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📝 '''Brokerage agreement''' is the formal contract that governs the relationship between an [[Definition:Insurance broker | insurance broker]] and an [[Definition:Insurance carrier | insurance carrier]] (or between a broker and a [[Definition:Managing general agent (MGA) | managing general agent]]), setting out the terms under which the broker may solicit, negotiate, and place [[Definition:Insurance policy | insurance business]] on the carrier's behalf. It defines critical parameters such as [[Definition:Commission | commission]] structures, lines of business the broker is authorized to present, data reporting obligations, and the circumstances under which either party may terminate the relationship. Unlike a [[Definition:Binding authority agreement | binding authority agreement]], a standard brokerage agreement does not grant the broker power to commit the carrier to [[Definition:Risk | risk]] — the broker introduces business, but the carrier retains full [[Definition:Underwriting | underwriting]] discretion.

⚙️ Typical provisions within a brokerage agreement address [[Definition:Premium | premium]] collection and remittance timelines, [[Definition:Fiduciary duty | fiduciary]] handling of client funds, [[Definition:Errors and omissions insurance | errors and omissions]] insurance requirements for the broker, and confidentiality obligations. The agreement may also outline performance expectations — minimum [[Definition:Premium | premium]] volume thresholds, [[Definition:Loss ratio | loss ratio]] targets, or [[Definition:Submission | submission]] quality standards — that the broker must meet to maintain the relationship or earn contingent [[Definition:Profit commission | profit commissions]]. In [[Definition:Lloyd's of London | Lloyd's]] and the [[Definition:London market | London market]], brokerage agreements often incorporate [[Definition:Terms of business agreement (TOBA) | terms of business agreements (TOBAs)]] that layer on market-specific conduct and transparency requirements.

🔑 A well-drafted brokerage agreement protects both the intermediary and the carrier by reducing ambiguity about roles, economics, and exit procedures. For carriers, it ensures that distribution partners operate within defined guardrails and that [[Definition:Regulatory compliance | regulatory]] expectations — such as those imposed by state departments of insurance or the [[Definition:Financial Conduct Authority (FCA) | FCA]] — are contractually embedded in the relationship. For brokers, the agreement secures their [[Definition:Commission | commission]] entitlements and clarifies which party bears responsibility for policyholder communications, [[Definition:Claims | claims]] notifications, and [[Definition:Renewal | renewal]] processing. As insurance distribution grows more complex — with layers of [[Definition:Wholesale broker | wholesale brokers]], [[Definition:Retail broker | retail brokers]], and program administrators — the brokerage agreement remains the foundational document that keeps accountability clear across the chain.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Insurance broker]]
* [[Definition:Commission]]
* [[Definition:Binding authority agreement]]
* [[Definition:Terms of business agreement (TOBA)]]
* [[Definition:Broker of record]]
* [[Definition:Insurance carrier]]
{{Div col end}}

Definition:Brokerage agreement - Revision history

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