FCA Authorisation for Mortgage and Insurance Intermediaries

The regulated activities you carry on

Authorisation is granted by reference to specific regulated activities, not to a job title. A mortgage broker is not a regulated category in itself. What is regulated is the set of activities you perform. For mortgages, the two core activities are arranging (bringing about) regulated mortgage contracts and advising on regulated mortgage contracts. Entering into, administering, arranging or advising on a regulated mortgage contract are all regulated activities that require FCA authorisation, and MCOB then applies to how you carry them out.

MCOB expresses its application by reference to four types of firm: lenders and providers, administrators, arrangers and advisers. Arrangers and advisers together are referred to as intermediaries, which is where most brokers sit. The FCA groups mortgages, home purchase plans, home reversion plans and regulated sale and rent back agreements under the umbrella term home finance transactions, so a firm advising across these products needs the relevant home finance mediation permissions.

For insurance, the relevant activity is insurance distribution. ICOBS sets the conduct standards for firms carrying on insurance distribution activities in relation to non-investment insurance contracts, and it principally implements the UK's retained version of the Insurance Distribution Directive. In practice the permissions cover dealing as agent, arranging (bringing about) contracts of insurance, assisting in the administration and performance of a contract, and advising on non-investment insurance contracts. Many broking firms hold both mortgage and insurance permissions, because protection and general insurance sit naturally alongside a mortgage sale.

Permissions for mortgage versus insurance intermediaries

When you apply, you request a defined bundle of permissions that matches your intended business. A firm advising on and arranging mortgages will apply for home finance mediation permissions and be allocated to the FCA fee block A.18, covering home finance providers, advisers and arrangers. A firm distributing general insurance applies for insurance distribution permissions and falls into the retail intermediary fee blocks. The table below sets out the main differences in the framework that applies to each.

It is common for the same firm to hold both sets of permissions. Where a firm carries on both insurance distribution and home finance mediation, the MIPRU requirements are combined rather than chosen between, and the higher of any overlapping figures applies. Getting the permission profile right at application stage matters, because acting outside your permissions is a breach in its own right.

MIPRU capital resources requirements

Every authorised intermediary must be able to meet its liabilities as they fall due and must hold capital resources at least equal to the applicable MIPRU requirement at all times. The figure depends on whether you hold client money and on the mix of activities you carry on.

Under MIPRU 4.2.11R, a firm carrying on insurance distribution activity or home finance mediation activity (and not holding client money or other client assets) must hold capital resources of the higher of £5,000 or 2.5% of its annual income. A firm in the same category that does hold client money or client assets must hold the higher of £10,000 or 5% of its annual income. These thresholds scale with the size of the business, so a growing broker should model capital against income well before it becomes binding.

Firms that also administer home finance or lend face higher requirements set elsewhere in MIPRU 4, and where a firm combines several activities MIPRU requires the applicable amounts to be summed. The chart below shows the base capital floors for a pure intermediary.

Professional indemnity insurance under MIPRU 3

MIPRU 3 requires intermediaries to hold professional indemnity insurance, and the minimum limits differ by activity. For an insurance intermediary, MIPRU 3.2.7R sets a minimum single-claim limit of EUR 1,300,380 and an aggregate limit of the higher of EUR 1,924,560 or an amount equivalent to 10% of annual income, subject to a maximum of £30 million. These euro figures were uprated in 2021 from the previous EUR 1,250,000 single-claim and EUR 1,850,000 aggregate levels, to keep the real value of cover in line with the IDD-revised minimums.

For a firm carrying on home finance mediation activity that is not caught by the Mortgage Credit Directive, MIPRU 3.2.9R sets the limit by reference to a percentage of annual income. Where a mortgage intermediary is an MCD credit intermediary, the minimum limits are EUR 460,000 for a single claim and EUR 750,000 in aggregate per year. A policy denominated in a currency other than euros must be at least equivalent to these figures when it is effected and at each renewal.

The permitted policy excess is capped too. Under MIPRU 3.2.12R, a firm holding client money or client assets must keep its excess to no more than the higher of £5,000 or 3% of annual income; under MIPRU 3.2.11R, a firm not holding client money keeps its excess to the higher of £2,500 or 1.5% of annual income. Cover must run continuously from the date Part 4A permission was granted and must extend to Financial Ombudsman Service awards against the firm.

