The Prudential Regulation Authority (PRA) has launched a consultation on proposed reforms to the UK Insurance Special Purpose Vehicle (UK ISPV) regulatory framework, according to a news release issued today.
The consultation, detailed in consultation paper (CP) 15/24, outlines a series of changes to the finalized PRA rules and accompanying policy materials. The policy statement (PS) 15/24, published concurrently, will replace Solvency II assimilated law.
The PRA’s core objectives are to enhance the insurance sector’s safety and solidity. These reforms also seek to foster greater diversification within reinsurance capital available to cedants.
A further ambition is to improve the UK’s competitiveness and encourage growth by streamlining the authorization process for UK ISPVs.
To achieve these goals, the PRA is introducing an accelerated pathway for certain UK ISPV applications. This path will be available to those applications like some catastrophe bonds – that meet specific criteria outlined in the PRA’s proposed new statement. This statement concerns the Approach to authorising and supervising UK insurance special purpose vehicles.
Under the accelerated approach, the PRA, in conjunction with the Financial Conduct Authority (FCA), anticipates reviewing complete applications and granting approvals within 10 working days. This is a marked improvement over the current 4–6 week timeframe.
In addition, the proposed reforms aim to facilitate current market practices in the UK, while also speeding up the standard application and approval procedures.
The reforms will also clarify the PRA’s expectations of UK insurers who cede risks to Special Purpose Vehicles, regardless of where the vehicles are established.
Sam Woods, the Deputy Governor for prudential regulation, said: ‘These reforms will deliver a much faster turn-around time for approval of new Insurance Special Purpose Vehicles in the UK, supporting growth and competitiveness while maintaining safety and soundness.’
The PRA engaged with industry stakeholders, including a subject expert group, to inform these proposals, gathering information and exploring reform options.
The PRA is now seeking feedback on the proposals described in the consultation and welcomes further stakeholder discussion to inform its final policy decisions.
The consultation period will remain open until 14 February 2025. Comments and inquiries should be sent to [email protected].
The PRA plans to publish the final policy in mid-2025.
The current requirements on UK ISPVs originate from a combination of the PRA’s final policy – detailed in PS15/24 – and existing UK legislation.
The PRA is working with stakeholders to determine the most effective approach to further reforms. The PRA appreciates the input received and welcomes further engagement during the consultation period.
