Contingent commission (definition)
Carrier profit-sharing paid to agencies based on the book's volume, growth, or loss performance; high-margin and volatile.
Contingent commission is profit-sharing a carrier pays an agency based on the performance of the agency’s book with that carrier: typically some combination of volume, growth, retention, and loss ratio thresholds, settled annually.
Contingents are high-margin revenue, and they are volatile by design; a bad loss year in the book can zero them. Sophisticated buyers underwrite contingent income separately from commission income and discount its durability accordingly.
Contingent agreements also shape behavior, which is why disclosure matters. An agency’s editorial position on placement should be defensible independent of its contingent schedule.