To start an insurance brokerage in the UK you need FCA permission for insurance distribution, or must work as an appointed representative of a firm that has it. A directly authorised broker needs capital of at least £5,000 or 2.5% of annual income (£10,000 or 5% if it holds client money), PII of at least EUR 1,300,380 per claim and EUR 1,924,560 or 10% of annual income in aggregate, a compliant way of handling premiums, and approved senior managers. Most general insurance intermediary applications fall into FCA fee Category 4, which is £2,820.
This guide covers the directly authorised route for a general insurance broker, retail or commercial: permissions, the prudential and client money rules as they stand on 15 November 2026, people, the application file and the rules that apply once trading.
Broker, appointed representative or MGA
A broker acts for the customer, arranges cover with insurers and is usually paid commission by the insurer, a fee by the client, or both. An appointed representative trades under a principal's permission and PII, which is quicker to start but limits the firm to the principal's insurers and terms. A managing general agent (MGA) acts for insurers under delegated authority to bind cover, price or handle claims, which brings extra product governance and oversight duties. Our guide to MGA compliance covers that model.
Which permissions an insurance broker needs
Insurance distribution activity covers several regulated activities, applied for by type of contract.
| Permission | What it covers |
|---|---|
| Advising on contracts of insurance | Recommending a policy to a customer |
| Arranging (bringing about) deals in contracts of insurance | Taking the steps that bring about the policy |
| Making arrangements with a view to transactions in contracts of insurance | Introducing customers to insurers and placing cover |
| Dealing as agent in contracts of insurance | Concluding policies as the insurer's or customer's agent, for example under a binding authority |
| Assisting in the administration and performance of a contract of insurance | Claims help, mid-term changes and renewals |
Apply separately for general insurance and for life and protection contracts if both are in the business plan. Life policies with an investment element fall under investment rules and need investment permissions.
Capital: MIPRU 4.2
| Firm | Capital resources requirement (MIPRU 4.2.11R) |
|---|---|
| Does not hold client money or other client assets | Higher of £5,000 and 2.5% of annual income from insurance distribution |
| Holds client money or other client assets | Higher of £10,000 and 5% of annual income from insurance distribution |
| Holds retail client money under a non-statutory trust | At least £50,000 of capital resources (CASS 5.4.4R), with other conditions |
Annual income is the broker's commission, fees and other income from insurance distribution. The firm must also be able to meet its liabilities as they fall due.
PII: MIPRU 3.2
| Requirement | Rule |
|---|---|
| Minimum limit per claim | EUR 1,300,380 (MIPRU 3.2.7R) |
| Minimum aggregate limit | Higher of EUR 1,924,560 and 10% of annual income, up to £30 million (MIPRU 3.2.7R) |
| Maximum excess, no client money | Higher of £2,500 and 1.5% of annual income (MIPRU 3.2.11R) |
| Maximum excess, with client money | Higher of £5,000 and 3% of annual income (MIPRU 3.2.12R) |
| Higher excess | Allowed only with additional capital from the MIPRU 3.2 tables |
A policy in sterling must be at least equal to the euro limits when it is taken out and at each renewal (MIPRU 3.2.8R). It must cover the firm's employees and appointed representatives, give continuous cover from the date of permission, and cover Ombudsman awards. Our FCA PII requirements guide compares the insurance limits with those for advisers and mortgage brokers.
Premiums and client money: risk transfer or trust
How a broker holds premiums and claims money is one of the first questions in the application. CASS 5 gives three main routes.
| Route | How it works | What the FCA expects |
|---|---|---|
| Risk transfer | The broker holds money as the insurer's agent under a written agreement, so a premium paid to the broker counts as paid to the insurer | Risk transfer agreements with each insurer, and records of which money is covered |
| Statutory trust (CASS 5.3) | Client money held on trust in designated client bank accounts | Segregation, reconciliations and acknowledgement letters from the bank |
| Non-statutory trust (CASS 5.4) | A trust deed allows the broker to use client money for credit, such as paying premiums before the customer pays | Adequate systems and controls, written auditor confirmation, a designated manager, and at least £50,000 of capital if it handles money for retail customers |
The choice affects capital, PII excess, audit cost and the client money reporting the firm must do. Many brokers combine risk transfer with most insurers and a statutory trust for any money not covered.
People: SM&CR and competence
The firm is an SM&CR firm. A small brokerage is usually a core firm, with senior managers such as SMF1 (chief executive) or SMF3 (executive director), SMF16 (compliance oversight) and SMF17 (money laundering reporting officer), each approved by the FCA. Staff who advise customers are certified by the firm every year.
The firm must ensure staff who carry on insurance distribution are competent and keep their knowledge up to date. Since 9 December 2025 there is no longer a fixed requirement of 15 hours of continuing professional development each year, but the competence duty remains. Our guide to insurance training and competence covers what changed.
The application file
| Document | What the FCA looks for |
|---|---|
| Regulatory business plan | Lines of business, retail or commercial customers, insurers and wholesale brokers used, distribution, remuneration |
| Financial projections | Three years with headroom over MIPRU capital, including a stressed case |
| Wind-down plan | How policies, renewals, claims and client money would be handled if the firm closed |
| Client money arrangements | Risk transfer agreements, trust status, reconciliations, bank accounts |
| Product governance | How the firm meets PROD 4 as a distributor: target market, fair value, information from insurers |
| Consumer Duty evidence | Fair value of fees and commission, customer understanding, claims support |
| PII | Policy or firm quote meeting MIPRU 3.2 |
| People | SMF applications, controllers, competence arrangements |
The FCA will read the remuneration model closely. Broker fees charged on top of commission must represent fair value, and the firm must be able to show the customer what it is paying for.
Timescales and fees
Most general insurance intermediary applications are Category 4, a fee of £2,820, paid through Connect and non-refundable. The FCA must decide a complete application within 6 months and any application within 12 months. The Government confirmed on 12 May 2026 that it will cut these to 4 and 10 months, through the Financial Services and Markets Bill. After authorisation the firm pays annual FCA fees and levies for the Financial Ombudsman Service and the Financial Services Compensation Scheme.
The rules that apply from day one
- ICOBS: demands and needs, information before conclusion, claims handling support
- PROD 4: product governance duties for distributors, including fair value
- the Consumer Duty and its annual board report. See Consumer Duty for brokers and MGAs
- terms of business agreements with insurers and wholesale brokers. See our guide to TOBAs and agency agreements
- CASS 5 reconciliations and client money audits if the firm holds client money
- Retail Mediation Activities Return (RMAR) reporting
The insurance rules are being simplified. The FCA's CP26/22 proposes further changes, so build to the current rules and track the final policy.
How Regulatory Counsel helps
We prepare insurance broker applications end to end, including client money design, PROD 4 and Consumer Duty evidence, and SM&CR documents, and we support brokers after authorisation through our insurance broker compliance service. See our insurance, MGAs and brokers sector page.