In short
Under CASS 5, a broker must pay client money into a client bank account as soon as practicable, usually by the next business day. At least every 25 business days it checks that its resource covers its requirement as at the previous day's close, funds any shortfall the same day, and reconciles each client bank account to the bank statement within ten business days.
Key takeaways
- Client money must be paid into a client bank account as soon as practicable (CASS 5.5.5R), and the FCA expects this to be possible by the next business day after receipt in most cases (CASS 5.5.6G).
- If a UK bank has not acknowledged in writing that a client bank account is held on trust within 20 business days of the firm's notice, the firm must move the money to another bank as soon as possible (CASS 5.5.50R).
- The calculation in CASS 5.5.63R compares the resource and the requirement as at close of business on the previous business day, at least every 25 business days, using either the client balance method or the accruals method.
- A shortfall must be paid in by close of business on the day the calculation is performed, and each client bank account must be reconciled to the bank's statement within ten business days of the calculation.
- A receipt that cannot be matched to a transaction should be treated as client money until it is matched (CASS 5.5.17G(4)), and the non-client part of a mixed remittance must be removed within 25 business days of clearing or at the next calculation if earlier.
What segregation means for a broker
Segregation means keeping client money apart from the firm's own money so it is protected if the firm fails. CASS 5.5.3R requires a broker to hold client money separately from its own money, and CASS 5.5.5R says that is done by paying it as soon as practicable into a client bank account, or by paying it out in a way CASS 5.5.80R allows, such as to the client or to the insurer. A client bank account is a bank account in the firm's name, held as trustee, that the bank has acknowledged is held for clients.
The rules set specific timings. Money the firm owes a client must be paid into a client bank account or to the client no later than one business day after it becomes due (CASS 5.5.4R). Automated transfers must go straight into a client bank account, or be moved there by the next business day if they land in the firm's own account (CASS 5.5.12R). Only limited firm money may sit in a client bank account: the minimum needed to open or keep it open, commission and other firm money temporarily present under CASS 5.5.16R, and interest not yet withdrawn (CASS 5.5.9R), plus any of its own money the firm prudently pays in as a buffer, which then becomes client money (CASS 5.5.10R).
This guide builds on the overview in our CASS 5 client money rules guide. Money held as an insurer's agent is outside the client money rules and should not enter a client bank account unless the insurer agrees; see risk transfer agreements.
| Money | Where it goes | Timing | Rule |
|---|---|---|---|
| Premiums and claims money received as client money | Client bank account | As soon as practicable; usually by the next business day | CASS 5.5.5R, 5.5.6G |
| Money the firm owes a client | Client bank account or the client | No later than one business day after it is due | CASS 5.5.4R |
| Automated transfers received in the firm's own account | Client bank account | No later than the next business day | CASS 5.5.12R |
| Money from appointed representatives (immediate regime) | Client bank account or forwarded to the firm | Received by close of the third business day | CASS 5.5.19R |
| Firm money in a mixed remittance | Out of the client bank account | Within 25 business days of clearing, or at the next calculation if earlier | CASS 5.5.16R(2) |
Choosing and opening client bank accounts
Client money must be held at one or more approved banks (CASS 5.5.38R). Before opening a client bank account, and as often as appropriate but at least once in each financial year, the firm must take reasonable steps to establish that the bank is appropriate (CASS 5.5.43R). The guidance in CASS 5.5.45G lists what to look at: the bank's capital, how much client money is placed with it relative to its capital and deposits, its credit rating, and the risk in its lending, investment and group activities. CASS 5.5.44G suggests spreading money across more than one bank where the amounts justify it.
Using a bank in the firm's own group needs extra care: the firm must review that bank at least as rigorously as any other and tell clients in writing that they may object (CASS 5.5.47R). Holding a consumer's money in a bank outside the UK needs prior written disclosure of the different legal regime and its consequences (CASS 5.5.53R). Clients in a general client bank account share in a common pool rather than owning a specific sum (CASS 5.5.13G).
Acknowledgement letters and the 20-business-day rule
When it opens a client bank account, the firm must give the bank written notice asking it to acknowledge in writing two things (CASS 5.5.49R). First, that all money in the account is held by the firm as trustee, and that the bank may not combine the account with any other account or set off against it any sum owed on another of the firm's accounts. Second, that the account title sufficiently distinguishes it from accounts holding the firm's own money.
