Latvia’s insurance intermediary framework, supervised by the Bank of Latvia (formerly the FCMC), distinguishes between insurance broker companies (IBCs) and insurance agent companies (IACs).

An IBC operates independently and can arrange insurance with multiple insurers, while IACs are not permitted to offer similar products from multiple insurers, meaning they cannot engage in insurance distribution activities on behalf of and in the interests of two or more insurers offering identical or similar insurance products providing insurance coverage within the same class of insurance acts on behalf of one or more specific insurers.

The choice between the IBC and IAC routes has significant implications for the authorization process, the degree of regulatory oversight, and the operational flexibility. Most MGAs operating under delegated authority will find either category workable, though the IAC route may be more aligned with the typical MGA model as it acts in the interest of the insurer that respective MGA represents.

The authorization pathway differs between IBCs and IACs. IBCs require direct authorization from the Bank of Latvia, with the process typically taking approximately 30 days from submission of a complete application.

IACs follow a simpler route; they’re registered with the relevant insurer rather than directly authorized by the regulator, which significantly reduces the administrative burden and timeframe.

Latvia has fully implemented the IDD, and intermediaries authorized or registered in Latvia can exercise EEA passporting rights. This allows both IBCs and IACs to provide cross-border services throughout the EEA under either the freedom of establishment or freedom of services regimes.

Latvia offers a regulatory sandbox that’s available to insurance intermediaries seeking to test innovative distribution models and technologies. This sandbox provides a structured environment in which insurtech MGAs can develop and pilot new approaches under regulatory supervision.

During the registration IBCs and IACs have to provide a list of shareholders or members who have a qualifying holding in the IBC/IAC, indicating the amount of their holding, and a confirmation that the participation of these persons in the activities of the IBC won’t impede the Bank of Latvia in carrying out effective supervision of the IBC.

In line with the IDD, Latvia requires insurance intermediaries involved in product design or distribution to maintain product oversight and governance (POG) frameworks. This includes identifying target markets, testing products before launch, and conducting ongoing monitoring of distribution outcomes. MGAs that play a role in product manufacturing are subject to heightened POG obligations.

IBCs and ICAs are subject to client money segregation requirements, meaning premiums and claims funds held on behalf of clients or insurers must be maintained in segregated accounts.

The requirements for IACs are less prescriptive, reflecting the fact that IACs operate under the supervision of the appointing insurer. In the event of the bankruptcy of the IBC or ICA, only the claims of policyholders, insured persons, beneficiaries, and injured third parties can be satisfied from the separate account. The account must be opened with a regulated credit institution.

Latvia’s PII and capital requirements are aligned with EIOPA guidance. These requirements apply to IBCs directly and to IACs through the insurer’s own compliance obligations.

The key strategic decision for MGAs entering Latvia is whether to pursue the IBC or IAC route. The IBC route offers greater independence but requires direct authorization, while the IAC route is simpler and faster through insurer registration.

Latvia's EU membership and full IDD implementation provide a solid platform for EEA-wide operations through passporting.