OGC Opinion No. 05-11-29

The Office of General Counsel issued the following opinion on November 29, 2005, representing the position of the New York State insurance Department.

Re: Financial Audit of Managing General Agents ("MGA")

Questions Presented:

(1) How often must an insurer do an independent financial audit of each managing general agent ("MGA") that it uses?

(2) When should such an audit be done for an MGA that started its contractual relationship in 2004 but whose policies generally were not in effect until 2005?

(3) When during the year is an MGA's report required to be submitted to the insurer to hold on file?


(1) Section 33.6(a) of N. Y. Comp. Codes R. & Regs. tit. 11, Pt 33 (2003) (Reg. 120) requires an insurer to have independent accountant audit reports on each MGA on file. Although the Regulation does not specify that the audit reports should be done annually or less frequently, the Department believes it would be prudent for the insurer to do the audit report every year.

(2) Regulation 120 does not indicate, for purposes of this fact pattern, whether a certified audit report should be available for 2004 or 2005 or both. However, it is the Department's belief that such report should be on file in acceptable form to cover the year the MGA contract went into effect (2004) and that another report be obtained for filing to cover the year that the policies were in effect (2005).

(3) The Regulation does not specify a date during the year when the audit report must be prepared or submitted to the insurer. This decision is left to the management of the insurer.


None provided. The inquirer requests an interpretation of the provision regarding an independent financing audit in Regulation 120, § 33.6(a).


The questions all relate to the following sentence in Section 33.6(a) of N.Y. Comp. Codes R. & Regs. tit. 11, Pt 33.6(a) (2003) (Reg. 120): "The insurer shall have on file an independent financial audit, in a form acceptable to the superintendent, of each MGA with which the insurer has done business."

As stated in Section 33.0 of Regulation 120, the regulation was promulgated because the Department was concerned that when insurers shifted its responsibilities to MGAs that are outside of its organization, the insurers were not exercising proper oversight, resulting in abuses detrimental to both the insurers and insureds. Accordingly, for its own protection and that of insureds, the insurer should require periodic reports that will provide the insurer with correct information, which will enable the insurer to safeguard its interests. The Department believes it would be prudent for the insurer to require an annual audit report in order to know the financial health of the MGA.

For further information please contact Associate Attorney Jeffrey A. Stonehill at the New York City Office.