FCA sets present expectations and looks to ‘future of insurance’

Matt Saward, an insurance regulation expert at Pinsent Masons, made the suggestion after the FCA said it wants to “hear firms’ views on how we can help them develop products to meet new and evolving needs”.

The regulator issued its call for views in a new paper (17-page / 3.7MB PDF) in which it outlined its regulatory priorities for the insurance industry over the remainder of 2026.

The regulatory priorities report replaces more than 40 portfolio letters and represents a fresh approach by the regulator in how it intends to communicate its message to the industry. 

Engagement over the future of insurance is one of a number of actions the regulator plans to pursue as part of a stated priority to support growth and innovation.

In this regard, the FCA also intends to “evaluate the risks and opportunities of AI in insurance”; including by reviewing how firms use AI for underwriting, in claims, and in providing services to consumers. It hopes to “identify barriers to adoption”. It said the review will kick off during the course of the first quarter of this year.

The FCA has already opened a “focused” review of cyber insurance. It said it wants to improve its understanding of the product’s risks and opportunities, and the barriers to purchase.

Steps to the development of a new regulatory regime for captive insurance will also be taken forward this year, the regulator said. Together with the Prudential Regulation Authority (PRA), it plans to consult on such a framework in the third quarter of 2026.

Captive insurance is a method of self-insurance and risk management. Among other uses, captive insurance provides businesses with greater opportunity to control, and contain, insurance programme costs and the ability to tailor coverage for their specific risks. Last year, the UK government confirmed plans to introduce a new regulatory framework for captive insurance by the middle of 2027.

Among its other priorities, the FCA wants to continue its drive to simplify areas of insurance regulation, including general insurance pricing data, information disclosure, and reporting requirements. One focus of this work will be on halving the “regulatory burden” associated with the Senior Managers and Certification Regime (SM&CR). It plans a joint review of the SM&CR with the PRA and Treasury during the first half of this year.

The FCA also wants to continue efforts to increase access to insurance products, with a raft of initiatives targeted at increasing home contents insurance uptake for social renters, building an understanding of travel insurance underwriting decisions for consumers with pre-existing mental health conditions, and tackling aspects of the motor insurance market as previewed in the Motor Insurance Taskforce report, among others.

The FCA said it will also look at how life insurers ensure “good outcomes for consumers with closed book products” – specific products to be confirmed – as well as review its funeral plan conduct of business sourcebook, assess how effective the financial crime systems and controls are at some larger firms, and introduce new rules for operational incidents and material third parties reporting following its 2024 consultation.

Other areas will also remain under scrutiny, including pet insurance and private medical insurance, while the FCA said ‘ghost broking’ – where fraudsters pose as real brokers and sell consumers fake policies – also remains a concern.

Saward said: “The FCA's report is a helpful aide‑mémoire of the FCA's past actions, current expectations and future game plan. Boards and senior leaders should use the FCA's stated priorities and other continued focus areas as key reference points in informing oversight, strategy and risk management for the year ahead.”

“Firms should also take up the FCA's encouragement of engagement so as to help shape future product and service innovation in the tech space,” he said.