Question 1

What does a binding authority let a coverholder do?

Accepted Answer

Accept and bind risks on the insurer's behalf within agreed limits — A binder delegates underwriting authority — the power to accept risks and issue cover — within pre-agreed limits, without referring each one back to the insurer first.

Question 2

Why do reinsurers covering binder-driven business rely heavily on bordereaux?

Accepted Answer

The insurer itself may never see the individual risk details before a claim, so the bordereaux is the record of what was actually bound — Because the coverholder binds risks directly, the periodic bordereaux listing is often the first detailed record the insurer — and its reinsurers — have of exactly what was written.

Binding Authority

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