Binding Authority Agreement Template for England and Wales
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What is a Binding Authority Agreement?
Binding authorities are a standard feature of the United Kingdom and London insurance markets, where insurers use coverholders to access business they could not economically underwrite case by case. The agreement is a delegated underwriting arrangement, so it attracts regulatory attention: the insurer remains responsible to policyholders for business written under it and must be able to demonstrate oversight of the coverholder. Terms are commonly recorded in a schedule setting out the risks that may be bound, the maximum limits, excluded business and the premium rating basis.
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About the Binding Authority Agreement
A Binding Authority Agreement delegates an insurer's authority to write business to a coverholder, within defined limits. Under England and Wales law the insurer remains answerable to policyholders and to its regulator for business bound on its behalf, so the agreement carries both a commercial and a supervisory function.
When do you need this document?
You need a Binding Authority Agreement when an insurer wants a broker, managing general agent or other intermediary to accept risks on its behalf rather than referring each one for underwriting. It is used to reach specialist or regional business through a party with local distribution, to write high volume low value risks efficiently, and to give an intermediary a defined delegated claims handling role alongside the authority to bind.
What does it cover?
The agreement grants and bounds the authority, setting out the classes of business that may be written, maximum limits, territories, and the risks that are excluded outright. It establishes how premium is collected, held and accounted for, and whether money is held as agent of the insurer or the insured. It sets the reporting cadence through bordereaux, gives the insurer audit and inspection rights over records, and provides for complaints and regulatory cooperation. It then deals with the end of the arrangement, including run-off of risks already bound after the authority stops.
Common pitfalls
The most damaging problem is authority defined loosely enough that the coverholder writes business the insurer never intended to accept, and the insurer is nonetheless bound to the policyholder. Precision on limits, classes and exclusions is the protection. The second is premium handling: if the agreement does not state clearly whether premium is held as the insurer's money and in what account, disputes on insolvency become severe. The third is reporting that arrives too late or in too coarse a form for the insurer to see aggregation building up across bound risks.
GOVERNING LAW
Applicable law
This Binding Authority Agreement is drafted to comply with England and Wales law. Key legislation includes:
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