InterContinental Insurance Brokers, LLC and Risk Transfer Insurance Alliance,
LLC are committed to full disclosure of income and revenues earned through
the structure and management of risk management programs on behalf of
our clients. We view the issue of disclosure as one of transparency and
accountability to the highest standards of professional conduct in all
aspects of our business practices – including of course that of
fair and reasonable compensation for services. This Disclosure Statement
identifies and defines the various mechanisms through which we may receive
compensation for our brokerage services. In the interests of full disclosure,
we are compelled here to identify and define all possible methods of compensation
for brokerage services. In so doing, please understand this to be a general
Disclosure Statement and as such, we include certain methods of brokerage
compensation for which we may have never received revenue. If you are
a client of ours, we would call your attention to the Compensation Disclosure
Statement contained in the Insurance Program Proposal we present to you
as the unequivocal Disclosure Statement of all compensation and revenue
associated with our risk management services.
Commissions paid by insurance carriers as sales compensation for the placement
of insurance policy(ies) is the most traditional method of broker compensation
and represent one of the two (2) principal mechanisms through which we
receive compensation - the other being brokerage fee for service agreements
discussed here below. In offering terms and conditions of coverage, including
premium consideration; the insurance carrier may include commission in
the premium offering or offer coverage terms and premium consideration
“net” of commission. The inclusion of commission is a fixed
percentage of the policy premium paid to the producing broker or agent
as sales compensation. Commission compensation is a fixed or flat percentage
of the policy premium, paid by the insurance carrier, by policy, under
commissionable policies.
In certain instances, we may be asked by a client or prospective client
to provide insurance brokerage and risk management services of a wholly
analytical nature – neither related to any insurance policy nor
intended to result in a policy placement. Rather, our services are intended
to examine the viability of current risk management program structure(s)
and/or feasibility of alternative risk financing approaches, including
non-traditional risk financing mechanisms. Under these circumstances,
since no commissionable policy placements exist or are contemplated; we
would offer a specific Brokerage Fee for Services Agreement identifying
brokerage and risk management services to be provided and associated fees
to be earned as compensation for the services identified. Broker Fee for
Services Agreements are client specific, agreed to and executed by both
the client and ourselves and represent the second principal source of
compensation income for us. We would also note that under certain circumstances,
insurance carriers will offer policy terms and conditions offerings, including
premiums, that do not include producer commission compensation –
offerings “net” (zero) of commission. These policy offerings
– excluding commission – are particularly common where the
insurer’s terms and conditions of coverage contain high insured
retentions (deductibles) under cash-flow programs and/or contain loss
sensitive or retrospective rating mechanisms which preclude ultimate premium
determination until the expiration of the policy term. These risk management
program structures can result in significant upward or downward premium
adjustments between the insured and carrier which preclude traditional
fixed percentage policy commission based sales compensation commonly associated
with guaranteed cost insurance policies. Under these circumstances, policy
offerings are “net” of commission to the producer and Broker
Fee for Services Agreements are both necessary and a more appropriate
form of compensation.
Contingency Agreements or Profit Sharing Agreements – commonly referred
to as “incentive” compensation - are commissions that may
be paid by an insurance carrier contingent upon the achievement of premium
growth, total premium volume and/or profitability ratios across the total
of all policy premiums placed with the carrier. Profit Sharing Agreements
or contingent commissions represent a “pooling concept” which
may or may not result in additional compensation to the producer based
on a host of pre-established factors of growth, total volume and profitability
unrelated to any specific policy but nonetheless reflective of collective
sales performance. It is important to note that within the context of
the “pooling” concept inherent in profit sharing agreements,
any singular policy placement may contribute to the achievement of incentive
compensation or negatively impact incentive commission that may have otherwise
been earned. Our decisions and recommendations of insurance carriers is
based solely on the strength of the carrier’s terms and conditions
of coverage, including premium considerations and financial strength and
service capabilities of the proposing carrier to support the program and
are wholly unrelated to the existence, if any, of profit sharing or contingent
commission agreements.
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