In short
Lloyd's brokers are insurance intermediaries, so CASS 5 governs the premiums, claims money and refunds they hold, while managing agents acting as such are outside it. Lloyd's requires UK brokers to meet the FCA's client money rules and to sign a terms of business agreement with each managing agent before placing business, covering premiums and claims on a risk transfer or non-risk transfer basis.
Key takeaways
- CASS 5 applies to Lloyd's and London Market brokers as insurance intermediaries, but CASS 5.1.1R excludes a managing agent acting as such, and an insurer is not the broker's client unless agreed (CASS 5.1.6R).
- Lloyd's requires UK brokers to be FCA-authorised general insurance intermediaries, to operate strictly segregated client money accounts and to meet the FCA's client money rules in CASS.
- A broker must sign a terms of business agreement with each managing agent before placing business, and that agreement sets whether premiums and claims are handled on a risk transfer or non-risk transfer basis.
- Lloyd's outsources premium and claims processing and the central settlement system to Velonetic, and each broker needs a central settlement number and bank mandates to use it.
- CASS 5.5.8R allows client money to be held in a different currency from the one received, provided the amount is adjusted at least every 25 business days to the original amount at the previous day's closing spot rate.
How the Lloyd's market is organised
Lloyd's is a market, not an insurer. Capital providers, called members, back syndicates, and each syndicate is run by a managing agent that employs the underwriters and runs its operations. Lloyd's reports that at 31 December 2025 there were 401 registered brokers, 57 managing agents and 103 syndicates, and that the majority of business written at Lloyd's is placed through brokers.
Lloyd's distinguishes two kinds of broker. A registered Lloyd's broker can transact with every syndicate in the market and may use the title. A non-Lloyd's broker can also transact directly, but only with managing agents it has signed a terms of business agreement with. For client money purposes the distinction makes little difference: both are insurance intermediaries handling premiums, claims money and refunds, and both are subject to the CASS 5 client money rules if they are UK firms.
How CASS 5 applies in the Lloyd's market
CASS 5.1.1R applies CASS 5 to a firm that receives or holds money in connection with its insurance distribution activity. It excludes an insurance undertaking for its permitted activities and a managing agent acting as such. So the broker is in scope and the managing agent, when acting as managing agent, is not. CASS 5.1.6R adds that an insurer the firm deals with is not treated as the firm's client, unless the two agree otherwise under CASS 5.1.5AR.
Lloyd's adds its own entry requirements. Its guide to becoming a Lloyd's broker says a UK firm must be authorised as a general insurance intermediary, must demonstrate that it operates strictly segregated client money accounts, and must meet the FCA's client money rules in CASS. Overseas brokers must show equivalent arrangements. Managing agents must also be satisfied with the broker's arrangements before trading.
| Party | Subject to CASS 5? | Basis |
|---|---|---|
| UK Lloyd's broker or London Market broker | Yes, for money held in connection with insurance distribution | CASS 5.1.1R(1) |
| Managing agent acting as such | No | CASS 5.1.1R(2) |
| Syndicate or insurer | Not as the broker's client, unless agreed | CASS 5.1.6R, 5.1.5AR |
| Overseas broker placing at Lloyd's | Not under CASS 5; Lloyd's requires equivalent arrangements | Lloyd's broker guidance |
Agreements with managing agents and risk transfer
Lloyd's requires a broker to enter into a terms of business agreement, or TOBA, with any managing agent it intends to trade with before business is placed. Lloyd's says the agreement must cover premium and claims arrangements, whether on a risk transfer or non-risk transfer basis, and that a model wording agreed between the Lloyd's Market Association and the London and International Insurance Brokers Association is available but may be amended. Business for risks in the European Economic Area needs a separate agreement with Lloyd's Insurance Company S.A. For the company market, the International Underwriting Association publishes Risk Transfer and Non Risk Transfer model agreements with the same brokers' association.
