Definition:Schedule of authority
📋 Schedule of authority is a document embedded within or appended to a binding authority agreement that defines the precise limits, classes, territories, and terms under which a coverholder or MGA may accept risks on behalf of an insurer or Lloyd's syndicate. Rather than granting blanket permission, the schedule itemizes each line of business the delegate may write, the maximum policy limits and aggregates permitted, acceptable deductibles, approved policy wordings, and any exclusions that must be applied. In markets governed by Lloyd's oversight, schedules of authority are a core component of the delegated authority framework, but equivalent documents exist wherever insurers entrust binding power to third parties — from surplus-lines operations in the United States to delegated arrangements in the London, European, and Asian markets.
⚙️ When an insurer negotiates a delegated authority relationship, the schedule of authority translates the commercial agreement into operational guardrails. Each entry in the schedule typically specifies the class code, territory, per-risk and per-occurrence limits, aggregate exposure caps, permitted premium bands, and any mandatory reinsurance protections. If the coverholder receives a risk submission that falls outside these parameters, it must refer the risk back to the insurer for individual underwriting approval. Compliance with the schedule is monitored through regular bordereaux reporting and periodic audits, and material breaches can trigger suspension or termination of the binding authority. Increasingly, insurtech platforms embed schedule parameters directly into underwriting decision engines, enabling automated compliance checks at the point of quote.
🔍 A well-drafted schedule of authority protects both parties in a delegated relationship. For the insurer, it ensures that the risk appetite agreed at the portfolio level is respected at the individual-risk level, limiting unintended accumulations and adverse loss-ratio outcomes. For the coverholder, it provides clarity on what can be bound without referral, enabling faster service to brokers and policyholders. Regulators — including Lloyd's, the FCA, and state insurance departments — scrutinize these schedules as part of their oversight of delegated authority arrangements, recognizing that poorly defined authority is a common root cause of underwriting losses and conduct failures.
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