IDD conduct requirements for insurance distributors

If you distribute insurance, ICOBS layers conduct obligations on top of authorisation. Because ICOBS implements the retained provisions of the Insurance Distribution Directive, an insurance intermediary must meet status and disclosure standards that a mortgage-only firm does not. Under ICOBS 4.1, a firm carrying on insurance distribution activities must disclose its identity and address, the type of firm it is, and whether it provides a personal recommendation about the products offered.

An insurance intermediary must go further. It has to disclose that it is included in the Financial Services Register, whether it holds 10% or more of the voting rights in any insurer, whether any insurer holds 10% or more of the intermediary's voting rights, and crucially whether it is acting for the customer or for and on behalf of the insurer. These transparency rules, drawn from IDD articles 18 and 19, are designed so customers understand whose interests the firm is representing.

Alongside status disclosure, IDD-derived rules require demands-and-needs assessments, product information such as insurance product information documents, and product oversight and governance. These are conduct rules rather than authorisation gateways, but the FCA will expect an applicant's business plan and systems to show how they will be met from day one.

Direct authorisation or appointed representative

There are two routes to trading. You can apply for your own FCA authorisation and become directly authorised, or you can become an appointed representative (AR) of a firm that already holds the relevant permissions, often a mortgage or insurance network. An appointed representative is a person party to a contract with an authorised firm which permits them to carry on certain regulated activities, and who is exempt from the need for their own authorisation under section 39 of the Financial Services and Markets Act 2000.

The defining feature of the AR route is responsibility. The principal firm must accept responsibility for the appointed representative's regulated activities, must itself hold permission for those activities, and must have a written contract that meets the FCA's requirements. In return the network typically provides compliance oversight, systems and access to lenders or insurers. The FCA has repeatedly emphasised that principals must properly oversee their ARs, so this is a supervised relationship rather than a light-touch one.

Direct authorisation gives you full control of your permissions, your proposition and your regulatory reporting, but you carry the whole compliance burden yourself, including MIPRU capital, PII and the Senior Managers and Certification Regime. Many small brokers begin as ARs to reach the market faster and move to direct authorisation as they scale. Whichever route you choose, the underlying regulated activities and consumer protections are the same. If you want help weighing the options, our team can talk it through in a free consultation.

Governance and the Senior Managers regime

Authorisation is not just about permissions and capital. Once authorised, your firm falls within the Senior Managers and Certification Regime (SM&CR). Most mortgage and insurance intermediaries are classified as Core firms, which means they apply the baseline set of Senior Management Functions, the Certification Regime for staff who could pose significant harm, and the Conduct Rules for individuals.

A firm only moves to the more demanding Enhanced tier if it crosses set thresholds, such as total intermediary regulated business revenue of £35 million or more per annum on a three-year rolling average (a £45 million threshold applies to certain firms based on how they report), or being a mortgage lender or administrator that is not a bank with 10,000 or more regulated mortgages outstanding. Smaller firms, and sole traders in particular, may fall into the reduced Limited Scope tier. Building a clear governance map, with named senior managers and statements of responsibility, is part of a credible authorisation application.

Conclusion

Getting authorised as a mortgage or insurance intermediary is a structured process rather than a mysterious one. The FCA wants to see that you understand exactly which regulated activities you will carry on, that you have applied for the matching permissions, and that you meet the MIPRU capital and professional indemnity insurance floors. Insurance distributors additionally need to evidence the IDD-derived conduct standards in ICOBS, while mortgage firms work to MCOB. Both are anchored to the same threshold conditions and the Consumer Duty.

The single biggest early decision is direct authorisation versus the appointed representative route, and the right answer depends on your scale, your appetite for running compliance in house, and how quickly you need to trade. Whichever path you take, preparing a realistic business plan, robust financials and a clear governance structure is what turns an application into an approval. If you would like a structured plan for your permissions, capital and SM&CR setup, our FCA authorisation service is built for exactly this.

Frequently asked questions