Finance in Insurance Intermediaries: What the FC Owns

Insurance intermediary finance is one of the more distinctive corners of the regulated sector, and the reason is a concept that has no real equivalent elsewhere in finance: risk transfer. Whether money held by a broker belongs to the client, to the insurer or to the firm changes the accounting, the regulatory obligation and the reconciliation entirely – and it is determined by terms of business agreements that finance did not write and frequently has not read.

This guide sets out what a Financial Controller actually owns in a broker or managing general agent (MGA): client money under CASS 5, capital resources under MIPRU, the retail mediation activities return, commission recognition, Insurance Premium Tax, and the evidence finance must supply for Consumer Duty fair value. It closes with a responsibilities table, salary benchmarks, the backgrounds that work and answers to the questions employers ask most. Where we summarise FCA rules we link to the FCA Handbook; always check the current text for your firm’s permissions.

Client money under CASS 5

The defining feature of the role. Insurance intermediaries hold client money under CASS 5, which works differently from the CASS 7 regime most people mean when they say “client money”. Our guide to CASS and client money sets out the framework; what follows is what the FC needs to own.

Risk transfer

Where a firm receives premium as agent of the insurer under a written agreement, the insurer carries the credit risk: the premium is treated as paid to the insurer when the customer pays the broker, and claims money and refunds are treated as received by the customer only when they actually reach them. Money held under risk transfer is not client money for the customer’s protection – but where the firm co-mingles it with client money in a client bank account, it falls under the client money rules, and the firm needs the insurer’s written agreement confirming its agency, that co-mingled money is treated as client money, and that the insurer’s interest is subordinated to other clients’. Where no valid agreement exists, the money is client money and must be protected accordingly. The same firm often has both arrangements across different insurers and products, which is why the mapping is real work. The FCA’s Dear CEO letter to general insurance intermediaries describes keeping a register of risk transfer agreements as good practice.

Statutory and non-statutory trusts

Under the default statutory trust, client money cannot be used to give credit – the firm cannot pay a premium to an insurer before the customer’s money has arrived. A non-statutory trust (NST) permits client money to be used for advances of credit to clients and insurers (paying premiums, refunds or claims ahead of receipt), but only with conditions: systems to monitor the credit given that an auditor has confirmed as adequate, a manager responsible for compliance, capital resources of at least £50,000, a trust deed, and terms of business that tell clients how their money is held. The choice affects working capital, the calculation and the audit, and the trust deed governs it.

The calculation and the reconciliation

The client money calculation determines whether the segregated balance is adequate. It must be performed as often as necessary and at least every 25 business days (larger firms generally need to do it more often), with any shortfall made good and any excess withdrawn promptly – the FCA expects the reconciliation to be completed within 10 business days of the calculation. Doing it correctly means knowing which category every balance falls into, and that mapping is the work. The FCA’s review behind its Dear CEO letter found over half of the firms assessed had calculations that did not meet the rules, and common failings included commission withdrawn before the calculation was done and shortfalls not rectified on the day. Our guide to the CASS reconciliation in practice covers the method, and CASS 7 versus CASS 15 explains why experience of one regime does not transfer automatically to another.

The other sector-specific work

Capital resources under MIPRU 4

Insurance intermediaries must hold capital resources under MIPRU 4. For a firm carrying on only insurance distribution (or home finance mediation), the requirement is the higher of £10,000 and 5% of annual income from those activities if it holds client money or assets, and the higher of £5,000 and 2.5% if it does not. A firm operating a non-statutory trust needs at least £50,000. The calculation sits alongside the professional indemnity insurance requirements in MIPRU 3, and capital is expected to cover the PII excess. The FC owns the calculation, monitors headroom monthly and explains to the board what a dividend, acquisition or loss would do to it – the discipline covered in our guide to regulatory capital in management accounts.

The RMAR via RegData

Brokers file the retail mediation activities return (RMAR) through the FCA’s RegData platform, which replaced GABRIEL. Most sections are reported at least twice a year, based on the accounting reference date, with 30 working days to submit. The sections an FC is most involved in are the balance sheet (RMA-A), profit and loss (RMA-B), client money and assets (RMA-C), regulatory capital (RMA-D1), financial resources (RMA-D2) and PII (RMA-E). The numbers must tie back to the ledger and to the client money calculation; a return that does not reconcile to the management accounts is a supervisory red flag. Our guide to regulatory reporting through RegData covers the platform.

Insurance Premium Tax

IPT is charged on most general insurance premiums at a standard rate of 12% and a higher rate of 20% (which applies to travel insurance, mechanical and electrical appliance cover and some vehicle insurance), according to HMRC’s published rates. The insurer normally accounts for IPT to HMRC, but the intermediary collects it within the premium, so it must be shown correctly to the customer, passed through accurately in the settlement to the insurer, and kept separate from commission. Fees a broker charges on top of premium raise their own VAT and IPT questions, and an MGA working under delegated authority will often calculate IPT on the insurer’s behalf. Take specialist advice where the position is not clear-cut.

