What distinguishes a risk transfer TOBA from a non-risk transfer TOBA?

A risk transfer Terms of Business Agreement (TOBA) specifically involves arrangements where the responsibility for risk is transferred from one party to another, typically from the broker to the insurer. In these agreements, it is essential to obtain the insurer's permission when there is an intention for funds to be held or passed between the broker and the insurer. This requirement ensures that all transactions are conducted transparently and that the insurer is aware of the financial implications of the risk being transferred. By requiring permission to hold funds, the insurer maintains oversight and control over the financial arrangements, which is crucial in managing their risk exposure effectively.

In contrast, non-risk transfer TOBAs do not involve the same level of financial exposure or obligation, which allows for more flexibility in negotiation and handling of funds without needing the same level of oversight from the insurer. The distinction comes from the nature of the risk involved and the subsequent controls required to manage that risk effectively.