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📋 '''Overriding commission''' is an additional commission paid on top of the standard [[Definition:Brokerage commission | brokerage]] or [[Definition:Agent commission | agent commission]], typically awarded to a [[Definition:Managing general agent (MGA) | managing general agent]], [[Definition:Wholesale broker | wholesale broker]], or supervising intermediary that manages a portfolio of business or oversees the performance of producing agents. In insurance and [[Definition:Reinsurance | reinsurance]] markets, the override serves as compensation for the administrative, [[Definition:Underwriting | underwriting]], and oversight functions the recipient performs beyond simply placing individual risks.

🔧 The mechanics of an overriding commission are usually spelled out in a [[Definition:Binding authority agreement | binding authority agreement]] or [[Definition:Agency agreement | agency agreement]] between the [[Definition:Insurance carrier | carrier]] and the intermediary. The override is expressed as a percentage of [[Definition:Gross written premium (GWP) | gross written premium]] and is layered on top of any [[Definition:Acquisition cost | acquisition costs]] already built into the pricing. For example, an MGA that holds [[Definition:Delegated underwriting authority (DUA) | delegated underwriting authority]] might earn a base commission of 10% plus an overriding commission of 5% to cover its [[Definition:Policy administration | policy administration]], [[Definition:Claims handling | claims handling]], and portfolio management responsibilities. In [[Definition:Treaty reinsurance | treaty reinsurance]], the [[Definition:Ceding company | ceding company]] often receives an overriding commission from the [[Definition:Reinsurer | reinsurer]] that reflects the cedant's costs of acquiring and managing the underlying business.

💡 Getting the overriding commission right matters because it directly affects the [[Definition:Combined ratio | combined ratio]] and overall profitability of the book. If the override is too generous, the carrier's [[Definition:Expense ratio | expense ratio]] swells and the program may become unprofitable even with favorable [[Definition:Loss experience | loss experience]]. Conversely, an inadequate override can leave the intermediary unable to invest in quality underwriting talent, [[Definition:Risk selection | risk selection]] tools, or compliance infrastructure — ultimately degrading portfolio performance. Carriers increasingly tie a portion of the override to [[Definition:Profit commission | profit commission]] arrangements, aligning the intermediary's financial incentives with the long-term results of the book and creating a shared stake in disciplined [[Definition:Underwriting guidelines | underwriting discipline]].

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Brokerage commission]]
* [[Definition:Profit commission]]
* [[Definition:Managing general agent (MGA)]]
* [[Definition:Binding authority agreement]]
* [[Definition:Acquisition cost]]
* [[Definition:Expense ratio]]
{{Div col end}}

Definition:Overriding commission - Revision history

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