Commission income recognition

Commission is the intermediary’s revenue and the main judgement in its accounts. Under IFRS 15, a broker’s placement obligation is usually satisfied at policy inception, so placement commission is recognised then – but where the firm has ongoing obligations (mid-term adjustments, renewals administration, claims handling), part of the commission may need to be deferred over the policy term. Expected return commissions on cancellation are a refund liability, and profit commission and contingent arrangements are variable consideration, recognised only to the extent a significant reversal is highly unlikely. UK GAAP preparers should note that the FRS 102 periodic review changes, effective for periods beginning on or after 1 January 2026, move revenue recognition much closer to the IFRS 15 model, so commission policies written for the old Section 23 need revisiting.

Binder, bordereaux and insurer settlement

Where the firm underwrites under delegated authority, bordereaux reconciliation becomes a core monthly process – matching what was written and collected against what is reported and settled to the carrier. Differences age quickly and are painful to unwind. In every intermediary, account current statements, aged debt with carriers and the discipline of settling to terms are routine FC territory.

Consumer Duty and fair value

The Consumer Duty has applied to open products since 31 July 2023 and closed products since 31 July 2024. For general insurance it sits alongside the product governance rules in PROD 4 and the general insurance pricing practices rules, which since 1 January 2022 have prevented firms from charging home and motor renewing customers more than the equivalent new business price. Distributors must make sure their own remuneration – commission, fees, add-on income – does not undermine the product’s fair value to the end customer. That makes finance the source of the evidence: commission and fee levels by product, the cost of the services the firm provides, premium finance charges and cancellation fees. Our guides to Consumer Duty MI and what the Duty means for your finance function go further.

What the FC owns day to day

Beyond the standard control remit – close, balance sheet, statutory accounts, audit, team – the sector adds a defined set of responsibilities.

The CASS audit is a separate engagement from the statutory audit, with its own scope and findings; the FCA’s guidance is that the report should cover a period of not more than 53 weeks and be delivered within four months. Our guide to the CASS audit covers what it involves, and the statutory audit timetable is in our FC year-end audit checklist.

Where the firm is small, the FC is often also the CASS oversight function – preparing, reviewing and reporting on their own work, which is a control weakness worth naming. Our guide to CASS oversight versus operations sets out the proportionate answer. Senior compliance roles – SMF16 compliance oversight and SMF17 money laundering reporting – are a separate hire, handled by our sister firm SMF Capital.

Where firms most often struggle

Risk transfer applied by assumption rather than by agreement. The commonest and most consequential error. If the terms of business agreement does not confer agency, the money is client money whatever the firm has assumed – and any shortfall is historic.

Commission taken too early. Both in the accounts (recognised before it is earned, particularly on instalment and mid-term arrangements) and in the client account (withdrawn before the calculation is done).

Unallocated cash. Premium received without a matched policy, sitting in the client account and ageing. Every broker has some; the question is how much and how old.

Bordereaux differences left to accumulate. Easier to resolve at one month than at nine.

Key-person concentration. One person who understands the client money calculation, with the methodology undocumented. When they leave, an interim or fractional FC is often the fastest way to stabilise the position.

Insurance intermediary finance salaries

Regulated-sector finance roles typically pay 15–25% more than equivalent commercial roles, and in intermediaries two things push candidates towards the top of that premium: CASS 5 experience, which is the scarcest element, and MGA or delegated authority experience, where bordereaux and underwriting accounting narrow the pool further. Finance Director appointments in the sector usually run through our sister firm FD Capital. Wider benchmarks are in our regulated-firm finance salary guide and the CASS accountant job description and salary guide.

Backgrounds that work

Three routes produce credible candidates. Existing broker or MGA finance experience is the obvious one and the shortest pool. Practice auditors who have audited intermediaries arrive understanding risk transfer and the client money calculation from having tested them – an underrated and available source. CASS 7 experience from investment firms transfers in mindset even though the mechanics differ; workable where someone in the firm knows CASS 5, risky where nobody does.

Qualification is the baseline – ICAEW, ACCA or CIMA – and sector experience is what employers are actually buying. A useful interview test: ask the candidate to explain risk transfer in their own words, then ask how they would satisfy themselves it applies to a given insurer. The answer shows quickly whether they have done the work. Our guide to hiring an FC for a broker or MGA covers the assessment in detail, and the insurance intermediary FC practice the search.

Frequently asked questions

What is risk transfer in insurance broking?

An arrangement, made in a written agreement with the insurer, under which the broker holds premium as the insurer’s agent. The customer is treated as having paid the insurer once they pay the broker, so the insurer bears the risk if the broker fails. Without a valid agreement the money is client money.

How often must a broker do its client money calculation?

As often as necessary and at least every 25 business days, with the reconciliation completed within 10 business days of the calculation. Larger firms are generally expected to calculate more often.

How much capital does an insurance intermediary need?

Under MIPRU 4, the higher of £10,000 and 5% of annual income from insurance distribution if it holds client money, or the higher of £5,000 and 2.5% if it does not. A firm using a non-statutory trust needs at least £50,000.

Is IPT the broker’s liability?

The insurer normally accounts for IPT to HMRC, but the broker collects it within the premium and must show and pass it on correctly. MGAs often calculate it on the insurer’s behalf, and broker fees raise separate VAT and IPT questions.

What does a Financial Controller at a broker earn?

Typically £75k–£110k in London and £64k–£94k regionally, with interim FCs at around £500–£700 a day in London. CASS 5 and delegated authority experience push towards the top.