A retail broker is the firm you deal with and the one that holds your account. A wholesaler sits behind it and may reach specialty insurers the retail broker may not be able to reach directly. A managing general agent (MGA) is a firm that holds underwriting authority from an insurer and can often quote and bind on its behalf. You may only ever meet the retail broker. Yet the firm you pay, the firm that underwrites and the insurer that pays the claim can be three different companies. If an inherited declarations page names a firm you have never heard of, this guide is for you: it explains why the firm may be there.
The short answer
- Retail broker or agent: your contact. It keeps the client relationship, advises you and services the policy.
- Wholesaler: sits between the retail broker and the insurer and usually has no contact with you. Common for specialty and surplus lines placements.
- MGA: a firm with authority delegated by an insurer to underwrite, and sometimes to bind and issue policies. It can look like a wholesaler to the retail broker but acts with the insurer's authority.
- Why it matters to you: an extra layer can open markets for a hard-to-place acquired account, and it can also put another party between you and the underwriter. Ask which markets are in use and why.
Who is the retail broker, the wholesaler and the MGA?
The retail broker or agent is the person you hired, or inherited from the seller. In general usage a broker represents the buyer of insurance and an agent represents an insurer, but states define the roles differently and a firm can act in either role. Whatever the label, the retail firm holds your relationship.
A wholesale broker acts between a retail broker and an insurer and, in the usual definition, has no contact with the insured. It places business that retail agents bring to it, often specialty or hard-to-place risks.
A managing general agent (MGA) is an agent or broker that an insurer has given underwriting authority. Depending on its contract, it may bind the insurer, issue policies, appoint producers and arrange reinsurance (the insurer's own insurance). The difference from a wholesaler is that an MGA is using authority delegated by the insurer.
| Role | Who it deals with | What it generally does | What to ask |
|---|---|---|---|
| Retail broker or agent | You, the insured | Collects your information, advises, requests quotes, services the policy, helps with claims | Who do you represent, and what authority do you have with each insurer? |
| Wholesale broker | The retail broker and the insurer | Takes a submission from the retail broker and places it, often with specialty or surplus lines insurers | Why was this account sent to a wholesaler, and how is each party paid? |
| Managing general agent | The retail broker and the insurer it works for | Underwrites and may bind for one or more insurers within the authority it was given | Which insurer stands behind this policy, and what does the MGA decide on its own? |
One firm can do both jobs, and a wholesaler can hold binding authority on some programs, so judge each placement by the written authority, not the firm's label. The difference between a broker and an agent is its own topic. Here the point is simpler: who does what changes by placement, so ask.
How does a placement travel from you to the insurer?
Picture a chain. If a standard insurer will write the account, the retail broker sends the submission straight to that insurer, or to an MGA that underwrites for it. If the account needs a specialty market, the retail broker may send it to a wholesaler, which then approaches the insurers that write that kind of risk. Either way you usually see one proposal from the retail broker, often without the other names. Coverage starts only when the insurer or an authorized party binds it, and a quote is not coverage.
Servicing follows the same path. A mid-term change or a certificate request may go from you to the retail broker to the wholesaler or MGA, which can add time. Ask your broker how requests are handled for your account and who can issue what.
Claims can follow a different path again. In some programs the MGA takes first notice or handles the claim under authority from the insurer, and in others the insurer or its claims administrator does. Ask where to report a claim, who decides it and which party pays it.
Why is there a firm on my policy I have never heard of?
Wholesalers exist because some risks do not fit a standard insurer's rules, and MGAs exist because insurers hand underwriting for a niche or program to a specialist firm, sometimes for admitted business that is not hard to place. An acquired company can land with one of them for ordinary reasons: a program built for its kind of business, a class of work standard insurers write sparingly, a loss history from the seller's era, thin records, rapid growth, or a structure the seller never retested.
Many wholesale placements are with surplus lines insurers, which are not licensed in your state but may write risks the admitted (state-licensed) market will not. They are generally not backed by state guaranty funds (the safety net that pays claims if an insurer fails), so ask what protection stands behind the policy. A state may also limit placing workers' compensation with surplus lines insurers. That is a difference to understand, not a verdict on the insurer.
Our guide on whether the seller's account is in the wrong market covers when to test a move back to admitted carriers, and the surplus lines glossary entry explains the terms. If your account has a wholesaler or MGA in the chain, know why, and whether the reason still applies after the sale.
What could this look like on an inherited account?
A hypothetical example. A buyer acquires a specialty contractor whose liability policy was written through an MGA for an admitted insurer. Customers keep asking for certificates that name them as an additional insured (a party added to your policy for a job), and each request goes from the retail broker to the MGA and back, which takes several days.
The buyer asks four questions: which insurer is on the paper, what the MGA can issue on its own, how long certificate requests take, and who to call to report a claim. The retail broker answers in writing and agrees a turnaround for certificates. Nothing changes the coverage itself, and any change in markets would depend on underwriting.
How do you find out which firms are on your account?
You can check your own paperwork first. The declarations page (the summary at the front of the policy) names the insurer, and the policy or invoice may also name a producer or program administrator, which can show whether a wholesaler or MGA is involved. Surplus lines policies may carry a notice that the insurer is not licensed in the state, and a separate surplus lines tax or fee line on the invoice may be another sign. See how to read a declarations page and the market check in whether the seller's account is in the wrong market.
