Insurance: Non-contentious: A UK-Wide Overview

The insurance sector continues to play a significant role in the UK economy. As well as the important function of providing protection to businesses and individuals, insurers are major investors and are becoming increasingly important in the pensions market.

The UK government and the Prudential Regulation Authority (PRA), which among other responsibilities oversees the insurance sector, have taken a number of steps over the past 12 months to seek to harness the investment power of the sector.

• Following changes introduced in June 2024, in October 2025 the PRA introduced further amendments to the “matching adjustment” regime relevant to the life insurance sector in the form of a “Matching Adjustment Investment Accelerator”. Sam Woods (CEO of the PRA) has suggested that the changes would “reduce barriers to investment by insurance firms, enabling them to deliver more quickly on their commitments to make additional investments in the UK and so support economic growth”.

• In May 2025 the government delivered the Mansion House Accord, under which 17 signatories – including a large number of insurers – pledged (on a non-binding basis) to invest 10% of their workplace pension scheme portfolios in “assets that boost the economy”. The government is also taking a “reserve” power in the Pension Schemes Bill (currently going through Parliament) to set binding asset allocation targets for certain pension schemes. This would give government greater power to force the hands of pension scheme providers should they not deliver on the commitments made under the Accord.

The importance of insurers to the pensions market has increased over recent years as large numbers of pension derisking deals continue to be executed. Under these deals, the trustees of a defined benefit pension scheme can transfer the risks associated with their scheme liabilities to an insurer under a buy-in insurance agreement. It has been estimated that deals involving approximately £48–50 billion of liabilities were transacted in 2024. As insurers take on increasing quantities of risk from pension schemes, however, the PRA has been sounding some notes of caution. These have been aimed in particular at the practice of insurers passing on some of this risk under “funded reinsurance” arrangements with (often overseas) reinsurers. This is an area of ongoing regulatory scrutiny by the PRA which was mentioned in a number of speeches in 2025, and where the regulator continues to consider taking further action.

On the non-life side, measures have been introduced and proposed aimed at boosting the competitiveness of the UK as a market for, firstly, sales of insurance-linked securities (ILSs) and, secondly, the establishment of captive insurers. Both of these initiatives seek to tap into markets in which the UK has not to date been particularly active. In July 2025 the PRA published new rules and guidance in respect of the UK insurance special purpose vehicle regime, which included an accelerated pathway for approval of certain ILS structures. Also in July, HM Treasury published its proposals for a new regime for captive insurers, which would include lower capital and reporting requirements and faster authorisations for captives. The PRA and Financial Conduct Authority (FCA) are expected to consult on required changes to their rules to facilitate the new captive insurance regime in summer 2026.

In the retail sphere, there has been increasing scrutiny from the FCA of sales practices following the introduction of the Consumer Duty in 2023. The FCA published a road map for retail insurance in July 2025 and plans to engage with firms individually over issues around home and travel insurance claims handling. It is also expected to publish a final report on the use of premium finance in motor insurance by the end of 2025. Separately, Which? announced in September 2025 that it had made a super-complaint to the FCA in respect of the home and travel insurance markets, and the FCA is required to respond to that complaint within 90 days.

Recent M&A activity and the ongoing private capital investment in the sector will also shape the competitive landscape of the UK insurance market. In the past 12 months there have been significant consolidations in the general insurance market – for example, Aviva’s £3.7 billion takeover of Direct Line and Ageas’s £1.3 billion acquisition of esure from Bain – and strategic transactions in the pensions derisking market, such as Athora’s agreement to acquire Pension Insurance Corporation for £5.7 billion and the £2.4 billion bid made by Brookfield Wealth Solutions for Just Group. It will be interesting to see if the top end of the UK insurance M&A market continues to be hot in 2026 or, alternatively, if the recent spate of major deals means that the pool of larger targets is relatively smaller, such that insurers and financial sponsors start to look more closely at small and mid-market opportunities. Interest from a variety of market participants to enter or establish new structures across the life and general (including Lloyd’s and specialty) markets is also likely to drive activity over the coming year, including in light of the new regimes expected to be introduced by the government.

An upcoming development that will affect insurers operating in both the life and non-life spaces is the new requirement for solvent exit plans for insurers, due to come into effect in June 2026. The PRA’s final rules and guidance for the new regime were published in December 2024. The key requirement is for all in-scope firms to plan for an orderly solvent exit as part of its business-as-usual activities, including preparing and maintaining a solvent exit analysis (SEA). Among other things, this will require firms to identify any potential barriers and risks to the execution of a solvent exit and to take steps to mitigate or remove these. The PRA has published guidance suggesting that potential barriers to exit might include complex legal and corporate structures, illiquid or very long-term liabilities and the existence of untraceable or uncontactable policyholders. Firms will need to have met the requirements of the new Preparation for Solvent Exit Part of the PRA Rulebook and the expectations set out in the PRA’s accompanying supervisory statement by 30 June 2026, including having prepared an SEA.