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Insurance glossary
What is binding authority in insurance?
A plain-English definition for wholesale insurance producers, and for the retail producers they work with.
Binding authority is the power, granted by an insurer in a written agreement, to put coverage in force on the insurer's behalf without sending each risk back for approval. The agreement sets limits on classes of business, territory, maximum limits and other terms. In wholesale distribution, binding authority is what separates an MGA or coverholder from a wholesale broker.
How it works.
An insurer delegates authority to an intermediary, such as an MGA or a Lloyd's coverholder, through a binding authority agreement. The agreement lists the classes of business it can write, excluded businesses and coverages, territorial limits and the maximum limits or sums insured. Depending on the contract, it may also let the intermediary collect premium, issue policy documents and endorsements, or settle claims.
A wholesale broker without binding authority submits each risk to an underwriter, who decides whether to quote and bind.
Why it matters to wholesale producers.
If your brokerage holds binding authority for a class, you can promise retail producers fast, certain answers on that class. That is one of the strongest reasons a retail producer sends you a submission instead of a competitor.
For retail producers: knowing which wholesalers can bind a class in-house helps you route urgent accounts to the place that can answer fastest.
Related terms.
Sources (opened October 23, 2026): IRMI: coverholder; IRMI: wholesale broker; WSIA: An introduction to the surplus lines insurance market (2026). General information, not legal or tax advice. Requirements vary by state.
Questions.
Who grants binding authority?
The insurer, through a written agreement with the intermediary.
Can an intermediary bind anything it wants?
No. It must stay within the classes, territories, limits and other terms in the agreement.