Before a coverholder audit begins, the auditor needs the binding authority agreement, a completed pre-audit questionnaire, underwriting and claims records, bordereaux and financial data, and evidence of compliance and governance controls. Together, these documents define what is tested and how far the review reaches.
The exact list varies by insurer, territory and class of business, so the audit request is the first reference point. The sections below set out each category of information and why auditors ask for it.
Which documents define the scope of a coverholder audit?
The binding authority agreement and its schedules define the scope of a coverholder audit. These documents set out the authority granted, the classes of business, territorial limits, underwriting guidelines and reporting duties, which give the auditor a benchmark against which actual practice is tested.
Auditors typically request the following scoping documents:
- The current binding authority agreement, including all signed amendments and endorsements
- Underwriting guidelines, rating models and referral criteria issued by the insurer
- The audit notification letter and any pre-audit questionnaire
- Prior audit reports and the action plan used to close earlier findings
Prior findings matter because auditors usually check that agreed actions were completed. A coverholder that cannot show closure evidence should say so early, so the issue is not discovered mid-audit. For Lloyd's coverholder audit work, the insurer's own delegated authority requirements also shape the scope, so confirm which standards apply.
What underwriting and policy data should be ready in advance?
Auditors need a full policy listing for the audit period, together with the underlying underwriting files. This allows them to select a sample and test whether each risk was written within the authority granted, priced correctly and documented in line with the delegated underwriting audit criteria.
Have the following available before the audit starts:
- A policy or risk listing covering the audit period, showing premium, limits, inception dates and territories
- Underwriting files containing proposal forms, quotes, referrals and supporting documents
- Rating sheets and evidence of how discounts or loadings were applied
- Policy wordings and certificates issued, including any manuscript terms
- Records of referrals to the insurer and the responses received
A common problem is files that lack a clear decision trail. If a risk fell outside guidelines, the file should show who approved it, when and on what basis. Gaps in that trail are among the more frequent findings in delegated underwriting reviews.
Which claims and complaints records do auditors need?
Auditors need a claims register, individual claim files and a complaints log. These show whether claims were handled within the delegated claims authority, reserved sensibly and settled fairly, and whether complaints were recorded, escalated and resolved in line with the agreement and applicable regulation.
Where claims authority is delegated, the register should show every notification, reserve movement and payment. Claim files should hold the acknowledgement, investigation notes, coverage analysis, settlement authority and correspondence. Auditors also look for evidence that claims above authority limits were referred to the insurer promptly.
For complaints, provide the complaints log, the written procedure and copies of final response letters. Even a coverholder with no complaints should keep a clear record that confirms this. An empty log with no explanation of how issues would be captured can raise questions about the process itself.
What financial and bordereaux information is requested before an audit?
Auditors request bordereaux, premium and claims reconciliations, bank statements and evidence of how funds are held and remitted. A bordereaux audit tests whether reported data matches the underlying policies and cash, and whether premium is paid to the insurer within the agreed terms.
The usual financial requests include:
- Premium and claims bordereaux for the audit period, as submitted to the insurer
- Reconciliations between bordereaux, the policy administration system and the ledger
- Statements for client money or premium trust accounts
- Records of commission calculations and brokerage splits
- Evidence of settlement dates against the contractual payment terms
This is not a financial audit. The auditor is checking compliance with the delegated authority arrangement and the accuracy of reporting, not giving an opinion on the coverholder's accounts. Reconciliation differences should be explained before the visit rather than left for the auditor to find.
What compliance and governance evidence should a coverholder provide?
Coverholders should provide evidence that their business is properly regulated and controlled. This includes regulatory permissions, written policies, staff competence records, outsourcing and business continuity arrangements, and proof of how conduct and financial crime risks are managed day to day.
Typical governance documents include:
- Regulatory authorisation details and any licences required in the territories written
- Policies covering conduct risk, Consumer Duty, data protection, anti-money laundering and sanctions screening
- Training and competence records for underwriting and claims staff
- Organisation charts, delegation of authority matrices and conflict of interest registers
- Professional indemnity cover, business continuity plans and details of any outsourced functions
Policies alone are rarely enough. Auditors look for proof that procedures operate in practice, such as sanctions screening outputs, training attendance logs and board or management meeting minutes that show oversight.
How should a coverholder prepare once the information is gathered?
Once the documents are collected, the coverholder should check them for completeness, brief staff and agree the logistics with the auditor. Preparation reduces disruption and helps the audit stay on schedule, which also supports timely and accurate reporting.
A practical approach is to work through these steps:
- Cross-check the information request against what has been gathered and note any gaps
- Assign a single point of contact for queries and file retrieval
- Make sure underwriters, claims handlers and finance staff are available during the visit
- Arrange system access, or screen sharing for remote audits, in advance
- Review known issues honestly, and be ready to explain them and the plan to fix them
Transparency tends to produce better outcomes. Auditors work more efficiently when issues are flagged openly, and findings are easier to address when the coverholder understands the reasoning behind each recommendation.
How Otter Audit helps with coverholder audit preparation
Otter Audit is a specialist delegated authority audit and compliance firm, and its ACII-qualified auditors work with insurers and coverholders across the UK, Europe and North America. Its approach to preparation is designed to keep audits focused and predictable.
- A clear pre-audit information request that sets out exactly what is needed and why
- Technical knowledge of specialist and non-standard products, so context does not need lengthy explanation
- Reports with clearly explained findings and reasoning, delivered within the agreed deadline
- Coverage of delegated underwriting, claims, run-off, pre-bind and complaints reviews
To learn more about the scope of each review, see the delegated authority audit services available, or contact Otter Audit to discuss your next audit.