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📋 '''Delegation of authority''' is the formal mechanism by which an [[Definition:Insurance carrier | insurance carrier]] or [[Definition:Lloyd's syndicate | Lloyd's syndicate]] grants a third party — typically a [[Definition:Managing general agent (MGA) | managing general agent]], [[Definition:Coverholder | coverholder]], or [[Definition:Third-party administrator (TPA) | third-party administrator]] — the right to perform specific [[Definition:Underwriting | underwriting]], [[Definition:Claims management | claims handling]], or policy administration functions on the carrier's behalf. The scope of the delegation is defined in a [[Definition:Binding authority agreement | binding authority agreement]] or similar contract that sets out which classes of business can be written, the maximum [[Definition:Policy limit | limits]] and [[Definition:Premium | premiums]] permissible, the geographic territory, and any referral thresholds that require the carrier's direct approval.

⚙️ The operational framework around a delegation of authority involves several layers of governance. The delegating insurer establishes an authority matrix — a document specifying exactly what the delegate can and cannot do at each decision point, from quoting and binding to issuing [[Definition:Endorsement | endorsements]] and settling claims below certain thresholds. Performance is monitored through regular [[Definition:Bordereaux | bordereaux]] reporting, periodic [[Definition:Audit | audits]], and increasingly through real-time data feeds enabled by [[Definition:Insurtech | insurtech]] platforms. In the [[Definition:Lloyd's of London | Lloyd's]] market, delegated authority arrangements are subject to oversight by the [[Definition:Lloyd's Performance Management Directorate | Performance Management Directorate]] and must comply with Lloyd's minimum standards for coverholder management. Other major regulatory regimes — including the [[Definition:Solvency II | Solvency II]] framework in Europe and the [[Definition:Australian Prudential Regulation Authority (APRA) | APRA]] guidelines in Australia — impose their own requirements on insurers that outsource core functions.

💡 Delegated authority arrangements have become a significant growth engine across the global insurance industry, enabling carriers to access distribution channels, local expertise, and niche market segments that would be uneconomical to serve through their own branch networks. However, delegation does not transfer [[Definition:Regulatory responsibility | regulatory responsibility]]; the carrier remains accountable for the quality of underwriting and claims decisions made in its name. High-profile losses stemming from poorly supervised delegated portfolios have repeatedly demonstrated the consequences of inadequate oversight — including [[Definition:Reserve | reserve]] deterioration, regulatory sanctions, and reputational damage. As a result, best practice now demands that insurers treat delegation of authority not merely as a distribution strategy but as an enterprise [[Definition:Risk management | risk management]] discipline, with dedicated teams responsible for onboarding, monitoring, and — when necessary — revoking delegated authority.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Binding authority agreement]]
* [[Definition:Managing general agent (MGA)]]
* [[Definition:Coverholder]]
* [[Definition:Delegated underwriting authority (DUA)]]
* [[Definition:Bordereaux]]
* [[Definition:Underwriting authority]]
{{Div col end}}

Definition:Delegation of authority - Revision history

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