The Practice Manual

In this episode of “The Practice Manual,” host Robert Chaplin is joined by colleagues Sebastian Barling, George Gray and Katie Barnes to examine management incentive plans (MIPs) and managing general agents (MGAs). The group analyzes how MIPs serve as a critical tool for aligning management interests with those of financial sponsors and other investors; why the structure of an MIP must be carefully tailored to the MGA’s business model, hold period and regulatory environment; and how the interplay between growth shares, hurdle shares, vesting schedules, leaver provisions and regulatory remuneration requirements is essential to designing effective incentive arrangements.Key PointsWhat are MIPs and why do they matter: MIPs are compensation programs designed for senior or select members of management that align management interests with those of investors over the medium-to-long term. They are structured so that participants only benefit from value if certain measures of success are achieved, making them a powerful tool for driving value creation, particularly in the lead-up to a liquidity event.Benefits of MIPs: MIPs give managers skin in the game and an opportunity to share in the value of the business they are helping to build. They serve as an important recruitment and retention tool, enabling companies to offer competitive equity compensation packages. They can also be a tax-efficient way of remunerating employees.What are MGAs and how do they make money: MGAs are agents that act on behalf of insurance carriers or Lloyd’s syndicates under binding authority agreements, carrying out functions such as underwriting, pricing, claims management and policy administration. They typically generate revenue through base commission on gross written premiums, profit commission linked to underwriting performance and fees for ancillary services such as claims handling and risk management.Why insurers use MGAs: Insurers delegate authority to MGAs to access specialist underwriting expertise in niche or specialty lines of business, extend distribution reach into specific markets, geographies or customer segments, achieve cost efficiency by paying commission on business written rather than maintaining fixed in-house infrastructure, and gain speed to market when entering new classes of business or territories.MIPs in the MGA context: The MGA sector has attracted significant interest from financial sponsors, and MIPs are a standard feature of sponsor-backed structures. Given that an MGA’s ability to trade depends on maintaining relationships with its carriers, a MIP that helps retain key individuals can provide carriers with confidence in continuity of the team, strengthening the binding authority relationship.Risk management and conflicts of interest: Where MIP rewards are linked to key insurance metrics such as loss ratios, there is a risk that such metrics may not fully account for the quality of the underlying risks being written. Regulators are concerned that aggressive incentive arrangements could encourage individuals to bind risks outside appetite, relax underwriting standards or resist fair claims settlements. MIP design should be reviewed alongside the MGA’s broader conduct and risk management framework to ensure they are pulling in the same direction.

Episode SummaryDuring this episode of “The Practice Manual,” host Rob Chaplin is joined by colleagues George Gray, Anika Goodfellow and Usman Sawar to examine the ins and outs of brokerage M&A. The team covers a range of topics, including how acquirors of brokerage businesses must tailor their transaction documentation to protect value, why a standardized approach to deal documents can be a costly mistake and how the interplay between earn-outs, management reinvestment, leaver provisions and restrictive covenants is critical to aligning interests post-acquisition. The panel also explores the FCA change-in-control process and multijurisdictional regulatory approvals, among other key topics.Key PointsWhy brokerages are different: The primary assets in a brokerage are client relationships, key producers and regulatory permissions rather than tangible property or proprietary technology. Revenue is relationship-dependent and largely intangible, which means the legal documentation must work hard to protect what the buyer has actually paid for. Sponsors and acquirors need to resist the instinct to use standardized documents and instead tailor the transaction carefully to preserve value.Earn-outs and consideration structuring: Earn-outs are a common feature of brokerage M&A, particularly on bolt-on acquisitions and platform establishment transactions, where they serve to defer consideration until revenue sustainability can be verified and to keep sellers economically incentivized post-acquisition. On larger, more institutionalized transactions, earn-outs are less common, as sellers — and any external private capital in the structure — tend to push for greater upfront certainty of value.Reinvestment and management incentivization: The obligation for sellers to reinvest in the go-forward business is becoming increasingly central to brokerage transactions. Reinvestment ensures alignment between seller and buyer interests post-closing, with key personnel sharing both upside and downside.Gap controls and interim period management: Gap controls in brokerage M&A require a careful balance between protecting the buyer’s position and allowing the target to continue operating — and, critically, continuing its own acquisitive business model. Restrictions around changes to key personnel, remuneration structures, insurer relationships and key contracts should be calibrated to ensure the business delivered at completion has moved forward during the gap period.Execution risk and shareholder dynamics: Founder-owned brokerages often have large, fragmented shareholder bases with differing tax positions, views on value and levels of transaction experience. Without early planning — including establishing a shareholder representative structure, mapping drag-along and tag-along mechanics and implementing a disciplined power-of-attorney process — deal friction can cause economic terms to reopen and bidder tension to collapse.Regulatory approvals and FCA change-in-control: The FCA’s change-in-control process is typically the dominant timetable driver on U.K. brokerage transactions, with a statutory assessment period of 60 working days that can be extended through clock-stopping and further information requests. Where deals require filings across multiple jurisdictions, each regulator will have different requirements, tests and documentation expectations, and long-stop dates must be calibrated accordingly.Connect and Learn More☑️ Robert Chaplin | LinkedIn☑️ George Gray | LinkedIn☑️ Usman Sawar | LinkedIn☑️ Anika Goodfellow | LinkedIn☑️ Skadden | LinkedIn | X | Facebook☑️ Subscribe Apple Podcasts | Spotify | YouTube“The Practice Manual" is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

