Category: Reinsurance fundamentals · Reviewed by Jake Leat, Associate Director · Last reviewed 2026-06-05
Override commission is an additional commission allowance paid by a reinsurer to a cedant or intermediary, over and above the original commission allowance on the underlying business. It is the marginal commission attaching to the cession itself and is most commonly seen in delegated underwriting and binding authority arrangements.
Category: Reinsurance fundamentals Also known as: override, broker override Related concepts: reinsurance commission, profit commission, Lloyd’s coverholder
Override commission is most commonly encountered in coverholder and managing general agent (MGA) arrangements. The original commission is the amount paid by the insurer to the retail intermediary on the original placement; the override is an additional percentage paid to the MGA or coverholder for the value added by aggregating, selecting and administering the portfolio. In a reinsurance context the override is the additional commission paid by the reinsurer to the cedant to recognise its role in originating and managing the cession.
Overrides are typically expressed as a percentage of ceded premium and are paid in addition to the standard ceding commission. The aggregate cost (original commission plus override) determines the total acquisition cost reflected in the reinsurer’s pricing.
Override commission is governed by the contractual terms of the reinsurance and (where relevant) the coverholder or MGA agreement. The FCA regime on insurance distribution (ICOBS) and the Insurance Distribution Directive impose disclosure obligations on commission arrangements between intermediaries and customers, although these do not in general apply to reinsurance arrangements between insurers.
Lloyd’s Market Bulletins and binding authority requirements set out detailed expectations for the disclosure, recording and audit of override commissions in delegated arrangements.
In a delegated underwriting authority, the typical commission structure is: original commission (paid to the retail broker) plus override (paid to the coverholder) plus profit commission (paid to the coverholder or cedant if the treaty performs). The reinsurer bears the cost of all three and prices its rates accordingly.
For the cedant, the override is income that offsets the cedant’s own acquisition cost. For the coverholder, the override is its principal source of remuneration for selecting and writing the underlying business under delegated authority. For the reinsurer, the override is a known cost that must be reflected in the technical price.
An illustrative example: a Lloyd’s syndicate (the cedant) writes UK SME property business through a coverholder. The original commission paid to the retail broker on each policy is 15 per cent. The coverholder receives a 7.5 per cent override on top of the original commission. A facultative reinsurance of part of the portfolio carries a 25 per cent ceding commission to the syndicate and a further 2 per cent broker override paid by the reinsurer to the placing reinsurance broker.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
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