Why do our premiums arrive in US dollars and euros?
Because premium follows the currency of the policy, and London market business is often written in the currency of the risk or the insured rather than in sterling.
A US property schedule placed in London is usually written and paid in US dollars. European business written through a coverholder or a branch is often in euros, and Canadian, Australian and other business can arrive in its own currency. Reinsurance premiums follow the currency of the contract. Return premiums usually go back in the currency the policy was paid in.
The cost base of a London MGA or broker is mostly in sterling: salaries, rent, systems, outsourced services and tax. So income arrives in several currencies while most of what the firm spends is in one. Every month someone has to decide how much to convert, when and at what rate. Where nobody decides, the bank usually decides instead.
Should an MGA convert US dollar premiums to sterling straight away or hold them?
Convert the part you will spend in sterling and hold the part you will pay out in dollars. Converting everything on arrival and buying dollars back later for claims or remittances means paying the spread twice.
Most of a premium is not the firm's to spend. For an MGA or coverholder the larger part is owed to the insurer or syndicate providing capacity. Some may be needed for claims paid under delegated authority. Only the commission is the firm's own income. Each part has its own currency need and its own rules about where the money must sit, so the answer is rarely all or nothing.
| What the money is needed for | Usually points to | Client money and binder terms questions |
|---|---|---|
| Claims in the policy currency | Hold enough in the policy currency to meet expected claims, where claims are paid from your accounts under delegated authority | Does the binding authority or claims agreement say which account claims funds are held in? If the premium is client money, is there a client bank account in that currency? |
| Expenses in sterling | Convert the part that is your own income, such as earned commission, when you need it for sterling costs | When is commission treated as earned and able to leave the client account under your terms of business? Has compliance confirmed the timing? |
| Reporting in sterling | Held balances are translated at each reporting date, so results move with the exchange rate. Ask your finance director and auditors how held balances are reported before deciding | Does the binder require reporting to capacity in original currency? Do bordereaux show the original currency and amount on every line? |
| Remittances to capacity | Hold premium owed to the insurer or syndicate in the currency the binder says it is remitted in. Converting it and buying the currency back costs two spreads | Which currency does the binding authority agreement require premium to be remitted in, and by when? Who bears any exchange difference if premium is converted first? |
| Return premiums and refunds | Hold or buy back the original currency, because returns usually go back in the currency the policy was paid in | Do your terms of business say which currency and rate apply to a return premium? |
Matching means setting expected payments in each currency against expected receipts and converting only the difference. For illustration, an MGA that receives US$3 million of premium in a month and remits US$2.4 million to capacity in dollars has about US$600,000 of its own commission in dollars to think about. Converting the full US$3 million to sterling on arrival and buying back US$2.4 million when the remittance falls due would pay the spread on US$5.4 million of conversions instead of US$600,000.
Why does our bank convert every dollar premium automatically?
Because the account it lands in is a sterling account. When a payment in another currency reaches a sterling account most banks convert it on arrival at their own rate, and the statement shows only the sterling amount.
This is often called forced conversion or automatic conversion. It is convenient because nobody has to approve anything, and that is the problem. The rate is whatever the bank applies to incoming payments, it is rarely shown anywhere as a charge, and nobody at the firm chose the moment or the amount.
It can also happen before the money reaches you. If a producing broker or coverholder tells its bank to send sterling, that bank converts the dollars at its own rate before sending, and you receive sterling without ever seeing the dollar amount. Debit notes and remittance instructions that show only sterling account details invite this.
How do we stop our bank converting premiums automatically?
Give the money somewhere to land in its own currency and tell payers to use it. A currency account in the right name and the right account details on every debit note stop most forced conversion.
Ask your bank what it does now
Ask in writing what happens to an incoming US dollar or euro payment, which rate is used and whether it can credit a currency account instead. The answer tells you what the current setup costs.
Open a currency account in the right name
A US dollar or euro account in the name of the entity that receives the premium, with your bank or with a regulated payment provider. If the premium is client money, the type of account and where it is held are questions for compliance first. See the client money section below.
Ask the bank to hold, not convert
Ask for a standing instruction that incoming payments in a currency you hold an account in are credited to that account rather than converted. Get it confirmed in writing and record who agreed it.
Update every payment instruction
Put the currency account details on debit notes, statements of account, terms of business agreements with producing brokers and coverholder remittance instructions. Change them through channels payers already trust and ask them to confirm by phone, because a change of bank details is when payment fraud happens.
Check the first receipts
Confirm that the next few premiums arrive in the original currency and in full. If one still arrives in sterling, find out whether it was converted by your bank or by the sender's.
Once the currency is held, you convert when you choose, in the amount you choose, at a rate you can check against the market mid.
Can overseas brokers and coverholders pay premiums to us in their own currency?
Yes. Some banks and payment providers can give a UK firm local account details in other countries, so a producer pays by domestic transfer in its own currency and you decide when to convert.
A coverholder that pays by international transfer from its own bank may find that bank converting at its own rate, charging a sending fee and losing a further deduction to an intermediary bank on the way. Paying into local account details avoids most of that. The money usually arrives as a domestic payment and in full, and the conversion happens when you choose.
