Binding Authority

A binding authority is an agreement between a managing agent and a coverholder.

Under this agreement, the managing agent delegates its authority to enter into a contract of insurance to be underwritten by the members of a syndicate managed by it to the coverholder in accordance with the terms of the agreement.

A binding authority agreement can also be used to give a coverholder the authority to issue insurance documents on behalf of Lloyd’s syndicates. Insurance documents include certificates of insurance, temporary cover notes and other documents acting as evidence of contracts of insurance. It also set out the coverholder’s other responsibilities, such as handling premiums or agreeing claims.

The contract that frames the responsibilities, entitlements and obligations of the parties is the contract of delegation and is referred to as the binding authority agreement. It is the document that the parties use to make sure all contracting parties are clear about their roles and responsibilities. The binding authority agreement (contract of delegation) is not the contract of insurance.

Binding authorities need to comply with the requirements Lloyd’s sets.  Details can be found in the Code for Delegated Underwriting. The LMA produces model binding authority agreements that the market may use and which are designed to meet those requirements.

> LMA Multi-Year binding authority model agreements

The LMA has produced multi-year versions of the model binding authority agreements. With effect from the 2016 year of account, managing agents may enter into binding authority agreements of up to 36 months ('multi-year binding authorities')

> LMA Annual binding authority model agreements

The LMA has launched three new model binding authority wordings: LMA 3113 (Worldwide excluding USA/Canada); LMA 3114 (USA); LMA 3115 (Canada). These wordings replace a number of the existing 2006 model binding authority wordings. These are intended for use from 1 November 2013 (or earlier if all the parties agree).

Contract Certainty Tool

> Wordings Repository

To help you achieve contract certainty, the Lloyd's Wordings Repository enables you to view vetted policy wordings and clauses regularly used within the London market.

See Also

> Code of practice

The code of practice sets out the obligations of a managing agent when entering into a binding authority:

> Annual Compliance

Annual compliance must be completed once a year via Atlas by either the coverholder or sponsoring broker.

> Market Directory

Looking for the contact details of a broker or managing agent?

> Atlas

Atlas is an online market system that makes the process of managing coverholders.