Information Letter 3 of 2013 on Binders Regulations

This document from the FSB provides:

  1. Guidance on activities that constitute binder functions,
  2. Guidance on activities that are incidental to binder functions.
  3. Remuneration payable as a binder fee.

Some important points:

  • Inclusion of “Incidental Activities”
  • Incidental Activity : “any activity that is necessary or expedient for the achievement of the objectives of the binder agreement and the effective and efficient performance of a binder function”
  • A Binder holder may not receive an additional fee from an insurer for performance of incidental activities, related to the binder function performed by that binder holder, on behalf of the insurer (i.e. an outsourced fee) over and above the binder fee.
  • Where no binder function is performed in relation to certain insurance business, the activities referred to in column 3 of Annexure A will no longer be activities that are incidental to a binder function. Rather, they will be insurer functions that the insurer will either perform itself or may choose to outsource to a third party (Subject to Directive 159.A.i)
  • Changes to the format and frequency of reporting of remuneration /Activity Based Fee Model
  • Reporting will initially be on an “as and when requested” basis, but will over time become part of regular quarterly reporting.
  • The Binder fees may be expressed as either a percentage of gross premium, a fixed Rand amount, or an alternative measure, provided that the binder fee is reasonably commensurate with the actual costs of the binder holder associated with rendering the services under the binder agreement, with allowance for a reasonable rate of return for the binder holder. The binder fee reported must include remuneration for all applicable incidental activities.
  • Insurers must ensure that all existing binder agreements are aligned with this Information Letter by no later than 90 days after the issue date of the Information Letter.

An Insurer that is not able to align its binder agreements with this Information Letter within the required period must notify the Registrar accordingly. A notification must be submitted electronically to the Registrar at

Please click here to download a copy of Information Letter 3 of 2013.

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