Why local market understanding is critical in delegated authority audits
By Ameet Kaushal, Managing Director, Audit Solutions – Insurance Solutions, Davies
As delegated authority business becomes increasingly international, insurers are managing relationships with Coverholders and other delegated partners across a growing range of markets and jurisdictions. This creates opportunity, but it also adds complexity, with regulatory expectations, business practices and operating models differing significantly between markets.
For insurers seeking effective oversight of international portfolios, the challenge is to maintain consistent audit standards while recognising the environment in which each delegated partner operates. Language is an important part of this, but it needs to be combined with insurance expertise and an understanding of the local market.
Understanding the context behind the answers
An audit depends on good conversations. Auditors need to ask the right questions, understand the responses and know when an issue warrants further investigation. Conducting those discussions in the local language can help establish rapport and allow operational staff, underwriters, claims handlers and management to explain processes and practices in the language in which they work every day.
Effective communication, however, goes beyond translation. The auditor also needs to understand the context behind what they are hearing. A claims process, for example, may reflect established local market practices, while governance arrangements can be influenced by the regulatory environment in which an organisation operates.
Differences in terminology, documentation or operational processes do not necessarily indicate a problem. Understanding why those differences exist is important when assessing whether appropriate controls are in place and identifying areas that may require closer attention. This is where local market experience can add real value.
For example, during a European delegated authority audit, we identified a claims sign-off process that initially appeared inconsistent with the insurer’s expectations. Authority approvals were evidenced through a combination of workflow records and local documentation rather than a single formal approval document as might be expected in the UK market. On closer review, however, the process reflected a well-established local operating model, supported by clear authority limits, management oversight and a robust audit trail. The issue was not a control weakness but a difference in market practice and documentation standards. Understanding that distinction allowed the audit to focus on the effectiveness of the control itself, rather than the format in which it was evidenced.
Looking beyond compliance
A delegated authority audit should provide insurers with an independent and informed view of how an arrangement is operating in practice. At Davies, our focus is on giving clients clear, practical insight that supports effective oversight and governance, rather than approaching audit purely as a compliance exercise.
An auditor who understands the regulatory, operational and cultural environment is better placed to distinguish between genuine areas of concern and legitimate differences in market practice — and better placed to know when something does warrant closer attention. There are benefits for the delegated partner too: direct engagement with an auditor who understands its market and can communicate effectively with its people supports a more constructive audit, making it easier to explore issues as they arise rather than around them.
Combining local insight with consistent standards
For insurers operating international delegated authority programmes, consistency remains essential. They need confidence that risks are being assessed against a robust methodology and that findings can be considered consistently across different territories and delegated partners.
The aim is therefore to combine local expertise at the point of delivery with consistent audit methodology, reporting and quality oversight. This becomes particularly important as delegated authority programmes grow: a consistent approach across multiple audits allows insurers to identify recurring themes, compare findings and develop a clearer view of risk across the portfolio, while still taking account of the characteristics of individual markets.
It’s this combination — local depth, delivered to a single standard — that has shaped how we’ve built out our own audit capability.
Davies Audit Solutions International was established to extend our audit capability across the UK, Europe, Middle East, Asia-Pacific and wider international markets, complementing our established operations in the US and Canada. As part of that development, we have enhanced our European multilingual capability, with support across Italy, France, Spain, Germany and the Nordic markets.
The strength of this capability lies in combining language skills with insurance and delegated authority experience and local market knowledge. For clients, this supports effective engagement with delegated partners locally while maintaining the consistency and quality required across an international audit programme.
As delegated authority continues to develop across markets and borders, this combination of local depth and consistent standards isn’t a nice-to-have — it’s what separates an audit that flags the right issues from one that flags the unfamiliar ones. Technology, data and more sophisticated monitoring all have an important role to play in strengthening oversight, but audit still relies on professional judgement, informed questioning and an understanding of how a business operates in practice.