Then ask. You can ask where your account is placed, and a good broker answers without drama. Use this list at onboarding, at renewal and before a remarket (shopping the account to other insurers, see how to remarket inherited insurance).
- For each policy, which insurer is on the paper, and is it admitted or surplus lines?
- Is there a wholesaler or MGA between you and that insurer? If so, why?
- Does the MGA or wholesaler hold binding authority, and who issues the policy documents?
- Are you licensed for this line in my state? If a surplus lines insurer is used, who is the licensed surplus lines producer on this placement, you or the wholesaler, and in which state? Confirm the producer's surplus lines license on your state insurance department lookup.
- Which markets declined this account, and how is each party paid on this placement?
Whether a broker must tell you how each party is paid varies by state. New York, for example, requires producers to describe their role and say whether an insurer or other third party may pay them on the sale, with exceptions that can include wholesale brokers and MGAs that have no direct sales contact with the buyer, so ask in writing. See how insurance brokers get paid and questions to ask a broker after buying a business.
Is an extra layer good or bad for a new owner?
Neither is good or bad in itself. They are tools with real trade-offs.
| Question | What the extra layer can offer | What to watch |
|---|---|---|
| Market access | Reach to insurers and programs a retail broker may not deal with directly | Is the access needed for your account today, or a leftover from the seller's history? |
| Underwriting and service | Specialist knowledge of a class, and sometimes faster decisions where authority is delegated | More hands on each request, so more room for delay, and terms that vary between markets, so compare wording, not just price |
| Cost | Can be the only route to coverage for a hard risk | Each party may be paid from the premium or by fees, and surplus lines placements can carry state premium tax and possibly other charges on top, so ask for the full cost |
| Protection | Usually nothing extra: the insurer, not the wholesaler or MGA, is generally the party that stands behind the policy | Ask which insurer is on the paper and how it is licensed in your state |
A retail broker who uses a wholesaler is not doing anything wrong. For many specialty accounts it is the normal route. The question is fit: does the structure still match the business you run?
Can Morrow help with this?
Morrow is an independent insurance agency that focuses on business insurance. It can review the policies you inherited, identify from your declarations pages and policy documents which insurers and intermediaries appear, flag gaps and request quotes. Surplus lines placements go through a licensed surplus lines producer, which can be a wholesale firm, so ask Morrow how it would handle yours. It is licensed in Arizona, California, Colorado, Florida, Georgia, Illinois, Louisiana, Massachusetts, Michigan, Nevada, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas and Virginia, and you can confirm any producer's license on your state insurance department lookup. Any new terms depend on carrier underwriting.
You may want to look elsewhere if any of your operations are in states outside that list (Morrow is not licensed there), if you need life, health or benefits advice, or if you run a very large and complex program that needs a specialist wholesale or program desk. If you trust your incumbent retail broker, the questions above work just as well with them. If a firm on your declarations page is a mystery, send the page and loss runs and ask for the chain in writing.
Keep reading
- How Insurance Brokers Get Paid: Commissions, Fees and Disclosure
- Admitted vs Surplus Lines: Is the Seller's Account in the Wrong Market?
- How to Remarket an Inherited Insurance Program After an Acquisition
- Questions to Ask an Insurance Broker After Buying a Business
- Independent Broker vs Captive Agent After You Buy a Business
- All guides for new business owners
Frequently asked questions
Is a wholesaler the same as an MGA?
No. A wholesale broker places business that retail brokers bring to it and generally has no contact with the insured. A managing general agent holds underwriting authority from an insurer and may be able to bind coverage and issue policies. They can look alike to a retail broker, so ask who holds authority.
Do I deal with the wholesaler directly?
Usually not. The retail broker keeps the client relationship and the wholesaler works behind it. Ask your retail broker how service requests, certificates and claims reporting are handled.
Does a wholesaler mean my policy is surplus lines?
Not always. Many wholesale placements are with surplus lines insurers, but wholesalers and MGAs also work with admitted insurers. Your declarations page and your broker can tell you which applies.
Should I move my account away from a wholesaler after buying the business?
Not automatically. The question is whether the reason for the placement still applies. If it came from the seller's loss history or a structure that has changed, it can be worth testing standard markets at the next renewal. The result depends on underwriting.
There is a company on my declarations page I have never heard of. Should I worry?
Not by itself. It may be a wholesaler or an MGA, which are common on specialty accounts. Ask your broker why it is there, which insurer stands behind the policy and whether the reason still applies after the sale.
References
- IRMI: Wholesale broker (definition)
- IRMI: Managing general agent (definition)
- IRMI: Broker and Agent (definitions)
- NAIC: Managing General Agents Act, Model #225
- NAIC: Nonadmitted Insurance Model Act, Model #870
- NAIC: Surplus Lines
- Cornell LII: 15 U.S.C. 8202, Regulation of nonadmitted insurance by insured's home State
- Cornell LII: 11 NYCRR 30.3 and 30.4, Compensation disclosure (New York)
Just bought a business? Get your insurance reviewed.
Send Morrow the declarations pages, loss runs and key contracts you inherited. Morrow can review them against the business you bought, flag gaps and request quotes where it makes sense. Any new terms depend on carrier underwriting.
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This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.