LMA updates binder clauses for long-tail exposures

The Lloyd’s Market Association has released two new model profit commission clauses for use in binding authority agreements, offering updated options that reflect changing claims patterns.

Developed by the LMA’s personal accident committee in collaboration with the delegated authority community, the clauses are suitable for use across all lines of business. They follow recent changes to the personal accident K Form and are designed to address profit commission challenges arising from delayed claims, including those linked to Covid and chronic illnesses.

David Powell, head of technical underwriting at the Lloyd’s Market Association, commented: “These new model clauses reduce the risk of claw-back payments, which can take years to sort out when a profit commission is paid too early. One clause establishes a single payment profit commission, payable after a suitable time period has elapsed, with clear claw-back provisions in the event of over-payment. The second clause provides a multi-payment option, allowing the coverholder to receive a portion of the profit commission early, with further payments at agreed dates in the future, subject to adjustments to reflect claims experience and overall profitability of the binder.”

The new clauses form part of the LMA’s broader work to improve communication and consumer outcomes.



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