FCA Authorisation for Insurance Brokers and MGAs: Requirements, Capital, Fees and Timeline

Which insurance activities require FCA authorisation?

Authorisation is needed for each regulated activity the firm will carry on, for each type of investment. For insurance that means choosing between non-investment insurance contracts (general insurance and pure protection) and long-term care or life policies, and then selecting the activities below. Applying for exactly the activities the business plan describes is what keeps the assessment efficient.

• - Dealing in investments as agent (RAO article 21): concluding insurance contracts on behalf of a customer or an insurer, which is the core activity of an MGA with binding authority
• - Arranging deals in investments (article 25(1)) and making arrangements with a view to transactions (article 25(2)): bringing about the purchase of a policy, including through a digital journey
• - Assisting in the administration and performance of a contract of insurance (article 39A): handling claims and policy administration on behalf of the policyholder
• - Advising on investments (article 53): giving a personal recommendation on a specific insurance contract
• - Agreeing to carry on any of the above (article 64)
• - Holding client money: not a separate RAO activity for insurance, but it changes the capital requirement, triggers CASS 5 and must be declared in the application

Broker, MGA or appointed representative: choosing the model

A broker acts principally for the customer: it researches the market, recommends or arranges cover and usually handles client money. An MGA acts principally for the insurer: it underwrites within limits the insurer sets, binds cover, issues policy documents and often settles claims. Many firms do both for different books, and the permissions, client money position and product governance responsibilities follow the role played in each.

An appointed representative (AR) is a firm that is not itself authorised but carries on regulated activities under a contract with an authorised principal, which accepts regulatory responsibility for it. The AR route is fast to start because the principal notifies the FCA at least 30 days before the AR begins regulated activities (SUP 12.7.1R). Direct authorisation gives the firm control over its own permissions, panel of insurers, product design and growth, and is the natural destination for an MGA or a broker of scale.

MGAs and delegated authority

Delegated authority means an insurer has given an intermediary written authority to act on its behalf, typically to accept risks and bind cover within agreed limits, issue documents, collect premiums and settle claims. The agreement is often called a binding authority. CASS 5.2.3R requires a binding authority to state that the intermediary holds premiums, claims money and premium refunds as agent of the insurer to the extent of that authority. This is known as risk transfer: once the customer pays the premium to the MGA, it is treated as paid to the insurer.

Product governance is shared. Where an MGA has decision-making power over the design of a product, it is a co-manufacturer alongside the insurer under PROD 4, and the firms must set out their responsibilities in a written agreement. Since 9 December 2025 (PS25/21), firms co-manufacturing a non-investment insurance product may choose a single lead firm to be solely responsible for the PROD 4.2 manufacturer rules. The lead firm must be an insurer or a Lloyd's managing agent. The FCA considered and declined industry requests to let MGAs act as lead, so where the option is used the MGA becomes a non-lead firm that must cooperate with the lead and share the information it needs.

MGAs writing on behalf of Lloyd's syndicates also operate within the Lloyd's coverholder framework, which sits alongside, and does not replace, FCA authorisation. We align the FCA application, the binding authority wording and the coverholder documentation so they describe the same business.

Capital and professional indemnity insurance (MIPRU)

MIPRU is the FCA prudential sourcebook for mortgage and insurance intermediaries. It sets two financial safeguards: professional indemnity insurance (PII), which pays claims if the firm gives negligent advice or makes a mistake, and capital resources, which is the firm's own money held as a buffer. Both must be in place from the date of authorisation.

Client money under CASS 5

CASS 5 applies to a firm that receives or holds money in connection with its insurance distribution activity. Client money is money the firm holds for customers, such as premiums waiting to be paid to an insurer or claims money waiting to be paid to the policyholder, unless risk transfer applies.

The standard arrangement is the statutory trust in CASS 5.3, under which client money is held on trust in a segregated client bank account. A firm may instead elect the non-statutory trust in CASS 5.4, which gives more flexibility in how the trust operates within limits set by the rules. It can only do so if it meets the conditions in CASS 5.4.4R: adequate systems and controls, written confirmation from its auditor that those systems are adequate, a designated manager responsible for day-to-day compliance, capital of at least £50,000 where it holds retail client money, and informed client consent.

