The Prudential Regulation Authority (PRA) has launched a consultation on proposed reforms to the regulatory framework governing UK Insurance Special Purpose Vehicles (UK ISPVs). The consultation, outlined in consultation paper (CP) 15/24, published on November 15, 2024, seeks to reshape the existing framework, replacing the Solvency II assimilated law through policy statement (PS) 15/24.
The primary intention of these reforms is to bolster the security and stability of the insurance sector. The changes aim to achieve this by increasing the availability of diversified reinsurance capital for cedants. A secondary objective of the PRA is to encourage competitiveness and growth. The PRA intends to streamline the authorization process for UK ISPVs, making it faster and easier for firms to operate.
A key component of the proposals is the introduction of an accelerated pathway for certain UK ISPV applications. This will include, for example, some types of catastrophe bonds, that meet the criteria specified in the PRA’s new statement of policy – Approach to authorising and supervising UK insurance special purpose vehicles. Under the expedited process, the PRA, in conjunction with the Financial Conduct Authority (FCA), aims to review applications and, when satisfied, grant approvals within 10 working days. This represents a significant reduction from the current 4–6-week timeframe.
Furthermore, the proposed reforms seek to broaden the scope of permissible market practices within the UK. They simultaneously seek to streamline and expedite both standard application and approval procedures. Additionally, the PRA aims to clarify its expectations regarding UK insurers who transfer risk to Special Purpose Vehicles, irrespective of their location.
Deputy Governor for prudential regulation, Sam Woods, emphasized the significance of these reforms, stating, “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 gathered input from industry stakeholders to inform these proposals, including a subject expert group. This collaborative approach sought to collect a broad range of information and explore various reform options.
The PRA is inviting stakeholder feedback on the proposals presented in the consultation. It encourages further discussion to inform its final policy decisions. The consultation period is open and will close on February 14, 2025. Comments and inquiries can be directed to [email protected]. The PRA anticipates publishing the final policy in mid-2025.
Current regulations for UK ISPVs are derived from a combination of the PRA’s final policy, as outlined in PS15/24, and UK legislation. The PRA is actively collaborating with stakeholders to establish the most effective approach for implementing further reforms to the UK ISPV framework. The PRA appreciates the input received to date and encourages continued engagement throughout the consultation period.
