Binding Authority Agreement Template for Malaysia

The Binding Authority Agreement is a crucial document used in the Malaysian insurance market when an insurer wishes to delegate underwriting authority to a coverholder or managing agent. This delegation, regulated under the Financial Services Act 2013 and supervised by Bank Negara Malaysia, enables the coverholder to underwrite insurance policies on behalf of the insurer within specified parameters. The agreement details the scope of authority, classes of business, underwriting guidelines, compliance requirements, reporting obligations, and financial arrangements. It must incorporate specific Malaysian regulatory requirements while potentially accommodating international insurance practices, particularly when involving foreign insurers or reinsurers. The document serves as the primary reference point for the operational relationship between the parties and their regulatory compliance obligations.

1. Parties: Identification of the insurer/principal and the coverholder/agent, including their regulatory status and licensing details

2. Background: Context of the agreement, relationship between parties, and purpose of the binding authority arrangement

3. Definitions: Definitions of key terms used throughout the agreement, including insurance-specific terminology and regulatory references

4. Appointment and Scope: Terms of appointment and precise scope of authority delegated to the coverholder

5. Duration: Period of the agreement, including commencement date and renewal terms

6. Duties and Responsibilities: Detailed obligations of both parties, including underwriting guidelines, reporting requirements, and operational procedures

7. Compliance Requirements: Regulatory compliance obligations, including FSA 2013 requirements and BNM guidelines

8. Premium and Commission: Financial arrangements, including premium handling, commission structures, and payment terms

9. Claims Handling: Procedures for claims management and extent of claims authority if granted

10. Records and Reporting: Requirements for record-keeping, reporting, and audit rights

11. Termination: Grounds and procedures for termination, including regulatory notification requirements

12. General Provisions: Standard contractual provisions including governing law, dispute resolution, and notices