On this episode of “The Practice Manual,” host Rob Chaplin is joined by colleagues George Gray, Theo Charalambous and Usman Sawar to explore the world of Lloyd’s of London, the one-of-a-kind insurance and reinsurance marketplace and market regulator that has the capability to write insurance in over 200 territories around the world. The team examines what makes the Lloyd’s market distinctive, why investors are drawn to Lloyd’s businesses and what buyers need to know when approaching a Lloyd’s acquisition. Among other key topics, they cover regulatory engagement and deal structuring to Funds at Lloyd’s (FAL), diligence considerations and the market outlook.Episode SummaryLloyd’s of London is not an insurance company but a centuries-old marketplace where insurance buyers and sellers come together, supported by a unique regulatory structure and a distinct chain of security that underpins policyholder protection. During this episode, host Rob Chaplin is joined by colleagues George Gray, Theo Charalambous and Usman Sawar to examine Lloyd’s hands-on, front-end and ongoing regulatory oversight — from approving syndicates, managing agents and corporate members to monitoring underwriting performance, reserving and capital adequacy — and why change of control at a managing agent or corporate member always requires Lloyd's approval, among many other topicsKey pointsWhat makes Lloyd’s distinctive: Lloyd’s is a marketplace with over three centuries of history, global reach, specialty underwriting expertise and a subscription model for large and complex risks, with gross written premiums of £57.9 billion in 2025. Its chain of security provides layered financial protection to policyholders, from syndicate-level trust fund assets through to the Lloyd’s Central Fund as a discretionary backstop.Why investors are interested: Acquiring a Lloyd’s business can be the fastest route to accessing global insurance markets, as well as established permissions, operational infrastructure and specialty risk exposure that may be less correlated with domestic insurance markets. Alternative routes to market, including London Bridge 2 structures and new syndicate formations, also offer capital-efficient access alongside traditional M&A.Deal structuring and regulatory engagement: Lloyd’s M&A involves acquiring a group structure that may include a managing agent, corporate member and holding company, each with distinct regulatory status. Change of control requires Council of Lloyd’s approval and PRA sign-off after consulting the FCA.Market outlook: The fundamentals for Lloyd’s M&A remain strong, supported by niche and specialty underwriting growth, the influence of AI and technology on underwriting platforms, new syndicate formations seeding future activity, and PRA and Lloyd’s reforms aimed at promoting innovation, international competitiveness and market accessibility going forward.