Whatever the wording, the test for CASS 5 is the same. Money is held as the managing agent's agent, and so outside client money, only where the agreement meets CASS 5.2.3R, including express agency for each kind of money. A risk transfer agreement that covers premiums but not claims leaves claims money as client money. Our guide to risk transfer agreements sets out each condition.
| Money | Risk transfer agreement covering it | Non-risk transfer agreement |
|---|---|---|
| Premium from the client | Held as the managing agent's agent; treated as received by the syndicate | Client money until paid to the syndicate |
| Claims money from the syndicate | Held as agent only if expressly covered; treated as received by the client only when paid over | Client money from receipt |
| Return premium | Held as agent only if expressly covered | Client money from receipt |
Chains of brokers
London Market business often passes through more than one broker: a producing broker that deals with the client, and a placing or wholesale broker that deals with the managing agent. CASS 5.5.7G explains that in such a chain each broker owes obligations to its immediate client to segregate the client money it receives, and that letting another broker hold client money does not end the firm's own duties.
Several rules govern the hand-offs. A firm may let another person hold or control client money only if it transfers the money for a client's transaction through or with that person, and, for a consumer, the client has been told in writing that this may happen (CASS 5.5.34R). Excess client money should not be left with another broker (CASS 5.5.36G). Passing a consumer's money to a broker or settlement agent outside the UK needs prior written disclosure (CASS 5.5.58R). And in the calculation, a firm may disregard unreconciled money passed to an intermediate broker for a transaction with an insurer that is not a UK domestic firm only after reasonable steps to confirm completion and at least 12 months after the transfer (CASS 5.5.65R).
Central settlement
Premiums and claims between brokers and syndicates are settled through Lloyd's central settlement system. Lloyd's says it outsources a number of these functions, including premium and claims processing and maintenance of the central settlement system, to a processing company called Velonetic. To use it, a broker needs a central settlement number, bank mandates, system documentation, a meeting with Lloyd's, and training and testing, and pays an administration fee to Velonetic. Lloyd's says it makes no ongoing charges to brokers for placing and processing business.
For CASS 5, central settlement changes the shape of the money, not the rules. Settlements move between the broker's bank accounts and the market in amounts that combine many policies, so the broker must break each settlement down to the individual client and policy on the day it is received or paid. On the syndicate side, premiums received form part of the syndicate's premium trust fund, whose trustees are appointed by the managing agent and approved by Lloyd's. Until a premium reaches the syndicate, or is received under a valid risk transfer agreement, it sits with the broker as client money.
Premiums in more than one currency
London Market business is written in many currencies. CASS 5 does not require client money to be held in the currency in which it was received. CASS 5.5.8R allows a firm to segregate client money in a different currency, provided that at intervals of not more than 25 business days it adjusts the amount held to at least the original currency amount, or the amount in the currency of its liability to the client if different, translated at the previous day's closing spot exchange rate.
On the market side, Lloyd's operates a currency conversion service that translates premiums and claims between currencies at the point of settlement, following managing agents' standing instructions, and offers a same-day foreign exchange service in US dollars, Canadian dollars and euros. A broker should therefore run its calculation and reconciliation currency by currency, then test any cross-currency holding against CASS 5.5.8R at the previous day's closing spot rate. For multi-currency reconciliation generally, see our guide to multi-entity reconciliation.
Worked example: a multi-currency calculation
A wholesale broker places business at Lloyd's in four currencies. It holds part of its US dollar client liabilities in sterling. At close of business on the calculation date, its US dollar client bank accounts hold USD 270,000.00 less than its US dollar requirement. It has set aside £215,000.00 in its sterling client bank account against those US dollar liabilities. The rates below are illustrative previous-day closing spot rates.
At USD 1.3400 to the pound, the US dollar gap is worth £201,492.54, so the £215,000.00 set aside covers it with £13,507.46 to spare, and the sterling and Canadian dollar positions are covered on their own. If sterling fell to USD 1.2000, the same gap would be worth £225,000.00, more than the £215,000.00 set aside, and the broker would need to top up the sterling held against those liabilities by £10,000.00. That is why cross-currency holdings must be re-tested at each calculation, not only at year end.
