Overview of the Mansion House Speech and Reforms for the Insurance Industry

The Chancellor gave her annual Mansion House speech on 15 July, and at the same time a number of consultations and other documents were released by the Government with implications for the insurance industry. 

In this article we give a high-level overview of the consultations and other documents which are relevant to insurance:

• The Government’s Financial Services Growth and Competitiveness Strategy was published, following a consultation which took place at the end of last year. 
  
  Many of the documents below form part of the plan to deliver the Strategy. The Strategy sets out an ambition to be the global location of choice for financial services firms by 2035, by taking steps such as delivering a competitive regulatory environment. Amongst other things, the Strategy includes the intention to set shorter deadlines for regulatory applications¹, and addresses concerns about the application of the Consumer Duty to wholesale firms. Specifically in relation to insurance, the Government intends to ensure that regulation is proportionate to large risks², and to deliver a new captive regime (more below). A new concierge system will be established to guide and support international investors in the UK. The Government also intends to encourage and support developments in AI in financial services and encourage diversity and inclusion in its workforce.
• A Consultation on Reforming the Senior Managers & Certification Regime was published by HM Treasury³.
  
  This has been expected for some time following previous announcements and a call for evidence. The SM&CR was introduced in response to the 2008 financial crisis, but the industry view has been that the burden imposed by it on firms could be improved, and that it goes further than most comparable jurisdictions. The proposals include:
  • that the Certification Regime (which requires that individuals in roles extending below senior manager level that involve or could involve a risk of significant harm to the firm or customers are certified as “fit and proper”) be removed from legislation with the aim that the FCA and PRA can develop a more flexible and proportionate regime.
  • significant changes to the Senior Managers Regime including decreasing the number of senior manager roles by providing greater flexibility for the regulators in specifying the list of Senior Management Functions that require pre-approval, and removing the requirement for pre-approval for some roles.
  • removing some of the prescriptive requirements around how Statements of Responsibilities are provided, maintained and updated, and in addition removing some of the prescriptive requirements around the Conduct Rules, such as in relation to training. 

The Consultation closes on 7 October 2025.

The PRA and FCA also published consultation papers on 15 July on Phase 1 proposals, and both will consult further on Phase 2 if the HMT proposals are implemented.⁴ The Phase 1 proposals aim to improve effectiveness and reduce the regulatory burden of the regime, for example allowing longer time periods to take certain steps, and improving guidance.

• A Consultation on Regulatory Environment Cross-Cutting reforms was published.
  
  This Consultation contains a number of reforms that are proposed in relation to the regulatory environment. These include: setting shorter deadlines for determining applications for new firm authorisations, variations and senior manager applications; legislating to require the FCA and PRA to set out long-term strategies to advance their objectives, including the secondary objective to facilitate growth and international competitiveness; and changing regulatory reporting requirements on the FCA and PRA.
  
  The Consultation closes on 9 September 2025.
• A Consultation on Reviewing the Financial Ombudsman Service was published.
  
  The Government is proposing changes to the FOS regime, in response to concerns that the FOS has strayed beyond its remit to determine disputes informally and quickly and has now become a quasi-regulator. The FOS determines complaints about regulated firms on the basis of what is “fair and reasonable in all of the circumstances of the case“. In some matters, there is a lack of alignment between the FCA’s position and that of the FOS on what is misconduct, which creates an uncertain and unpredictable environment for firms and consumers. The key proposal is to adapt the “fair and reasonable” test so that the FOS will be required to find that a firm’s conduct is fair and reasonable where it has complied with the FCA’s rules in accordance with the FCA’s intent for the rules. There will also be a framework whereby the FOS or one of the parties can seek a view from the FCA on the rules, where there is ambiguity or uncertainty. The FOS will not be able to apply the rules retrospectively, i.e. it is the FCA rules at the time of the alleged misconduct that will be relevant to judging the complaint. The FCA and FOS have also published their own joint comments and consultation on, for example, the changes in approach and rules that will be required pursuant to the Government proposals. The FOS has additionally announced a change in the interest rate that will be applied to awards, from 8% to 1% above the average base rate.
  
  The consultation is open until 8 October 2025.
• The Government’s response to the Captive Insurance Consultation and its way forward has been set out⁵. 
  
  The Government indicates that it will take forward the proposed new captive insurance framework, which will be the subject of detailed rules set by the regulators. The PRA intends to consult on new rules in summer 2026 with a view to implementing them in mid-2027, and the FCA will develop its proposals in parallel⁶. The new framework will differentiate between direct-writing captives, and reinsurance captives (i.e. a captive insurer reinsuring the risk of a group member). 
  
  One of the changes since the consultation process is that the Government has rethought its proposal that regulated firms that deal with financial services and pensions should be excluded from establishing their own captives. It is accepted there is a case for some specific purposes, subject to limitations to be considered by the FCA and the PRA. Captives will be excluded from writing compulsory lines (such as employers’ liability) on a direct basis but this may be permitted on a reinsurance basis. The Government has concluded that it is not necessary to create a new regulatory activity in relation to captive managers, but the FCA is considering the application of the existing insurance intermediary regime.
• Consultation on Changes to the Risk Transformation Regulations published.
  
  The Risk Transformation Regulations cover the issuance of insurance linked securities (ILS) and the use of protected cell companies (PCCs). The proposals in the consultation are to introduce more flexibility in relation to ILS, allowing the PRA to have more flexibility in relation to determining how funding requirements are met, and other matters. Secondly, it is proposed to broaden the use of PCCs to cover insurance undertakings, which would allow the use of a PCC as a captive insurer or for a third party to establish a PCC, with different cells providing insurance services to different organisations. The consultation remains open until 8 October 2025.
• Publication of an Overseas Recognition Regime Guidance document, a Memorandum of Understanding and other documents⁷.
  
  The Overseas Recognition Regimes refers to legislative provisions that allow the UK to give unilateral recognition to an overseas regulatory framework, providing benefits such as enabling overseas firms to provide services directly into the UK, or removing duplicative regulatory requirements on overseas businesses. It was necessary for the UK to create these regimes to replace the equivalence regimes inherited from the EU. The documents are intended to provide clarity on how these regimes will be operated.
• Response to the Consultation on a Green Taxonomy
  
  The Government consulted on introducing a green taxonomy at the end of last year. This was intended to assist with the comparability of data and so the prevention of greenwashing, and to assist with investment decisions. Following the responses to the consultation, it has been concluded that a UK green taxonomy should not be developed, and instead the focus should be on UK sustainability reporting standards, assurance of sustainability reporting, and taking forward the development and implementation of requirements for transition plans.

Conclusion

The insurance industry will no doubt welcome many of these proposals. Some of them will take time to be realised, requiring changes to legislation and/or consultation on rule changes, but the direction of travel is promising, even if the effectiveness of various elements of the package will depend on the details of how they are implemented. 

We will continue to monitor the proposals, and will publish more detailed briefings on individual proposals where appropriate.

Footnote

1. The PRA has responded to this proposal here and the FCA has done the same here.
2. Our article on the FCA Consultation on Simplifying Various Insurance Requirements is here.
3. FCA paper here: CP25/21: Senior Managers & Certification Regime review and PRA paper here: CP18/25 – Review of the Senior Managers and Certification Regime (SM&CR) | Bank of England
4. See Footnote 3 above.
5. Our article with more detail on the Consultation is here: UK (re)insurance captives: is the proposed regime enough? – HFW
6. Joint statement from the PRA and FCA here.
7. The other documents available are a Table of UK HMT Equivalence Decisions and Overseas Regime Designations and a Table of the Lead Regulator for the Provision of Advice Under Each Regime available here.