If you’re a broker working under binder agreements, 2025 just became considerably more interesting. The Prudential Authority has put third-party risk management squarely in the regulatory spotlight with Prudential Communication 2 of 2025, and that means your binder arrangements are about to get some serious attention.

Frankly, it’s about time. We’ve been watching this space for years, and the industry has needed clearer guidance on third-party relationships for far too long.

Why Now? The Real Story Behind the Regulatory Push

This isn’t happening in a vacuum. We’ve all seen the headlines when third-party oversight goes wrong, operational failures, compliance breaches, and ultimately, poor outcomes for clients. The regulator is responding to real market concerns, and they’re right to do so.

What’s particularly telling about this communication is its scope. Whilst much of the language targets insurers directly, the practical impact extends well beyond insurance companies themselves. If you’re operating under a binder mandate, you’re very much part of this conversation.

Beyond Binders: The Bigger Picture

Here’s what many brokers haven’t fully grasped yet: this review covers far more than traditional binder agreements. The Authority wants insurers to examine their entire approach to third-party relationships, which means everything from strategic partnerships to your IT suppliers could fall under enhanced scrutiny.

The seven key areas they’ve identified tell the story:

• Strategy and governance – how third-party risk fits into the bigger picture
• Risk assessment – understanding who’s critical and who’s not
• Due diligence – knowing your partners properly, not just on paper
• Contracting – making sure agreements actually work in practice
• Onboarding and monitoring – getting relationships right from day one and keeping them that way
• Termination planning – having proper exit strategies when things go wrong
• Strategic partnerships – including, crucially, binder arrangements

What’s particularly interesting about Joint Standard 1 of 2024 is how it treats outsourced service providers. Many brokers are only just realising that their claims handlers, document management services, and other operational suppliers now fall under the same regulatory lens as their underwriting relationships.

What This Means for Your Binder Business

Let’s cut to the chase. If you’re operating under binder authority, you need to pay attention to several specific areas:

• Know your authority inside out. We regularly encounter brokers who may not have properly reviewed their delegation agreements in years. The days of “near enough” are over.
• Technical competence isn’t optional. Whether you’re quoting, issuing policies, or handling endorsements, you need to demonstrate genuine expertise. The regulator expects it, insurers demand it, and clients deserve it.
• Documentation matters more than ever. Your client communications need to be transparent, fair, and properly recorded. If you can’t evidence what you told a client and when, you’re exposed.
• Embrace oversight, don’t resist it. Audits, training sessions, and compliance reviews aren’t bureaucratic box-ticking exercises. They’re your opportunity to demonstrate professional competence.

The Enforcement Reality

Looking ahead, we expect the Prudential Authority to take a more hands-on approach to enforcement. The light-touch regulation era is definitively behind us. Insurers will face genuine consequences for poor third-party risk management, and that pressure will inevitably flow down to brokers and other service providers.

We’ve already seen this shift in our own client base. Insurers are asking harder questions, demanding more detailed reporting, and taking a much closer look at the brokers they work with. It’s not just about technical competence anymore, it’s about demonstrating robust governance and risk management at every level.

Our Take on What Good Looks Like

At PARTNER RISK, we’ve been building these principles into our binder relationships for years. Here’s what we think separates genuine partnership from mere compliance:

• Clear agreements that actually work in practice. We don’t just draft binder agreements, we make sure they reflect how business really gets done.
• Proper training and ongoing support. Product knowledge isn’t something you acquire once and forget about. Markets change, risks evolve, and your understanding needs to keep pace.
• Transparent oversight and reporting. Nobody likes surprises, especially in regulated industries. Our reporting mechanisms give all parties clear visibility of what’s happening and when.
• Consistency you can rely on. Whether you’re dealing with a straightforward renewal or a complex claim, you should know what to expect from your underwriting partner.

The Opportunity Hidden in the Challenge

Here’s the thing that many brokers are missing: this regulatory focus is actually an opportunity. Professional brokers who’ve been doing things properly all along now have a chance to differentiate themselves clearly from those who’ve been cutting corners.

Clients are becoming more sophisticated about regulatory requirements. They want to work with brokers who understand compliance, not just those who offer the cheapest premium. The regulatory emphasis on proper governance and risk management aligns perfectly with what fully compliant brokers have always provided.

What You Should Do Next

Don’t wait for your insurer partners to chase you. Take the initiative:

• Review your binder agreements properly. A quick skim isn’t enough – a legal review might be worthwhile to protect both your business and your clients.
• Audit your internal processes honestly. Identify any gaps and ask yourself what would be difficult to demonstrate under regulatory scrutiny.
• Invest in your record-keeping. Ensure documentation is accessible, accurate, and complete. If there are weaknesses, now is the time to address them.
• Stay engaged with training and updates. The regulatory landscape is evolving rapidly, and proactive awareness is your best defence.
• Assess your risk exposure regularly. What worked last year might not be adequate this year – review and adapt continuously.

Building a Stronger Industry Together

The reality is that stronger regulation, properly implemented, benefits everyone. Clients get better protection, professional brokers gain competitive advantage, and the market maintains the trust that’s essential for long-term success.

We’re here to support brokers who want to navigate this landscape professionally. Not just in managing binder relationships, but in understanding the broader risk environment that shapes our industry. Because ultimately, that’s how we build a more trusted, more professional insurance sector, by working together to get it right.

If you’d like to discuss how these regulatory changes might affect your business, or if you want to review your current binder arrangements, we’re here to help. The conversation is changing, let’s navigate it together.