1)(k) of IRDAI (Insurance Brokers) Regulations, 2018, seems to be structurally best positioned to undertake an MGA role, given their independence, multi-insurer interface and involvement in risk analysis, subject to regulatory permission for delegation of underwriting authority.

While under IFSCA Insurance Regulations, only a Body Corporate i.e. a company or an LLP is eligible to act as an MGA, US MGA Act recognises any form of persons to become an MGA provided they comply with the requirements of the Act. Banks and NBFCs, being regulated under separate sectoral statutes, are restricted from undertaking insurance underwriting functions directly and may participate in insurance intermediation only in permitted capacities or through separately incorporated and licensed entities. Accordingly, in substance and regulatory design, the MGA construct aligns most closely with the broker framework.

As per the US MGA Act, the following persons shall not fall within the definition of MGA:

1. An employee of the insurer. 
2. A manager of a U.S. branch of an alien insurer who resides in this country. 
3. An underwriting manager which, pursuant to contract, manages all or part of the insurance operations of the insurer, is under common control with the insurer, subject to the holding company regulatory act, and whose compensation is not based on the volume of premiums written. 
4. The attorney-in-fact authorized by or acting for the subscribers of a reciprocal insurer or interinsurance exchange under a power of attorney.

Compliance requirements

While there are no single uniform compliance requirements for MGAs, most of the governance requirements in MGAs arise out of the authority agreement entered into by it with the insurer. NAIC’s Model Law prescribes that the MGA must submit financial statements for the last two fiscal years demonstrating a positive net worth. Further, the officer, director, employee or controlling shareholder of MGAs shall not hold a position on the Board of the concerned insurer. 

Conclusion

MGAs occupy a position that is distinct from both brokers and insurers. While they do not assume insurance risk or carry solvency obligations like insurers, they also extend beyond the role of traditional intermediaries by operating under delegated authority in underwriting and policy administration. It is this separation of risk decision making from operational decision-making that places MGAs in a unique category neither brokers nor insurers, yet an integral component of the modern insurance value chain. 

A review of the specific regulations applicable to MGAs, as may be issued by the IRDAI, would be necessary to fully understand the definition, scope of functions, registration requirements and the extent of authority permitted to MGAs within the Indian regulatory framework.

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