In insurer and insurance brokerage M&A, the value of a business often lies in its people, client relationships and origination capabilities, making noncompete, nonsolicitation, nondealing and nonpoaching restrictions a critical part of deal protection. On this episode of “The Practice Manual,” host Rob Chaplin is joined by colleagues Caroline Jaffer, Helena Derbyshire and Damian Babic to examine how these restrictive covenants operate in practice, the differences between vendor and employment covenants and the U.K. enforceability principles that require restrictions to be carefully tailored to a legitimate business interest. The panel also explores practical risks that can arise in transactions, including TUPE-related issues in asset deals, team moves and post-acquisition hiring, as well as potential U.K. reforms to employment noncompetes.Key PointsRestrictive covenants are contractual provisions that restrict what a seller can do after a sale. To protect the goodwill in a business being sold and stop the seller from competing with the target for a defined period, companies utilize noncompetes, nonsolicitation, nondealing and nonpoaching clauses.In the employment context, stricter rules apply, including with regard to what legitimate business interests justify the clauses. The panel also examine why a one-size-fits-all approach is a recipe for unenforceability, as well as some of the less obvious risks in insurance M&A, including Transfer of Undertakings (Protection of Employment) (TUPE) transfers, and the litigation risk arising from team moves and hiring individuals subject to known restrictions.The U.K. government has issued a consultation paper on reforming noncompete clauses, including proposals for a statutory three-month cap, a complete ban and salary threshold restrictions. The panel assesses what the changes would mean in practice for insurance M&A and the creative retention strategies — such as deferred consideration, earn-outs and enhanced garden leave — that may become increasingly important to consider.Connect and Learn More☑️ Robert Chaplin | LinkedIn☑️ Helena Derbyshire | LinkedIn☑️ Caroline Jaffer | LinkedIn☑️ Damian Babic | LinkedIn☑️ Skadden | LinkedIn | X | Facebook☑️ Subscribe Apple Podcasts | Spotify | Amazon Music“The Practice Manual" is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

On the second episode of "The Practice Manual," host Robert Chaplin is joined by colleagues James Pickstock, Feargal Ryan and Richi Kidiata to examine reinsurance-to-close (RITC), a vital mechanism of the Lloyd's of London insurance market. The team examines what an RITC entails, including why they sit at the heart of Lloyd's three-yearly accounting process and assess timing, regulatory and operational considerations. The conversation also covers the three principal kinds of RITC and the steps involved in executing an RITC transaction, among other key topics.Episode summaryAt the heart of Lloyd's three-year year of account process is the reinsurance-to-close (RITC) mechanism, a contract that allows a syndicate to close a particular year of account by transferring its outstanding liabilities — both known and unknown — to another syndicate or a subsequent year of account. During this episode, host Robert Chaplin is joined by colleagues James Pickstock, Feargal Ryan and Richi Kidiata to examine how an RITC works in practice, the structures available and the regulatory, capital and operational considerations involved, including required engagement with Lloyd's and the Prudential Regulatory Authority.Key pointsWhy RITCs matter: An RITC enables capital to be returned to investors while ensuring liabilities are fully covered; without it, liabilities would remain indefinitely on the original syndicate's balance sheet, tying up capital and increasing risk. For third-party investors, an RITC reduces the risk of trapped capital, which is a common issue in offshore jurisdictions. For the market, they ensure liabilities are always matched with appropriate capital, supporting Lloyd's reputation for financial strength.Three RITC structures: (1) A natural successor RITC transfers liabilities into a subsequent year of account on the same syndicate, keeping everything under the same managing agent. (2) A third-party RITC transfers the business of one year to another syndicate's year of account, typically where the managing agent decides to exit a line of business. (3) A split RITC transfers a portfolio to two or more syndicates, often for run-off or capital efficiency reasons, and falls outside the definition of an approved reinsurance to close under the PRA rule book — meaning a rule modification application to Lloyd's and the PRA is required.The five-step RITC process: Execution typically involves (i) assessment of liabilities, including those incurred but not reported; (ii) negotiation of key terms, with a heavier focus on regulatory approvals, capital adequacy and operational readiness for third-party or split RITCs; (iii) Lloyd's approval (and PRA approval where required); (iv) execution of the transfer in exchange for a premium paid to the accepting syndicate; and (v) closure of the original underwriting year, with the accepting syndicate taking over claims management.Timing, regulatory and operational considerations: Most years of account close after 36 months, but long-tail classes such as liability and specialty lines may benefit from additional time, which adds execution and planning complexity. Early engagement with Lloyd's and the PRA is essential when utilizing an RITC, supported by a comprehensive package including full actuarial valuations, a partial capital return for Lloyd's and evidence of operational readiness, robust reserving and capital adequacy.