RIBO issues statement on premium financing

Registered Insurance Brokers of Ontario (RIBO), the province’s broker regulator, has issued a statement about how brokers might properly arrange premium financing for clients.
RIBO cautions that if brokerages opt to finance premiums themselves, the funds they place in trust for insurers must not come from any other of the brokerages’ trust accounts.
“Brokerages financing the premiums internally must transfer the amount being financed from the brokerage’s general/operating accounts into the trust account to pay the insurer since the use of any other trust funds constitutes non-compliance with Ontario Regulation 991, Section 16,” RIBO says in a statement posted on the regulator’s Web site.
“Simply put, you cannot use Peter’s money to pay Paul.”
RIBO notes brokerages can use two other methods to help clients finance their insurance premiums.
The brokerage could use the services of a third-party premium financing company, for example. It could also establish its own, separate business entity for the purposes of premium financing.
Brokerages that establish their own premium financing business entities would require a Secondary Business exemption from RIBO’s qualification and registration committee.
Any brokerage involved in the financing business is subject to RIBO’s Code of Conduct, the regulator noted.
“Clients must be advised of available alternatives, including low-cost or no-cost premium payment plans, which may be offered by insurers for the class of business involved,” RIBO notes in its statement. “The availability of insurance through the brokerage must not be made contingent upon the client agreeing to use the brokerage’s premium financing terms.”