| Currency | Requirement | Held in that currency | Difference | Rate to GBP | Difference in GBP |
|---|---|---|---|---|---|
| GBP (own liabilities) | 1,840,000.00 | 1,846,000.00 | 6,000.00 | 1.0000 | 6,000.00 |
| GBP set aside for USD liabilities | 215,000.00 | 215,000.00 | 1.0000 | 215,000.00 | |
| USD | 6,200,000.00 | 5,930,000.00 | (270,000.00) | 1.3400 | (201,492.54) |
| EUR | 905,000.00 | 905,000.00 | 0.00 | 1.1500 | 0.00 |
| CAD | 412,000.00 | 415,500.00 | 3,500.00 | 1.8500 | 1,891.89 |
| Net position | 21,399.35 |
What a failed London Market broker shows
In a judgment of 14 April 2026 ([2026] EWHC 829 (Ch)), the High Court approved a scheme for distributing about £13 million of client money, held in several currencies, by a London Market broker in administration. The court recorded that client balances were spread across several spreadsheets and a broking system that did not reconcile with each other, that bulk payments to and from Lloyd's and the London company market had not been handled with care, and that there were misallocated receipts and an overpayment in Australian dollars. The FCA modified CASS 5.6.7R so the administrators could distribute on their best practical reconstruction of the records.
The scheme followed the order of CASS 5: clients other than insurers rank ahead of insurers, and where a risk transfer arrangement could not be established the money was presumed to be held for non-insurer clients. The court approved administrators' costs of £1,084,949 plus VAT to date and estimated further costs of £702,068 plus VAT. Each failure in that case maps to a control a broker can run today.
| Failure recorded by the court | Control that prevents it |
|---|---|
| Client balances held across systems that did not reconcile | One record of client balances, reconciled at every calculation |
| Bulk settlements with the market not handled with care | Each settlement broken down to client and policy on the day |
| Misallocated receipts and wrong payment references | Unallocated cash treated as client money and matched promptly |
| Foreign currency balances not reconciled | Calculation and reconciliation run currency by currency |
| Risk transfer could not be proved | A register of managing agent agreements linked to money flows |
Controls for Lloyd's and London Market brokers
The controls that matter most in the London Market follow from its structure. Keep a register of agreements by managing agent, showing which money each covers and whether a separate agreement is in place for European business. Break every central settlement down to client and policy on the day. Run the calculation and the bank reconciliation in each currency, as described in our guide to insurance premium segregation and reconciliation, and re-test any cross-currency holding against CASS 5.5.8R. Track money passed to intermediate brokers, and apply the 12-month disregard only where all its conditions are met.
These are the records the auditor will test; see the CASS 5 client money audit for what the annual report covers.
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
Does CASS 5 apply to Lloyd's brokers?
Yes. A UK Lloyd's broker is an insurance intermediary, so CASS 5 applies to the premiums, claims money and refunds it holds, and Lloyd's requires UK brokers to meet the FCA's client money rules.
Do Lloyd's managing agents hold client money under CASS 5?
No. CASS 5.1.1R excludes a managing agent acting as such from the CASS 5 client money rules.
Is a premium paid to a Lloyd's broker client money?
It depends on the broker's agreement with the managing agent. Under a valid risk transfer agreement covering premiums it is held as the managing agent's agent; otherwise it is client money until paid to the syndicate.
Who runs Lloyd's central settlement?
Lloyd's outsources premium and claims processing and maintenance of the central settlement system to Velonetic. Brokers need a central settlement number and bank mandates to use it.
Does a Lloyd's broker need a TOBA with every managing agent?
Yes. Lloyd's requires a broker to enter into a terms of business agreement with any managing agent it intends to trade with before business is placed.
Can a Lloyd's broker hold US dollar client money in sterling?
Yes. CASS 5.5.8R allows client money to be held in a different currency, provided the amount is adjusted at least every 25 business days to the original amount at the previous day's closing spot rate.
References
- FCA Handbook, CASS 5.1 Application and general provisions
- FCA Handbook, CASS 5.5 Segregation of client money
- Lloyd's, Becoming a Lloyd's broker (2025)
- Lloyd's, The Lloyd's market
- Lloyd's, Foreign exchange
- High Court, [2026] EWHC 829 (Ch), judgment of 14 April 2026
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.