Every firm holding client money must check its client money position at least every 25 business days and correct any shortfall or excess (CASS 5.5.63R), and its auditor must submit a client assets report to the FCA (SUP 3.10). The application must show which trust is used, the banks holding the accounts and the reconciliation method.

Product governance and fair value (PROD 4)

• - A manufacturer of an insurance product must maintain a product approval process, set out in a written product oversight and governance policy, before each product or significant adaptation is marketed (PROD 4.2.1R and 4.2.6R)
• - Each product must have an identified target market, and the distribution strategy must suit it (PROD 4.2.15R onwards)
• - Non-investment insurance products must be designed to provide fair value, meaning the total price is reasonable relative to the benefits, including the remuneration of every firm in the chain
• - A product must be driven by features that benefit the customer, not by a business model that relies on poor customer outcomes to be profitable (PROD 4.2.14R)
• - Since PS25/21, the frequency of product reviews is set by the firm on a risk basis rather than a fixed 12 month cycle; higher-harm products are reviewed more often
• - Distributors, including brokers that do not manufacture, must obtain the manufacturer's product information, understand the target market and value assessment, and have their own arrangements so their remuneration does not undermine fair value

Consumer Duty and commercial customers

The Consumer Duty (PRIN 2A) requires firms to deliver good outcomes for retail customers across four areas: products and services, price and value, consumer understanding and consumer support. In insurance, a retail customer includes a consumer and, in many cases, a smaller business.

PS25/21 clarified where the Duty and the related ICOBS and PROD rules stop. Retail market business excludes specialist risks contracts (such as marine, aviation, goods in transit and certain credit and suretyship risks) for commercial customers, and any general insurance contract for a larger commercial customer. A larger commercial customer is a charity with annual income of £6.5 million or more, a trustee of a trust with net assets of £5 million or more, or an enterprise that is neither a micro-enterprise nor a small business.

A commercial broker or MGA should therefore map its book: the smaller business and consumer elements carry the full Duty, while larger commercial and specialist risks business carries the lighter set. The FCA expects the application to show how the firm will meet the Duty where it is in scope.

Senior managers and the SM&CR

The Senior Managers and Certification Regime (SM&CR) requires the individuals running the firm to be approved by the FCA before they start, to have a defined statement of responsibilities, and for staff in certain roles to be certified as fit and proper by the firm each year.

SYSC 23 Annex 1 sets the category. A firm whose only regulated activity is insurance distribution for non-investment insurance is a limited scope SMCR firm only where its principal purpose is a business other than regulated activities, for example a retailer selling insurance alongside its goods. A sole trader is also limited scope. Most brokers and MGAs, whose main business is insurance distribution, are core SMCR firms. Typical senior management functions are the chief executive (SMF1), executive directors (SMF3), the chair (SMF9) where there is one and, where the firm must have a compliance function, compliance oversight (SMF16).

The FCA states on its general insurance intermediary page that anyone holding a senior management function needs sufficient insurance experience, and that this has been an issue in past applications. The business plan should set out each senior manager's insurance background in specific terms.

What the FCA application contains

• - The application form, submitted through the FCA Connect system
• - A regulatory business plan tailored to the firm, covering background, the business to be undertaken and target customers, governance, staff and organisation chart, outsourcing, and systems and controls including financial crime controls
• - Financial forecasts showing how the firm will meet its capital requirement throughout the forecast period
• - Form A for each approved person, statements of responsibilities and CVs
• - The IT self-assessment questionnaire and, where indicated, the IT controls form
• - The fees and levies supplement for retail firms selling non-investment insurance, and controller, close links and significant events forms where relevant
• - Customer journey documentation, conflicts of interest policy and the policy on customers in vulnerable circumstances
• - Evidence of how the firm will meet the Consumer Duty, and how it has addressed the FCA's portfolio letters for general insurance
• - Client money bank account details where the firm will hold client money, plus a UK bank account and principal place of business