FCA and PRA Set Out Initiatives to Support Growth of the Mutuals Sector

At the beginning of December, the PRA and the FCA published a joint report setting out initiatives that will support the growth of the mutuals sector. The report follows the UK government committing to double the size of the co-operative and mutuals sector and opening a call for evidence on 26 November 2025. The government’s commitment and the regulators’ support for growth are positive for insurance mutuals, and we discuss them further in this article.

Insurance mutuals play a small but important role in the insurance sector, in particular the P&I sector. Based on figures provided in the report, the UK has 93 insurance mutuals with a market share of 5-6% of total premiums. The number of insurance mutuals is expected to decrease in the coming years, due to a number being in run-off. The last authorisation of an insurance mutual was in 1988, although there have been more recent authorisations of reinsurance mutuals. Furthermore, three insurance mutuals account for 84% of the insurance mutual sector’s assets. Accordingly, as recognised by the regulators, many insurance mutuals are small and are facing difficulty remaining competitive and targeting growth.

In the report, the regulators recognise that mutuals need slightly different regulatory treatment to other authorised firms and have stated that the right regulatory environment will help mutuals compete with other firms. The regulators have said that they will achieve this through:

1. proportionate regulation and supervision so that mutuals do not face undue costs and burdens;
2. targeted initiatives designed to support mutuals in tackling the challenges they face; and
3. regular, ongoing communication and engagement with the sector and its trade bodies to ensure their needs are well understood, and that they in turn understand regulatory priorities.

In the report, the regulators point towards a number of wider reforms that will support growth in the mutuals sector. For insurance mutuals, this includes:

1. removing the need for a Consumer Duty Board Champion and removing outdated guidance and Dear CEO letters to reduce regulatory burden;
2. the PRA’s introduction of Solvency UK for insurers;
3. proposed reforms to the Senior Manager and Certification Regime; and
4. simplifications to insurance rules (including changes to product governance rules) and product information.

The report also identifies the following initiatives as being supportive of the specific needs of the mutuals sector:

1. the regulators intend to set up a joint PRA and FCA Scale-up Unit to provide regulatory support to eligible firms, including mutuals, which are looking to grow rapidly; and 
2. the PRA intends to publish guidance on friendly society ‘Part VII’ transfers to help mutual insurers understand the simplifications applied by the PRA to the consolidation process.

Alongside publishing the report, the FCA has published another report on the landscape of registered societies and its role as the registering authority for mutual societies. The FCA has also launched the Mutual Societies Development Unit (MSDU) which is targeting the sustainable development of the mutual societies model.

Overall, the report positions the regulators as being willing to work with the mutuals sector to support growth, although the point is made that growth must also come from within the sector, such as through resource sharing with larger mutuals supporting smaller mutuals.

Many of the initiatives highlighted in the report are relevant to the wider insurance sector and relate to the regulators’ broader drive to advance their secondary international competitiveness and growth objective through reducing regulatory burden and creating a more attractive regulatory environment. A limited number of the initiatives are mutual-specific, and it remains to be seen whether wider reaching initiatives will be effective in driving growth in a sector which the regulators acknowledge as being unique and requiring a tailored regulatory response.