What is a Binding Authority (Binder)?

A binding authority is an agreement under which an insurer or Lloyd's managing agent authorises a coverholder or MGA to accept risks and issue cover on its behalf. The market calls it a binder because the holder can bind cover without referring each risk to the insurer.

This guide is for underwriters, delegated authority teams, MGAs and brokers. It covers who the parties to a binder are, what the agreement sets out, the main types of authority, how binders work at Lloyd's and how the holder reports against them.

What a binding authority is, and why the market calls it a binder

A binding authority is one form of delegated authority. The insurer, or a Lloyd's syndicate acting through its managing agent, keeps the risk and the capital. The holder of the authority does the underwriting and issues the policy documents within limits the insurer has agreed in advance.

"Binding" refers to the act of putting cover in force. Under a binder, the holder can accept a risk, agree terms and issue the certificate or policy without the insurer seeing that individual risk first. "Binder" is the everyday shorthand for the agreement and is used in the London market, in UK company market business and internationally.

The arrangement suits classes with high volumes of similar risks, or specialist niches where the holder has underwriting expertise and distribution the insurer lacks. It lets the insurer write business it could not reach directly and lets the holder offer cover in its own name with a carrier's capacity behind it.

The parties: the insurer or Lloyd's syndicate, the coverholder or MGA, and the broker

There are usually three parties. The capacity provider is an insurance company or, at Lloyd's, one or more syndicates whose managing agents sign the agreement on behalf of their members. It carries the risk, sets the terms of the authority and remains responsible for the business to the regulator.

The holder of the authority is called a coverholder at Lloyd's and is often a managing general agent (MGA) in the company market. In practice, many MGAs hold binders from both. The holder underwrites, issues documents, collects premium and, where the agreement allows, handles claims.

Most binders at Lloyd's are placed through a Lloyd's broker, although Lloyd's also allows direct arrangements between coverholders and managing agents. Where a broker is involved, it negotiates the binder on behalf of the coverholder and may also handle premium and data flows between the parties. Some coverholders are themselves brokers placing business locally under the authority.

What a binding authority agreement sets out: classes of business, territories, limits, premium income, underwriting guidelines and referral rules

The agreement defines the scope of what the holder may write. It names the classes of business, the territories in which risks may be located and the period of the agreement, which is usually twelve months. It sets limits on the maximum sum insured or limit of indemnity per risk, and often aggregate limits by location or peril for catastrophe-exposed classes.

It sets a gross premium income limit, the maximum premium the holder may write under the binder in the period, and in many cases a minimum or estimated premium income too. It specifies the policy wordings, rates and rating rules the holder must use, the commission it is paid and any profit commission.

Underwriting guidelines describe the risks the insurer wants and those it excludes. Referral rules set out the risks the holder must refer to the insurer before binding, for example risks above a value threshold, in a particular trade or with poor claims history. The agreement also covers premium handling and settlement, claims authority if any is given, reporting obligations, audit rights and the conditions under which either side may end the agreement.

Types of authority, from full binding authority to prior-submit arrangements, and how a binder differs from a lineslip or consortium

Authority sits on a range. Under full binding authority, the holder can accept any risk that falls within the agreement without reference to the insurer. Under a prior-submit arrangement, the holder can quote, but must submit each risk, or each risk above a threshold, to the insurer for approval before cover is bound. Between the two sit agreements that give full authority for standard risks and require prior submission for anything outside the guidelines. Some agreements give quoting or documentation authority only, with the insurer making every binding decision.

A lineslip is a different arrangement. Lloyd's defines a line slip as an agreement under which one or more managing agents delegate authority to enter into insurance contracts to another managing agent or authorised insurance company, for business introduced by a Lloyd's broker named in the agreement. The authority runs between insurers, with a lead underwriter binding following markets, and the broker brings the risks. Under a binder, the authority goes to an intermediary outside the insurer group. Lloyd's says it does not expect binding authorities to be written under line slip agreements.

