The Lloyd’s Market Association (LMA) has released two new model profit commission clauses for binding authority agreements.
The new model profit commission clauses aim to reduce disputes and improve flexibility in how managing agents and coverholders settle profit-based remuneration, especially in the context of long-tail claims.
Published on August 5, 2025, and developed by the LMA’s Personal Accident Committee in consultation with the delegated authority community, the clauses respond to operational challenges that have become more prominent in recent years, particularly in personal accident and health lines impacted by COVID-related claims and chronic illness exposures.
Profit commissions are typically paid by managing agents to coverholders 12 months after the expiry of a binding authority agreement. However, delayed claims development has made this traditional timeframe increasingly difficult to manage. Clawback provisions have become a frequent source of friction, requiring extensive administration and, in some cases, harming commercial relationships.
In response, the LMA has launched two new wordings: one introducing a single-payment model, settled only after a longer claims development period with clear clawback terms; and a second, multi-payment clause that allows staged commission payments over time, with later payments adjusted to reflect evolving loss experience.
“These new model clauses reduce the risk of clawback payments, which can take years to sort out when a profit commission is paid too early,” said David Powell, head of technical underwriting at the LMA. “They provide more practical and balanced options for managing agents and coverholders alike.”
The updated clauses are now available on the Lloyd’s Wordings Repository and are designed to be adopted across all lines of business.
The release comes after the launch of the UK Consumer Wordings Guidance and aligns with expectations set by the Financial Conduct Authority’s Consumer Duty.
The LMA has indicated that additional model clauses and guidance materials will be issued over the course of 2025, continuing efforts to support contract clarity, regulatory alignment, and operational efficiency in the Lloyd’s market. The changes have been well received across the market, it noted.
