UK FCA Closes Consultation on Further Simplification of Insurance Rules

The UK Financial Conduct Authority’s latest consultation on simplifying insurance rules reaches its response deadline on Sept. 19, 2026, after the regulator gave firms and other stakeholders an extra two weeks to comment. The deadline closes the feedback stage for CP26/22, but it does not itself change the FCA rulebook. The regulator still has to consider responses and decide which proposals to carry into final rules.

CP26/22, launched in late June, is the next phase of a wider effort to make insurance regulation more proportionate while retaining consumer protections. The package covers the territorial reach of detailed insurance conduct rules, disclosures to customers, the boundary between advised and non-advised sales, and the currency used for minimum professional indemnity insurance requirements. Most of the proposed changes are intended to give firms options rather than force them to redesign their processes.

In its consultation, the FCA said the proposals build on final rules issued in December 2025 and on its broader plan to rely more heavily on the Consumer Duty and other high-level standards where detailed prescription is no longer considered necessary. The regulator originally set a Sept. 4 deadline for CP26/22 before extending the response period by two weeks.

Non-UK insurance business could fall outside detailed conduct rules

The most consequential scope proposal concerns insurance business with customers and risks outside the United Kingdom. The FCA wants its Insurance Conduct of Business Sourcebook, known as ICOBS, and chapter 4 of its Product Intervention and Governance Sourcebook, known as PROD 4, to apply where there is a clear UK connection rather than simply because activity is carried on from the UK.

For ICOBS, that connection would be determined mainly by the policyholder’s habitual residence and, where relevant, the location of the insured risk. A customer who is habitually resident outside the UK and whose insured risk is also outside the UK would generally fall outside the detailed ICOBS requirements. If either the customer is habitually resident in the UK or the insured risk is located in the UK, the detailed rules would continue to apply. PROD 4 would follow the same basic principle at product level for products distributed only to overseas customers and covering risks outside the UK.

The FCA is not proposing to remove every UK requirement from overseas business. High-level obligations, including relevant Principles for Businesses other than the Consumer Duty and rules in the Senior Management Arrangements, Systems and Controls sourcebook, would continue to apply. The Consumer Duty is being considered separately in CP26/23, where the FCA has proposed a broadly aligned approach for non-UK customers.

The scale of the London market is central to the regulator’s case for changing territorial scope. CP26/22 says the London market handled $187 billion of gross written premium in 2024, with 67% coming from contracts with customers outside the UK and Ireland. The FCA argues that applying detailed UK rules alongside local requirements can create duplication and compliance costs without necessarily improving outcomes. Using membership data from major London market trade bodies, the FCA estimates that this scope change could affect about 139 underwriters and 166 intermediaries.

Any territorial change would be forward-looking. Existing insurance contracts would remain subject to the rules that applied when they were entered into, so firms would not be expected to reopen older contracts simply because the FCA later narrows the territorial reach of ICOBS or PROD 4.

Disclosure and advice rules would become less prescriptive

Another part of the consultation would remove several disclosures that the FCA considers duplicative, difficult for customers to use or of limited value. Examples include requirements to provide a firm’s postal address, to state whether a firm is an insurer or intermediary, and to give certain detailed conflict-of-interest disclosures. The FCA also proposes removing requirements to disclose the “nature and basis” of remuneration received by intermediaries and information about how employees may be remunerated.

The regulator is not proposing to abandon disclosure obligations generally. It points to items such as complaint procedures and fee information as useful, actionable information. The wider aim is to reduce dense blocks of text that can distract customers from information that is more relevant to a purchase decision.

Delivery methods would also become more flexible. The current framework can default to paper in circumstances where the FCA believes digital communication may work better. Under the proposals, firms would have more freedom to choose an appropriate durable medium based on the customer, the product and the way it is sold. Paper would remain available free of charge when a customer asks for it, and the FCA says the option to request paper should be clear and easy to use. The consultation also asks how artificial intelligence could affect the way insurers present information and whether new methods could create risks for customer understanding.

For advised sales, the FCA wants to simplify the boundary by treating a sale as advised only when the firm makes a personal recommendation as defined in the regulatory framework. Activities that may currently be described as advice but do not amount to a personal recommendation would move into the non-advised category. The regulator says this should leave two clearer categories of sale rather than several variations with slightly different requirements.

The change would not remove the core protections for non-advised sales. Firms would still need to make sure products they propose are consistent with a customer’s demands and needs, and customers would still need to be told whether they are receiving a personal recommendation or information only. The FCA says situations that would change category under the proposal are likely to be relatively rare in practice.

Sterling PII limits would replace euro figures if the FCA proceeds

CP26/22 also proposes converting several minimum professional indemnity insurance, or PII, limits from euros into pounds. The current euro figures originate in European legislation and can create exchange-rate uncertainty for firms whose PII policies are denominated in sterling. A sterling policy that satisfies the minimum when it is taken out can move below the euro-equivalent threshold before renewal if the pound weakens.

For insurance distribution activity, the FCA proposes replacing the current €1,300,380 minimum for a single claim with £1.11 million and the €1,924,560 aggregate figure with £1.65 million. The existing rule that can require a higher aggregate amount based on 10% of annual income, subject to a £30 million cap under MIPRU, would remain. For certain Mortgage Credit Directive credit intermediation activity, the proposed sterling minimums are £390,000 for a single claim and £640,000 in aggregate, replacing €460,000 and €750,000 respectively.

The FCA stresses that this is a currency conversion exercise, not a review of whether the underlying PII protection is high enough. It used Bank of England exchange-rate data covering 1,262 business days from May 2021 through May 2026 and calculated a five-year trimmed mean of 1.1674 euros per pound. The resulting sterling figures were rounded to the nearest £10,000.

If adopted, the new sterling limits would apply when the amending instrument takes effect, with transitional relief for firms that already have PII cover in place. Those firms could generally rely on existing cover until the next renewal or extension, with a proposed longstop of 12 months after the new rules take effect. Firms with policies denominated in another currency would still need to check equivalence, but against fixed sterling minimums instead of euro figures.

The FCA’s cost-benefit analysis identifies 4,205 regulated insurance firms across the market and says the PII proposal could affect 3,681 insurance intermediaries. The regulator does not expect new direct costs beyond familiarisation, although firms that choose to use the new flexibility may change systems, documents or internal processes.

The next step is for the FCA to assess consultation responses and decide whether to make the proposed rules. CP26/22 does not give a final policy-statement date. It does say that, where changes are adopted, the FCA intends most of them to take effect shortly after the final rules are made so firms can use the added flexibility quickly. That means the Sept. 19 deadline ends the consultation stage, not the policy process.