A consortium at Lloyd's is an agreement where one or more managing agents delegate authority to another Lloyd's managing agent, the consortium manager, to enter contracts on their behalf, with each follower taking a pre-agreed share. A consortium can participate on a binding authority, but it is a delegation between managing agents and is not itself a binder.

Binding authority at Lloyd's: coverholder approval and Lloyd's delegated authority requirements

Lloyd's controls who can hold a binder. A firm must be approved by Lloyd's as a coverholder before a managing agent can delegate authority to it. According to Lloyd's guidance for coverholders, approval is granted under paragraph 11 of the Intermediaries Byelaw requirements of the Council, each approved coverholder receives a unique PIN used in Lloyd's ATLAS system, and approval is conditional on the coverholder entering a contract of delegation with a managing agent within six months. Each additional trading location needs its own approval.

Lloyd's reported 3,015 approved coverholders at 31 December 2025 on its market overview page. The same guidance names Lloyd's Delegated Contract and Oversight Manager (DCOM) for recording contracts of delegation and the Lloyd's Wording Repository for policy wordings. Where the capacity is provided through Lloyd's Insurance Company, the agreement is a Coverholder Appointment Agreement rather than a binding authority.

The managing agent stays responsible for the business. It carries out due diligence before appointing a coverholder, monitors performance against the agreement and audits the coverholder during the life of the binder.

Reporting against a binder: premium and claims bordereaux

The holder reports what it has written and paid through bordereaux, usually monthly. A risk and premium bordereau lists each policy bound, with the risk details, sums insured, premium, taxes and commission. A claims bordereau lists each claim notified, with payments and outstanding reserves.

At Lloyd's, the Lloyd's Coverholder Reporting Standards, currently version 5.2, set a core data set for coverholders and delegated claims administrators across regulatory, tax, premium and claims data. Lloyd's mandates that syndicates request and collect that data for binding authority and coverholder appointment agreements incepting since July 2017, and managing agents can ask for more.

Bordereaux are how the capacity provider sees its exposure, checks the holder is within its limits, reconciles premium and monitors loss ratios. They are also the evidence a managing agent or insurer relies on to show the regulator it oversees business written in its name.

Common binder problems: authority breaches, late or inaccurate bordereaux and audit findings

Authority breaches are the most serious problem. They include risks written outside the agreed classes or territories, sums insured above the per-risk limit, premium income above the agreed limit and risks that should have been referred but were bound. A breach can leave the insurer on risk for business it never agreed to write, or leave a policyholder with cover that is disputed.

Late and inaccurate bordereaux are the most common problem. Where bordereaux are compiled from spreadsheets, data is often missing, inconsistent between periods or mapped differently from one coverholder to another, and the insurer's delegated authority team spends time cleaning and querying it before it can be used. Breaches often surface months after the risk was bound, because the bordereau was the first place the insurer could see it.

Audit findings typically cover weak controls over referral rules, gaps in underwriting files, premium held longer than the agreement allows, inconsistent use of wordings and claims handled outside authority. Repeated findings can lead to restrictions on the binder or its non-renewal.

How software supports binder management

Most binder problems trace back to the same cause: the binder's terms live in a contract document while underwriting happens in a separate system, or in spreadsheets, with nothing linking the two. Software reduces those problems by holding the binder's terms as data and applying them at the point of quote.

That means the system knows each binder's classes, territories, per-risk and aggregate limits, premium income limit, rates and referral rules. When a holder quotes, the system checks the risk against those terms, blocks anything outside authority and sends referrals to the insurer with the full risk data attached. Premium income against the limit is tracked as policies are bound.

Because every policy is recorded in structured form, bordereaux can be produced from policy data in the format each capacity provider needs, including the Lloyd's Coverholder Reporting Standards, rather than compiled by hand. Genasys provides policy administration that applies binder limits and referral rules at the point of quote and produces bordereaux from the policy record. Firms writing at Lloyd's can read more about London Market insurance software.