Before setting this up, check:
- Whose name the account is in, and whether producers will see your firm as the beneficiary when they pay.
- Where the money is held. A bank holds it as a deposit. A payment or e-money institution safeguards it, which is not FSCS deposit protection, and the FSCS does not cover payment or e-money services. The FCA's new safeguarding rules for those firms, in CASS 15, took effect on 7 May 2026.
- Whether the arrangement fits your client money position. That is a question for your compliance officer, set out in the next section.
- Whether the binder or your terms of business with producers say which currency and account premium must be paid into.
- How payments will be referenced so each one can be matched to a policy and a bordereau line.
- Which currencies and countries the provider actually covers for receiving money, not only for paying it out.
Can premiums held as client money be kept in dollars or converted?
That is for your compliance officer and CASS auditor to answer for your firm. CASS 5 generally requires client money to be held in a client bank account at an approved bank, risk transfer changes the analysis and each firm must check its own position.
Premium collected by a broker or MGA is often client money, held on statutory or non-statutory trust. Where the firm holds premium as agent of the insurer under a risk transfer agreement, the analysis is different. Converting premium, holding it in another currency or receiving it through a new provider can all raise client money questions. We do not answer them for you. We set them out so they can be raised before anything changes.
Questions for your compliance officer and CASS auditor:
- Is this premium client money, or held under risk transfer for the insurer or syndicate? Does the answer differ from one binder to another?
- If it is client money, is it held on statutory or non-statutory trust, and does our client bank account arrangement include accounts in the currencies we receive?
- At each step of a conversion, where would the money sit, and is that a client bank account at an approved bank?
- Can commission be withdrawn in the currency it was earned in, and at what point?
- Does the binding authority agreement say which currency premium must be held in and remitted in, and by when?
- Does any capacity provider require premium to be held in a trust account in a particular territory or currency?
- Who bears the conversion cost and any exchange difference, and how is it recorded against each risk?
- What record of the rate used on each conversion will the CASS audit expect?
InsuranceFX never holds client money, never receives premiums and never makes payments. Any account is opened by your firm directly with an FCA-authorised provider, which carries out its own checks. Our page on client money, CASS 5 and FX sets out where money sits at each step, and the rules are in CASS 5 in the FCA Handbook.
How much does it cost to convert premiums?
Mostly the markup built into the rate, which no statement shows as a fee. Measure it in basis points against the market mid at the time of each conversion.
The market mid is the halfway point between the price at which the market buys and sells a currency at a given moment. The difference between the rate you were given and the mid at that moment is the provider's markup. One basis point is one hundredth of one per cent.
markup (bps) = |your rate − mid| ÷ mid × 10,000
cost ≈ sterling value converted × markup (bps) ÷ 10,000
| Step | Figure |
|---|---|
| Amount converted | US$1,500,000 |
| Market mid at the time (assumed) | 1.3000 |
| Rate given (assumed) | 1.3130 |
| Markup: |1.3130 - 1.3000| / 1.3000 x 10,000 | 100 bps |
| Sterling at the mid | £1,153,846 |
| Sterling received | £1,142,422 |
| Cost of the markup on this conversion | £11,424 |
| The same conversion every month for a year | £137,091 |
Illustration of the method only. The mid and the rate are assumed for the arithmetic and do not describe any bank or provider. GBP/USD is quoted in US dollars per pound, so a higher rate means fewer pounds for the firm. The quick formula gives £11,538, close to the exact figure, and is meant for checking rather than accounting.
Other costs sit beside the markup: a fee on each incoming payment, deductions by intermediary banks on international receipts, fees on outgoing remittances, wider markups on small amounts and less common currencies, and the second spread whenever premium is converted and then bought back. On large conversions the markup is usually the bigger number, because fees are fixed per payment while the markup grows with the amount.
For a past conversion, daily reference rates from the Bank of England and the European Central Bank give an estimate of the mid that is good enough to show a trend. A mid timestamped to the minute gives an exact figure. If your markup has been rising since you opened the account, our guide to FX rate creep explains why that happens.
What does InsuranceFX do for premium flows?
We measure what you pay to convert premium today and put the same flow to several regulated providers without naming your firm. The provider holds the account, converts and pays.
A cost review takes 6 to 12 months of premium and commission conversions, compares each with the mid at the time and shows your markup by currency and size. A blind quote shows what other providers would charge for the same flow. If you decide to move, our switching plan keeps premiums arriving and remittances to capacity going out while the new account is tested.
For the other side of the same policies, see paying claims overseas. For the questions specific to delegated authority, see FX for MGAs and coverholders.
Ask for a cost review Request a blind quote
Sources
- Financial Conduct Authority, FCA Handbook, CASS 5 Client money: insurance distribution activity, checked 2 November 2026.
- Financial Conduct Authority, PS25/12: Changes to the safeguarding regime for payments and e-money firms, published 7 August 2025, rules in force 7 May 2026, checked 2 November 2026.
- Bank of England, Daily spot exchange rates against sterling, checked 2 November 2026.
- European Central Bank, Euro foreign exchange reference rates, checked 2 November 2026.