If a UK bank has not returned the acknowledgement within 20 business days after the notice was sent, the firm must withdraw all money from the account and deposit it with another bank as soon as possible (CASS 5.5.50R). For a bank outside the UK, the same 20-business-day test applies, but the consequence is that the firm must notify the client as CASS 5.5.51R requires. Diarise the 20th business day when the notice is sent, not when someone remembers to chase it.
| What the acknowledgement must confirm | Rule |
|---|---|
| All money in the account is held by the firm as trustee (as agent in Scotland) | CASS 5.5.49R(1) |
| The bank may not combine the account with any other account | CASS 5.5.49R(1) |
| The bank may not set off sums owed on the firm's other accounts | CASS 5.5.49R(1) |
| The account title distinguishes it from accounts holding the firm's own money | CASS 5.5.49R(2) |
| UK bank: no acknowledgement within 20 business days means move the money | CASS 5.5.50R |
| Non-UK bank: no acknowledgement within 20 business days means notify the client | CASS 5.5.51R |
Commission, mixed remittances and unallocated cash
A broker may draw commission from a client bank account once it has received the premium from the client, or from a premium finance provider acting for the client, and if doing so is consistent with its terms of business with both the client and the insurer (CASS 5.5.16R(1)). Commission may be drawn before the premium is paid to the insurer. Where a client pays in instalments, the test applies to each instalment (CASS 5.5.17G(3)).
A mixed remittance is a single receipt that is partly client money and partly the firm's own money, such as a premium that includes the broker's fee. The whole amount must go into a client bank account, and the firm's part must be paid out as soon as reasonably practicable and no later than 25 business days after the remittance clears, or at the next calculation if that comes first (CASS 5.5.16R(2)). Commission that has become due is treated the same way (CASS 5.5.17G(1)).
Unallocated cash is money received that the firm cannot yet match to a client or policy. CASS 5.5.17G(4) says such a receipt should be treated as client money while the firm works to match it as soon as possible. Unallocated balances that are left to age are one of the most common causes of inaccurate calculations.
Designated investments
A firm operating a non-statutory trust may, to the extent it considers appropriate, segregate designated investments instead of cash, provided their value is at least equal to the money that would otherwise have been in a client bank account (CASS 5.5.14R(1)). Designated investments are investments of the kinds the Handbook defines, and the permitted types for this purpose are set out in CASS 5 Annex 1R.
The conditions are strict. The firm must take reasonable steps to make consumers aware and give them an adequate opportunity to give informed consent in writing, its terms must make the firm responsible for any shortfall caused by a fall in market value, the trust deed must state that the investments are held on the trust, and the investments must stay within CASS 5 Annex 1R (CASS 5.5.14R(2)). In the calculation they are valued on a prudent and consistent basis (CASS 5.5.65R(1)). The statutory trust does not allow this. See our guide to the CASS 5 non-statutory trust.
The client money calculation: two methods
The calculation compares two figures. The client money requirement is what the firm owes clients and others from client money. The client money resource is what it actually holds for them. CASS 5.5.62G permits two methods of working out the requirement. The firm must record which one it uses, may use only one in each annual accounting period, and must use the same method for statutory and non-statutory trust money (CASS 5.5.64R).
Under the client balance method, the firm works out a balance for each client and adds them up, ignoring negative balances (CASS 5.5.66R and 5.5.67R). Under the accruals method, the firm takes totals from its business ledgers: what it owes insurers, clients and others, plus commission accrued but not yet due (CASS 5.5.68R). A firm using the accruals method must also be able, within a reasonable period, to match resource to requirement client by client for most clients and transactions (CASS 5.5.69R).
| Client balance method | Accruals method | |
|---|---|---|
| Requirement | Sum of each client's balance: amounts paid by the client, plus amounts due to the client, plus interest due, less amounts paid to insurers for the client, less amounts paid to the client; negative balances excluded | Insurance creditors owed to insurers, clients and others, plus unearned commission accrued but not yet due |
| Resource | Client bank account balances at close of the previous business day, plus designated investments and money held by third parties under CASS 5.5.34R | The same, plus insurance debtors as CASS 5.5.65R(2) or (3) allows |
| Insurance debtors | Not counted | Statutory trust: only debtors that are not pre-funded. Non-statutory trust: all debtors, to the extent needed to cover a shortfall |
| Rules | CASS 5.5.66R, 5.5.67R | CASS 5.5.68R, 5.5.69R |
The CASS 5.5.63R calculation step by step
CASS 5.5.63R(1) requires the firm, at intervals of not more than 25 business days and as often as needed to keep its records accurate, to check whether its client money resource on the previous business day was at least equal to its client money requirement at close of business that day. It must then pay in any shortfall by close of business on the day it performs the calculation, or withdraw any excess within the same period, unless it decides a prudent buffer of its own money should stay in (CASS 5.5.10R). The calculation must include amounts for appointed representatives' money that has to be segregated.
