Chapter 6 - D Flashcards
What are Terms of Business Agreements (TOBAs)?
Market agreements used to capture the terms and conditions under which a broker does business with various parties
TOBAs can be with insurers, clients, and producing brokers.
Who does a broker have TOBAs with?
Insurers, clients, and possibly producing brokers
In Lloyd’s, there is an individual TOBA with each managing agent.
Is there a standard template for TOBAs?
No, there is no standard template as long as the agreement is in writing
Parties must ensure the agreement covers the fundamentals of their arrangements.
Which organizations have produced model TOBAs?
LMA, IUA, and LIIBA
These models assist in the process but can be amended by agreement.
What does the broker and insurer warrant to each other in terms of regulatory status?
They warrant that they are duly authorised to conduct their respective activities
The broker conducts insurance mediation activities and the insurer conducts insurance business.
What is meant by the broker’s authority in a TOBA?
Includes the authority to hold premium funds on behalf of the insurer
If granted ‘risk transfer’, collected money is deemed paid to the insurer.
What is a ‘risk transfer’ TOBA?
A TOBA that allows the broker to hold funds on behalf of the insurer
Insurers should grant this only to trusted brokers.
What is a non-risk transfer TOBA?
A TOBA that does not allow the broker to hold any funds on the insurer’s behalf
More appropriate for brokers the insurer is unsure about.
What must brokers regulated in the UK comply with regarding client money?
They must comply with the UK regulator’s rules
Non-UK regulated brokers must comply with their own regulator’s rules.
What does the remuneration section of a TOBA cover?
How the brokerage/commission will be set out in individual contracts of insurance
It ensures clarity in compensation structure.
Who is responsible for taxes in relation to funds held by the broker?
The broker is responsible to the insurer but must account for taxes paid on the insurer’s behalf
This highlights the broker’s fiduciary duties.
What does compliance in a TOBA entail?
Each party must comply with their respective obligations, including contract certainty and financial crime avoidance
This ensures ethical standards in business practices.
Why is ownership and access to data and records important in a TOBA?
It clarifies who maintains documentation and reduces the chance of disputes
This is particularly important in case of disputes between insured and insurers.
What acts must both parties comply with regarding data?
Data Protection Act 2018 and General Data Protection Regulation (GDPR)
These regulations ensure the protection of personal data.
What should contracts specify regarding law and jurisdiction?
Where and under what rules any dispute will be heard
This provides clarity and legal framework for dispute resolution.
What is the purpose of conflict management in a TOBA?
To ensure conflicts are identified and managed
This promotes transparency and accountability between parties.
What does confidentiality in a TOBA require from each party?
To maintain the confidentiality of information received from the other
Disclosure is only permitted as required to perform obligations.
What does the identity of the client clarify for the insured’s client?
It clarifies that the broker is working for them.
What is the purpose of claims notification in a broker’s TOBA?
It allows the broker to give guidance to the clients as to the requirements in the event of a claim.
What does disclosure in the TOBA inform the client about?
It puts the client on notice as to their duty of disclosure during the placing process.
What does the TOBA state regarding how brokers are paid?
It sets out the various options for the broker to be paid, including fees from the insured and possible commissions from the insurer.
How does the TOBA clarify how monies are held by the broker?
It makes clear that the broker holds money on trust mainly for the client, but also occasionally for the insurer.
What should the TOBA specify about interest on funds held by the broker?
It should make clear which party may retain any interest made on funds being held by the broker.
What does the data protection clause in the TOBA state?
It states that the broker will comply with the requirements of the GDPR/Data Protection Act 2018.
What does the complaints section of the TOBA outline?
It sets out the broker’s complaints process and informs the client about referring their complaint to the Financial Ombudsman Service.
True or False: The TOBA should include provisions for dispute resolution.
True
Fill in the blank: The TOBA with the client should clarify how _______ are held.
[monies]
