Understanding Mortgage Brokerage Insurance Requirements

Under the Mortgage Services Act (“MSA”), every mortgage brokerage must carry Errors and Omissions (“E&O”) insurance as required by the Superintendent, including extended coverage for fraudulent acts. E&O insurance is an important safeguard that helps protect brokerages and consumers alike and supports confidence in the mortgage services industry.

At a minimum, the policy must provide $500,000 in coverage for a single occurrence and $1 million total coverage for all claims in a year. These are only the minimum requirements—brokerages can choose to be insured for higher limits. Brokerages may wish to consider their insurance needs based on factors such as their size, the nature of their business, and their risk tolerance. For details on minimum requirements please see s.62 of the Mortgage Services Rules and the Regulatory Statement on Mortgage Brokerage Insurance Requirements available on BCFSA’s Mortgage Services Knowledge Base.

Since E&O insurance is a mandatory licensing requirement, all mortgage brokerages must maintain coverage at all times, even when they are not actively doing business. If a brokerage’s E&O policy is cancelled, not renewed, falls below the required coverage levels, or a claim is made, the brokerage must immediately notify BCFSA. Failing to do so may lead to enforcement action.

It is also important to understand what E&O insurance does not do: E&O insurance does not eliminate or transfer a mortgage brokerage’s liability. The insurance only covers certain types of mistakes or omissions that fall within the boundaries of the policy. The brokerage is still legally responsible for complying with the MSA and meeting all regulatory obligations. In other words, E&O insurance offers a financial safeguard, not a replacement for a brokerage’s legal duties or accountability.

What is Errors & Omissions Insurance?

E&O insurance helps protect brokerages and consumers if something goes wrong in the course of a mortgage brokerage’s business—such as negligence, errors, or omissions. It may help to cover costs related to claims made against the brokerage, its mortgage brokers, or its principal broker(s).

Why is E&O Insurance Required?

All licenced mortgage brokerages in British Columbia must have E&O insurance, including extended coverage for fraudulent acts. This is a legislative requirement designed to protect consumers and brokerages from financial harm if mistakes or fraudulent acts occur.

What are the Minimum Coverage Requirements?

Every licensed mortgage brokerage must have E&O insurance that includes extended coverage for losses caused by fraud. At a minimum, the policy must cover:

• $500,000 for any single claim involving the brokerage or any of its brokers.
• $1,000,000 for all claims combined during a 12-month period involving the brokerage or any of its brokers.

These are the minimum amounts required. Depending on factors such as, your business size, business activities and risk tolerance, you may choose to purchase coverage for higher amounts.

What is the Extended Reporting Period (“Tail Coverage”) Required for E&O Insurance?

E&O insurance coverage must be maintained during the period the mortgage brokerage holds a licence in B.C. and for a period of 3-years following the event of either:  

• The merger or winding up of the mortgage brokerage.  
• The cancellation or suspension of the mortgage brokerage licence.  

The 3-year extended reporting period (also sometimes referred to as tail coverage) is the minimum requirement. Brokerages may choose to purchase a longer reporting period or additional coverage for greater protection, depending on factors, such as your business size, business activities and risk tolerance.

The extended reporting period does not eliminate liability. If a claim is made against your brokerage after the 3-year period expires, your brokerage may be responsible for addressing it, even if your insurance policy no longer covers it. Consider whether additional coverage makes sense for your business.

My E&O Insurance Details Have Changed or a Claim Has Been Made. Do I Need to Inform BCFSA?

A mortgage brokerage must immediately notify BCFSA if any of the following occurs:

• E&O insurance is cancelled or not renewed.
• The coverage provided by the E&O insurance falls below the minimum required:
• $500,000 for any single claim involving your brokerage or any of its brokers.
• $1,000,000 for all claims combined during a 12-month period.
• The mortgage brokerage makes a claim under the E&O insurance policy.

Notifications can be submitted through BCFSA’s IRIS portal.

My Brokerage is Licensed in Multiple Provinces, What Are My E&O Insurance Obligations?

If your brokerage is licensed in more than one province:

• The brokerage must meet the minimum E&O insurance requirements in each province in which it is licensed to conduct business.
• Claims in one province must not erode the minimum coverage available in another province.
• Each licensed mortgage brokerage must have its own coverage and must not share coverage with another licensed brokerage, even if the brokerages are related or affiliated. 

Does My Mortgage Brokerage Need to Have E&O Insurance That Applies Only to Certain Types of Mortgage Services?

The E&O insurance held by a mortgage brokerage must provide coverage for all categories of mortgage services for which the brokerage is licensed (i.e., dealing, trading, administering, and/or lending). BCFSA is aware that some E&O insurance providers offer coverage limited to specific mortgage services (e.g., dealing only). As such, it is important to confirm that your brokerage’s E&O policy covers all mortgage services for which you are licensed.

Should My Mortgage Brokerage Obtain Cyber Insurance or Other Types of Insurance?

Brokerages are not generally required to carry cyber insurance or other types of business or commercial insurance but it is strongly recommended that they give consideration to purchasing insurance that meets their business needs. Depending on the situation, some types of insurance may be required (e.g. landlords, lenders, or clients may require you to have commercial general liability insurance before signing a lease, loan, or contract).

Cyber insurance typically provides coverage for risks such as cyber-attacks, data breaches, or ransomware. Because mortgage services often involve handling sensitive personal and financial information, brokerages should strongly consider this insurance, or related types of coverage.

For more information about insurance, or to better understand your risks and available products, speak to a licensed insurance broker or authorized insurance company.