UK government eyes to speed up and refine ILS regime

By Rebecca Delaney

July 15 - (The Insurer) - The UK government launched a consultation on its Risk Transformation Regulations on Tuesday, while the financial regulator also confirmed new authorisation targets for certain ILS arrangements under the accelerated insurance special purpose vehicle (ISPV) regime.

A letter sent on Tuesday by Sam Woods, CEO of the Prudential Regulation Authority, to UK Chancellor Rachel Reeves underlined the financial watchdog's support of the government's work to improve the speed of processing regulatory applications.

As part of this effort, the PRA launched a consultation in November 2024 on reforms for the ISPV regime, including the introduction of a new accelerated pathway for certain UK ISPV applications that meet criteria set by the PRA.

The changes are designed to streamline and speed up the application and approval processes, as well as to clarify the PRA’s expectations of UK insurers who cede risks to ISPVs.

Woods' letter confirmed that for new firm authorisations, the PRA will target an approval time of three months for complete applications from insurance firms that qualify for the wholesale insurance accelerated authorisation pathway.

For ISPVs, Woods said the PRA is targeting an approval time of six weeks for complete applications, and just 10 working days for those that qualify for an accelerated pathway.

This marks a significant acceleration to the former approval process with applications taking between four and six weeks on average.

RISK TRANSFORMATION REGULATIONS CONSULTATION

The UK’s Risk Transformation Regulations, sponsored by HM Treasury, created a new market for ILS and protected cell companies (PCCs) in the UK and came into effect at the beginning of 2018.

However, as previously reported by The Insurer, the structure has drawn criticism from the London market for being overly complicated and costly. The UK government therefore launched a new consultation on Tuesday to support new risk transfer solutions in the insurance industry.

"The government has received industry feedback that the existing legislative framework for risk transformation activity is holding back UK deals," said the consultation.

"This consultation examines how the regime can best be adapted to encourage innovation and dynamism within the UK’s risk transformation market and better suit the balance between the regulators’ rulebooks and legislation within the framework established in the Financial Services and Markets Act 2000."

It includes proposals to enable PCCs to operate as insurers, which would expand the range of risk management options available to businesses, particularly for those that lack the resources or appetite to set up a standalone captive insurer.

The consultation will run until October 8.

REVIEW OF SENIOR MANAGER REGIME

Woods' letter noted that the senior manager applications are also included under the scope of the PRA's drive to speed up regulatory approvals.

"For senior manager regime applications, where the government is proposing a deadline of two months, the PRA will target completing at least 50% of cases within 45 days, increasing confidence in the speed with which more straightforward appointments can be made," said Woods.

The senior management regime was highlighted by Chris Croft, CEO of the London & International Insurance Brokers Association, to The Insurer earlier this week as a current "impediment" to attracting international talent to London.

Other "red tape" slashed to the senior manager regime on Tuesday includes proposals to give firms more time and flexibility to submit applications for approving new senior managers when there has been an unexpected or temporary change.

The PRA has also proposed stripping out duplication where the same individuals are certified for separate functions, allowing more time for firms to report updates to senior manager responsibilities, and providing guidance on how to streamline annual checks to certify that individuals are "fit and proper" to do their role.