In some jurisdictions other terminology such as “authorisation” or “registration”, are used in place of “licensing”. For the purposes of this ICP these terms are collectively referred to as “licensing”.

The supervisor may choose to license intermediaries at the entity level or the individual level, or both. In some jurisdictions insurance intermediation activities carried out by the insurer’s direct sales staff or its authorised representatives are covered by the insurer’s licence; in others these may require separate intermediary licensing.

Where licensing is at the entity level the supervisor may consider whether the entity has in place procedures to ensure that the individuals who conduct insurance intermediation under its responsibility meet appropriate standards of professionalism and competence. The supervisor may also wish to set its own requirements for approval of individuals, within an insurance intermediary, who conduct intermediary business.

Different types of insurance business involve different levels of complexity and risks and may require different levels of skill and experience in their intermediation. The supervisor may wish to specify in the licence the range of intermediation activities that it permits the insurance intermediary to undertake, taking into account, for example, the intermediary’s proposed business plan and areas of expertise.

• details of ownership, including all information necessary to provide a full understanding of the insurance intermediary’s ownership and control structure;
• a business plan, including details of proposed business and financial projections;
• the proposed sources and method of capitalisation;
• information on personnel, in particular on proposed holders of key functions;
• details of any significant third party service providers;
• details of the proposed auditor, where applicable;
• details of professional indemnity insurance cover, including amount and limitations, or comparable guarantee, where applicable;
• business continuity plans;
• if incorporated, relevant information on incorporation such as memorandum and articles of association and certificate of incorporation;
• details of policies, procedures and controls in key areas such as:
  • new business;
  • client money;
  • complaints;
  • conflicts of interest;
  • compliance;
  • combating financial crime (including AML/CFT and fraud); and
• a copy of the policy and supporting documents that govern the insurance intermediary’s conduct of business, or confirmation of agreement to conduct of business rules published by the supervisor.

The supervisor may set minimum financial resource requirements, for example, to discourage market entrants with insufficient financial resources and to help ensure that existing licensees have sufficient financial resources for business continuity purposes. Where this is the case, such requirements might take into account factors such as the nature of the business to be intermediated, whether the intermediary operates client accounts, the level of any professional indemnity insurance and the level of operating expenses, to ensure that an appropriately risk-based financial resource requirement is set.

The supervisor should only issue a licence if the applicant meets the initial licensing conditions.

In specific and limited circumstances, the supervisor may have the power  to make exceptions to certain licensing requirements. The supervisor should ensure that any such exceptions do not encourage regulatory arbitrage or increase the risk to consumers.

The supervisor should consider what licensing requirements are applicable to intermediaries operating on a cross-border basis from outside the jurisdiction. These requirements should be transparent to consumers, as well as to intermediaries, so that they can make an informed decision when choosing to deal with intermediaries from other jurisdictions.

The supervisor may consider the possibility of issuing periodically renewable licences. An advantage of doing so would be to ensure formal periodic reassessment of compliance with the regulatory licensing requirements.

• receive monies from a client for the payment of premiums to an insurer; and/or
• receive monies from an insurer in respect of claims or refunded premiums for onward payment to a client.

Some jurisdictions have specific legal requirements in respect of the cash flows where monies are transferred via an intermediary from the customer to the insurer, and vice versa, including in determining whether the customer or the insurer is at risk in respect of such funds.

Where funds are held at the risk of the client, they may be referred to as “client monies” or “client’s money”. The intermediary should have adequate policies and processes in place for the safeguarding of such funds in the interests of their customers.

In some jurisdictions, premiums are deemed to have been paid to the insurer as soon as the customer pays premiums to the intermediary. In these circumstances the insurer, rather than the customer, bears the risk of allowing intermediaries to collect premiums on its behalf.

• client accounts are separate and clearly distinguishable from the intermediary’s own bank accounts;
• client accounts are held with licensed banks within the jurisdiction, or specified other jurisdictions;
• disallowing monies other than client monies within the account, except in specific circumstances such as to achieve or maintain a minimum balance, to receive interest, or to receive commission due to the intermediary;
• monies are paid into the account promptly;
• adequate financial systems and controls are maintained, including authorisation of payments from the account;
• adequate books and records are maintained and subject to audit;
• reconciliations are performed on a regular basis and reviewed;
• discrepancies on the account are followed up promptly and resolved satisfactorily;
• for each client, payments from a client account are not made before sufficient monies paid into the account have cleared, thus ensuring that any balance held in respect of each client is not negative; and
• the treatment of interest.

In the interest of safeguarding clients’ money, it is important that client accounts cannot be used to reimburse creditors of the insurance intermediary.

Where insurance intermediaries operate client accounts, the supervisor may require that the terms and conditions of such accounts are disclosed to their customers, including whether funds held in such accounts are at the risk of clients or at the risk of the insurer.