Within ten business days of the calculation, the firm must reconcile the balance on each client bank account in its records with the balance on the bank's statement (CASS 5.5.63R(2)). Any difference that is not purely a timing difference between the two sets of records must be traced and corrected as soon as possible (CASS 5.5.63R(3)). While a difference is unresolved, the firm must assume the record showing more client money is needed is correct, and fund it (CASS 5.5.63R(4)).
- Fix the calculation date and identify the previous business day. All figures are taken as at close of business on that day.
- Extract the client bank account balances from the firm's records and any money held by third parties under CASS 5.5.34R.
- Work out the requirement under the method the firm has recorded: client balances under CASS 5.5.66R, or ledger creditors and unearned commission under CASS 5.5.68R.
- Work out the resource under CASS 5.5.65R, adding insurance debtors only if the accruals method is used and only as far as the trust type allows.
- Compare the two. Pay in any shortfall by close of business on the calculation day. Withdraw any excess within the same period, or record why a buffer is being kept.
- Notify the FCA immediately if the calculation cannot be performed or a shortfall may not be covered by close of business (CASS 5.5.76R, 5.5.77R).
- Within ten business days, reconcile each client bank account to the bank statement.
- Classify every difference as a timing difference or an error. Trace and correct errors as soon as possible, funding the larger figure until resolved.
- Sign off the calculation and the reconciliation, and file them with the supporting reports and the record of every difference.
Worked example: a full calculation and reconciliation
A 30-person commercial lines broker uses the accruals method and holds client money on a statutory trust in two sterling client bank accounts. It performs its calculation on Thursday 8 October 2026, as at close of business on Wednesday 7 October 2026. The requirement is £4,487,400.00. The resource is £4,460,400.00, made up of the two account balances in its records and £816,220.00 of debtors that are not pre-funded. There is a £27,000.00 shortfall.
The cause is a premium of £27,000.00 the broker paid to an insurer from the client bank account before the client had paid. Under a statutory trust that is a use of client money to give credit, which CASS 5.3.3G and CASS 5.5.11R do not allow, and a pre-funded debtor cannot count in the resource. The broker pays £27,000.00 of its own money into the client bank account before close of business on 8 October and logs the breach.
The bank reconciliation must be completed by Thursday 22 October 2026, ten business days later. The broker completes it on Monday 12 October. Account 2 agrees exactly. Account 1 differs by £18,400.00, which breaks down into two timing differences and one unidentified receipt that must be investigated and treated as client money until matched.
| Calculation as at close of business 7 October 2026 | Amount (GBP) |
|---|---|
| Premiums owed to insurers | 3,862,400.00 |
| Claims money and premium refunds owed to clients | 412,750.00 |
| Amounts owed to other intermediaries | 27,300.00 |
| Unearned commission accrued but not yet due | 184,950.00 |
| Client money requirement (CASS 5.5.68R) | 4,487,400.00 |
| Client bank account 1, per firm's records | 3,244,180.00 |
| Client bank account 2, per firm's records | 400,000.00 |
| Insurance debtors, excluding pre-funded items (CASS 5.5.65R(2)) | 816,220.00 |
| Client money resource (CASS 5.5.65R) | 4,460,400.00 |
| Shortfall | (27,000.00) |
| Firm money paid in by close of business 8 October 2026 | 27,000.00 |
| Position after funding | 0.00 |
| Reconciliation of client bank account 1 | Amount (GBP) | Type |
|---|---|---|
| Balance per firm's records at 7 October 2026 | 3,244,180.00 | |
| Add: payment to an insurer issued 7 October, not yet debited by the bank | 21,800.00 | Timing difference |
| Less: client cheque recorded 7 October, not yet credited by the bank | (6,800.00) | Timing difference |
| Add: receipt on the bank statement not in the firm's records | 3,400.00 | Investigate; treat as client money |
| Balance per bank statement at 7 October 2026 | 3,262,580.00 |
Timing differences, unallocated cash and aged items
A timing difference arises when the firm and the bank record the same transaction on different days, such as a payment issued but not yet debited. CASS 5.5.63R(3) does not require these to be corrected, but they should clear within days. A timing difference that has not cleared after a reasonable period is no longer a timing difference and must be investigated as an error.
