Binding authorities: Russian Roulette

Delegated authorities – and binding authorities in particular – are generating the biggest problems for the insurance and reinsurance sector today, costing the industry billions of dollars. Indeed, delegated authority accounts for around a quarter of the business in the London Market. Julian Ward, chief executive of JTW Reinsurance Consultants, the reinsurance inspection of record consultancy, says that around 10% of this business ends in tears because too many companies and syndicates consider that it is too expensive to regularly audit coverholders. Below, Mr Ward explains why this approach represents nothing less than a potentially disastrous ‘false economy’.