Definition:Terms of business agreement (TOBA)
📋 Terms of business agreement (TOBA) is a formal contract between an insurance broker or intermediary and an insurer that sets out the commercial and operational terms governing their working relationship. Unlike a binding authority agreement, which grants specific underwriting authority, a TOBA typically addresses the broader framework — covering matters such as commission structures, data-handling obligations, regulatory compliance responsibilities, claims handling procedures, and the duties each party owes to the policyholder. In the Lloyd's market, TOBAs are a well-established governance mechanism, and their use is actively encouraged by regulators to promote transparency and accountability across the distribution chain.
⚙️ When a broker and an insurer enter into a TOBA, they negotiate the specific provisions that will apply to all business placed between them. The agreement typically spells out how premiums are collected and remitted, the timeline for bordereaux reporting, the scope of authority the broker may exercise when presenting risks, and the process for resolving disputes. Many TOBAs also include provisions on data protection, anti-money laundering obligations, and professional indemnity requirements. In practice, large brokers may maintain hundreds of TOBAs across multiple markets, making centralized management of these agreements an operational challenge — and an area where insurtech solutions focused on contract lifecycle management have begun to add value.
💡 Without a clearly articulated TOBA, the relationship between an intermediary and an insurer rests on ambiguity — a risky foundation in a heavily regulated industry. Regulators such as the Financial Conduct Authority (FCA) in the UK expect firms to document intermediary relationships in writing, and the absence of a robust TOBA can lead to enforcement action, especially where consumer harm results from unclear responsibilities. For insurers, a well-drafted TOBA also provides contractual recourse if a broker fails to meet agreed service standards, mishandles client money, or breaches conduct risk expectations. As distribution networks grow more complex — spanning MGAs, coverholders, and digital platforms — the TOBA remains a foundational document that anchors accountability throughout the value chain.
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