PRA Consults on Proposals for Third-country Insurance Branches

The PRA has published a consultation (CP20/25) on proposals related to UK branches of overseas insurers. Following policy changes introduced in 2024 which generally sought to consolidate and clarify existing third-country branch policies, the PRA’s experience has indicated that further changes are needed to address inconsistencies, further streamline the regulatory framework and further clarify the expectations for branches. 

The aim of the proposals is to support the PRA’s secondary competitiveness and growth objective by further enhancing proportionality and regulatory clarity for international insurers operating in the UK. The proposals include: 

1. Raise the subsidiarisation threshold from £500m to £600m

The subsidiarisation threshold applies to a third-country insurance undertaking’s liabilities that are covered by the Financial Services Compensation Scheme. If those liabilities are projected to exceed the threshold “in the near future”, the PRA expects a third-country insurance undertaking to establish a subsidiary in the UK.

The initial threshold was set at £500m in 2018. Due to inflation, some branches are already close to breaching the threshold, hence a proposed uplift to £600m. The PRA states that it expects to revisit its approach to risk appetite in the future and may further increase the threshold.

The PRA proposes to amend SS44/15 (Solvency II: third-country insurance and pure reinsurance branches) to clarify that third-country branch undertakings should notify the PRA where it is projected that they may exceed the subsidiarisation threshold within the next three years (SS44/15 currently refers to the threshold being exceeded “within the near future”).

2. Permanently embed the PRA direction on the modification by consent (MbC) of Solvency II Reporting 2.2(1) in the PRA Rulebook on the basis of new quantitative thresholds 

The MbC currently provides quarterly and annual reporting relief to category 3 and category 4 third-country insurance branches. The proposed embedding of the MbC in the PRA Rulebook would replace the current use of firm categories with new quantitative thresholds. In other words, firms that fall below the thresholds would no longer be subject to the relevant reporting rules and would therefore no longer need to obtain a MbC from the PRA.

Only branches (excluding pure reinsurance branches) with at least £1 billion in gross written premiums or £2 billion in branch provisions (based on the annual regulatory data for the preceding financial year) would be required to submit the full suite of reporting templates applicable to third-country branch undertakings. Other branches would report a subset of these templates.

The PRA expects the proposed thresholds to cover almost all of the affected third-country branch undertakings, and that only two or three of the largest branches would be required to transition to full reporting.

3. Permanently embed the PRA direction on the MbC for pure reinsurance branches in the PRA Rulebook

The MbC currently provides relief to pure reinsurance branches from the Prudent Person Principle rules under the Investments Part of the PRA Rulebook. The proposed embedding of the MbC in the PRA Rulebook would amend those rules so that they no longer apply to pure reinsurance branches, thereby eliminating the need for firms to obtain a MbC from the PRA.

4. Modify reporting requirements for smaller branches

The PRA proposes to reinstate two annual reporting templates (IR.19.01.01 (non-life insurance claims) and IR.20.01.01 (development of the distribution of the claims incurred)) and discontinue quarterly reporting. 

This would apply to branches (excluding pure reinsurance branches) that fall below the new quantitative thresholds outlined in point 2 above.

5. Clarify the PRA’s expectations in respect of the branch-specific Own Risk and Solvency Assessment (ORSA) and the Resolution Report

Chapter 9 of SS44/15 currently sets out the PRA’s expectations in respect of third-country branches’ ORSAs, including branch-specific ORSAs (i.e. where a third-country branch undertaking ORSA is not submitted in lieu of a third-country branch ORSA). The PRA proposes to amend that chapter by adding guidance for branch-specific ORSAs, including an expectation that the branch-specific ORSA should contain a high-level summary of the undertaking’s solvency position with a rationale for capital buffers and an overview of stress testing results.

In respect of the Resolution Report, the PRA proposes to update the relevant guidance in SS44/15 to clarify (i) that pure reinsurance branches are not expected to calculate available assets and (ii) expectations for the content of the Resolution Report.

6. Restate and modify certain EIOPA Branch Guidelines on the supervision of branches of third-country insurance undertakings (Branch Guidelines) in the PRA Rulebook and policies

The PRA currently expects third-country branch undertakings to comply with certain Branch Guidelines (as detailed in chapter 2 and appendix 1 of SS44/15) that are relevant to them. Under the PRA’s proposals, some of those Branch Guidelines would be retained and restated in the PRA Rulebook with amendments, including in particular the expectation (i) to hold available assets to cover the branch provisions for direct insurance obligations (Branch Guideline 6), (ii) to keep records and management accounts relating to the branch balance sheet (Branch Guideline 17) and (iii) for the assets of the third-country branch undertaking security deposit to be of low volatility under all market conditions (Branch Guideline 19).

The remaining Branch Guidelines would no longer apply.

7. Other minor amendments

The PRA proposes to remove third-country branch undertakings’ eligibility to apply for volatility adjustment permissions. Related updates to reporting template and instructions will be addressed in a separate consultation.

The PRA also proposes several minor amendments to third-country branch policies to address inconsistencies and improve clarity for firms, such as addressing inconsistencies with the term “insurance policyholder” in SS44/15 and removing the reference to third-country branches in SS19/16 (Solvency II: ORSA).

Next steps

The PRA’s consultation is open until 16 December 2025. The increase of the subsidiarisation threshold would take effect on publication of the relevant policy statement (expected in Q1 or Q2 2026). The remaining measures would take effect on 31 December 2026 in the form of (i) updates to the relevant supervisory statements and statements of policy and (ii) changes to the Third Country Branches and Reporting Parts of the PRA Rulebook.

Edward Stembridge, Trainee Solicitor, assisted in the preparation of this briefing.