A Condition or not a condition: THAT is the question

It is probably fair to say that in our daily professional lives the word ‘condition’ has particular significance, especially when you are explaining to clients and making them aware of warranties and conditions attaching to contracts of insurance AND the consequences of an insured not complying with them - as dictated by ICOBS.

However, by being this diligent and by making sure that you give clients sufficient information upon which they can rely on when making an informed decision, how many of us, hand on heart scour the ins and outs of the many contracts we are asked to enter - just to run our business – so that we too can make an informed decision?

When Apple or Paypal or Magic Soul (the radio station I have in the background whilst I work – showing my age perhaps?) update their Ts & Cs, do I read line by line and then make an informed decision to either accept or reject? Nah… like many, I simply dive to the accept button and carry on regardless.

This brings me to the point of this article. Contracts, particularly Insurer Contracts, commonly known as Insurer TOBAs.

Generalising I know, but I am guessing that most insurer TOBAs would start by saying something like:

  • The Insurer is an insurer authorised in the UK to effect and carry out contracts of insurance in the UK or is an insurer authorised in its country of registration and having the appropriate permissions to effect and carry out contracts of insurance in the UK.
  • The Broker is an insurance intermediary authorised in the UK to carry on insurance broking activities in the UK and where conducting business outside of the UK, the Territory.
  • The purpose of this Agreement is to set out the basis on which the Broker may arrange policies of insurance underwritten by the Insurer.


The key in this opening salvo, is what it says at (C): ‘sets out the basis on which…

Do we really understand what the consequences might be of the remaining paragraphs, or the failure or refusal of a party to the agreement not fulfilling their obligations? I certainly do not when I am notified by Apple, Paypal or Magic Soul that they have updated their Ts and Cs. I have no interest and therefore no understanding of these contracts I so willingly enter.

Is the same true of insurer TOBAs I wonder?

Now, I am certainly not casting aspersions in your direction, however insurer TOBAS (as stated above) that  ‘set out the basis on which…’ - are vital components in your professional life therefore I am sure you would agree, it is important that they are right, reflect the relationship you have with each insurer, and both parties understand ‘… the basis on which…’


Of course, I hear you say. Yet this has not stopped the APCC (Association of Professional Compliance Consultants) writing to the FCA bringing to the regulators attention their collective concern regarding certain limitations and conditions contained within insurer TOBAs, specifically as they relate to Risk Transfer.

Russell-Cooke Solicitors stated:

“The breach of a condition entitles the innocent party to treat the contract as being at an end and to additionally claim damages for any loss suffered. This is because a condition is seen as being of such importance that it goes to the ‘heart’ or the ‘root’ of the contract. A breach of a condition would be disastrous for the performance of the contract as a whole and so it can be treated as being at an end.”

The APCC’s paper therefore cast doubt as to the veracity of insurer TOBAs where risk transfer is offered because these agreements [in the view of the APCC] make the appointment of intermediaries to act as their agent conditional on certain events occurring (or not as the case may be). For example:

conditional on the intermediary paying premiums on to the insurer within 30 days. If these conditions are not complied with the agency appointment may be questioned.

Way back in 2012, the FSA were cognisant of this and encouraged brokers to: review their risk transfer agreements to ensure that all risk transfer granted is unconditional:

 (CP12/20: https://www.fca.org.uk/publication/consultation/cp12-20.pdf)

Whilst I am not here to argue whether the APCC were right to do this, the fact remains that they are sufficiently concerned that they have brought this to the attention of the FCA.

What should you do?

In our travels, we have consistently drawn to our client’s attention the importance of ensuring that client or insurer money is handled in accordance with the FCA’s rules and expectations and that there is both effective segregation and proper use of risk transfer.

So, review your insurer TOBAs and make sure that these TOBAs that grant risk transfer do not impose limitations or conditions on you in return.

About the author

Bruce has worked in financial services for the whole of his professional life, including 11 years as a Compliance Director of a US owned Independent Financial Advisory and Wealth Management business. At RWA, Bruce led the Audit and Conduct Risk department from our Manchester office. Bruce left RWA in 2023

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