In the example, the £3,400.00 receipt is posted to an unallocated client money account on the day it is found and then matched. Recording it adds the same amount to the resource and to the requirement, so it does not change the calculation result, but leaving it unrecorded would understate both and hide the client the money belongs to. One further rule applies to London Market chains: under CASS 5.5.65R, a firm may disregard for the calculation unreconciled money passed to an intermediate broker for a transaction with an insurer that is not a UK domestic firm, but only after reasonable steps to confirm completion and at least 12 months after the transfer.
A disciplined break log is the simplest control. Our reconciliation break log template and guide to reconciliation break management set out the fields and the method.
| Difference | Classification | Action |
|---|---|---|
| Payment issued, not yet debited by the bank | Timing | Confirm it clears; investigate if it does not |
| Receipt recorded, not yet credited by the bank | Timing | Confirm it clears; chase dishonoured cheques |
| Receipt on the bank statement not in the records | Error until matched | Post as unallocated client money; match as soon as possible |
| Commission due but not drawn | Excess | Withdraw within the CASS 5.5.16R(2) period |
| Duplicate or misposted entry | Error | Correct; fund the larger figure until resolved (CASS 5.5.63R(4)) |
Notifications and sign-off
The FCA must be told immediately if the firm cannot perform the calculation or does not perform it (CASS 5.5.76R), and immediately if the firm becomes aware it may not be able to cover a shortfall by close of business on the calculation day (CASS 5.5.77R). If a bank, broker or settlement agent holding client money fails, the firm must tell the FCA as soon as it becomes aware and, as soon as reasonably practicable, say whether it will make good any shortfall (CASS 5.5.61R).
Every calculation and reconciliation should be signed off and filed with the reports it was built from, the classification of every difference and the evidence that each shortfall was funded on time. That file is what the auditor will test; see the CASS 5 client money audit.
Safeheld reconciles client money every day for regulated firms, works every difference to its cause and keeps the record auditors ask for, and is extending that work to CASS 5. If your firm holds client money under CASS 5, talk to us about CASS 5.
Frequently asked questions
How often must an insurance broker do a client money calculation?
At intervals of not more than 25 business days under CASS 5.5.63R(1), and more often where needed to keep records accurate.
What is the difference between the client balance method and the accruals method?
The client balance method adds up each client's balance, ignoring negative balances. The accruals method takes ledger totals owed to insurers, clients and others plus unearned commission, and allows insurance debtors to count in the resource within limits.
When must client money be paid into a client bank account?
As soon as practicable under CASS 5.5.5R. The FCA expects that in most cases this will be possible by the next business day after receipt.
What happens if a bank does not return an acknowledgement letter?
If a UK bank has not acknowledged within 20 business days of the firm's notice, the firm must move the money to another bank as soon as possible under CASS 5.5.50R.
Can an insurance broker hold client money in a different currency?
Yes. CASS 5.5.8R allows client money to be segregated in a different currency from that of receipt, provided the amount is adjusted regularly to at least the original amount at the previous day's closing spot rate.
How long does a broker have to reconcile client bank accounts?
Each client bank account must be reconciled to the bank's statement within ten business days of the calculation under CASS 5.5.63R(2).
When must commission be taken out of the client bank account?
Commission may be drawn once the client has paid the premium. Once due, it must be paid out within 25 business days of the remittance clearing, or at the next calculation if earlier.
References
- FCA Handbook, CASS 5.5 Segregation of client money
- FCA Handbook, CASS 5.3 Statutory trust
- FCA Handbook, CASS 5.4 Non-statutory trust
- FCA, RMA-C: Client money and assets FAQs
About Safeheld
Safeheld reconciles client money every day, resolves every difference and prepares every regulatory return for sign-off, for regulated firms in the United States, the United Kingdom, the European Union, Canada, Australia, Singapore and Hong Kong. To discuss your operations, contact us at safeheld.com/contact.
This article is for general information and does not constitute legal or regulatory advice.