A recent High Court judgment highlights the critical importance of strict compliance with binder agreements and licensing conditions in the insurance sector. The court confirmed that where an underwriting manager exceeds its mandate or disregards regulatory limits, an insurer is entitled to enforce its contractual rights — including urgent access to underwriting data.
Background
Underwriting managers act under binder agreements which define the scope of their authority. These agreements typically restrict them to the insurer's licence conditions, impose record-keeping obligations, and grant the insurer wide rights of oversight. Where an underwriting manager operates outside these boundaries — for instance, by writing business outside South Africa when only licensed to do so locally — both insurer and manager are exposed to regulatory sanction, reputational damage, and potential serious financial losses.
In the matter before the court, a licensed non-life insurer, authorised to issue guarantees only within South Africa, discovered in mid-2025 that its appointed underwriting manager had issued offshore guarantees in breach of both the insurer's licence conditions and the binder agreement. These guarantees — amounting to tens of millions in foreign currency — exposed the insurer to regulatory sanction, reputational harm, and potentially massive financial liability.
Relying on a termination clause in the binder, the insurer cancelled the agreement, demanded full disclosure of all guarantees issued, and sought access to the underwriting manager's systems and records. Although initial assurances of cooperation were given, the information provided was incomplete and evasive. Faced with this obstruction, the insurer approached the court on an urgent basis to secure access to the underwriting manager's premises and data, including the use of forcible measures if necessary.
Key Principles in Binder Agreements
The court's reasoning turned on standard provisions common to most binder agreements, including:
- Scope of appointment – the manager is confined strictly to the mandate granted by the insurer.
- Geographic limitation – business must be transacted only within the insurer's licensed territory.
- Access to data – insurers are entitled to access all policy and policyholder information upon request.
- Record-keeping – managers must maintain complete books and records, and provide unfettered access to insurers, actuaries, and auditors.
- Audit and monitoring – insurers may inspect records at any time on reasonable notice.
- Termination and breach – material breaches, including dishonesty or exceeding licence conditions, entitle insurers to cancel the agreement and recover all data.
- Step-in rights – in certain cases, insurers may take over the functions of the underwriting manager to protect themselves.
The Court's Approach
The court clarified several important points:
- Not an Anton Piller Order – the relief was not about preventing destruction of evidence but about enforcing existing contractual rights.
- Urgency established – where the insurer faces major financial, reputational, and regulatory risks, the court will intervene urgently without waiting for contractual termination periods to expire.
- Immediate contractual rights – insurers' rights to access data and inspect records apply throughout the life of the agreement, not just upon termination.
- Proportional relief – while intrusive measures may be justified where the manager is uncooperative, courts will impose safeguards such as notice periods, supervision, and return of original records.
Key Lessons for the Industry
- Licensing boundaries are non-negotiable – underwriting managers cannot exceed the insurer's licence conditions without exposing both parties to serious consequences.
- transparency Is essential – insurers have a continuing right to immediate access to underwriting data; resistance or delay is a breach of duty.
- Urgent enforcement is available – courts recognise the seriousness of regulatory and financial risks and will grant urgent relief where necessary.
- Proportional oversight – relief will be tailored to ensure fairness while protecting the insurer's interests.
Conclusion
The judgment affirms that strict adherence to binder agreements and licensing conditions is non-negotiable. Underwriting managers who exceed their mandates or resist cooperation expose themselves and their insurers to severe consequences. Insurers are entitled to enforce their rights promptly, and courts will support such enforcement to protect the integrity of the insurance regulatory framework.
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