With the modernising deadline of January 2005 fast approaching, regulation remains a hot topic in the London insurance market. Under the new Financial Services Authority-led regime, it will be illegal for insurance intermediaries to conduct business without authorisation or an exemption. At Lloyd’s, this has seen the advent of a new regime in respect of binding authority agreements in its marketplace.
By way of background, a binding authority is a form of delegated authority agreement whereby a ‘coverholder’ is authorised to bind risks on behalf of an insurer and/or to issue documents that evidence the insurance without the need for any further approval on behalf of the insurer. Such arrangements are an intrinsic part of the London insurance market (there are estimated to be more than 5,000 such arrangements at Lloyd’s) and often a broker may be the coverholder itself.
