Operational resilience: insights and observations one year on
The FCA has recently published Operational resilience: insights and observations one year on, setting out what it has learned from firms’ self-assessments following the end of the operational resilience transition period in March 2025. While much of the focus to date has been on larger and more complex firms, the message from the FCA is clear: operational resilience is now a business-as-usual expectation for all Solvency II insurers.
The paper recognises the significant progress firms have made, but it also highlights where improvement is still needed. In particular, the FCA places strong emphasis on firms having a clear, evidence-based understanding of how disruption to their important business services could cause harm to customers or threaten market integrity, and whether they could realistically remain within their impact tolerances in severe but plausible scenarios.
The FCA also highlights the need for firms to keep their self-assessments current as their business, technology and operating environment evolve, including by revisiting assumptions and testing them through severe but plausible scenarios.
A proportionate, well-reasoned approach to operational resilience can not only meet regulatory expectations but also support customer trust, operational efficiency and long-term sustainability.
If you would like support in reviewing your current operational resilience arrangements, refreshing your self-assessment, or preparing practical, board-ready materials aligned to the FCA’s latest observations, we would be happy to discuss how we can help.
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Operational resilience: insights and observations one year on
FOS response to Mills Review
In the previous edition of our regulatory newsletter, we referred readers to The Mills Review, the FCA’s forward looking assessment on how advanced AI could reshape retail financial services over the coming years.
On 1 April 2026, the Financial Ombudsman Service (FOS) published its response to the review focusing on the implications for the complaints and redress system. Their comments are applicable to wider financial services.
The FOS notes that AI is already influencing the volume and nature of complaints it receives. In particular, it has observed increased use of generative AI by consumers to draft and structure complaints, sometimes to help organise complex information, improve clarity or address language barriers. The FOS recognises that this can support access to redress, especially for vulnerable customers, but also highlights challenges where AI‑generated submissions are excessively long, inconsistent or factually inaccurate, increasing the time required to resolve cases.
Similar issues have been identified where professional representatives use AI, with the FOS citing examples of disproportionate and inaccurate submissions that run counter to its objective of delivering quick and informal dispute resolution.
At present, the FOS reports receiving very few complaints about firms’ own use of AI. However, it expects this to evolve as firms increasingly deploy AI‑driven tools for complaint triage, prioritisation and decision‑making. In anticipation of this, the FOS emphasises the importance of transparency and explainability, particularly where AI contributes to decisions affecting customer outcomes. It encourages clear regulatory expectations around governance, record‑keeping, routes for human escalation and the identification of vulnerable customers where automated processes are used.
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Financial Ombudsman Service response to Mills Review, February 2026
FCA Annual work review programme
The Financial Conduct Authority (FCA) has published its Annual Work Programme for 2026/27, which sets out the regulatory activities it plans to deliver during the year in support of its current multi-year strategy. The document provides an overview of planned policy, supervisory and operational work across UK financial services, including insurance.
The work programme is organised around the FCA’s four strategy priorities: smarter regulation; supporting growth; Helping consumers navigate their financial lives; and fighting financial crime. For each priority, the FCA describes the main programmes of work it expects to progress over the year including ongoing supervisory and enforcement activity, as well as planned policy development and market interventions.
Smarter regulation
The Work Programme highlights continued efforts to improve the effectiveness and efficiency of the FCA’s regulatory approach. This includes the use of data and AI to focus resources on areas of higher risk, streamlining regulatory processes, and reviewing existing rules to ensure they remain proportionate and fit for purpose.
Supporting growth
In support of growth and the international competitiveness of the UK financial services sector, the FCA intends to review regulatory frameworks and processes to ensure they support innovation and market entry while maintaining appropriate standards.
Helping consumers navigate their financial lives
The FCA confirms that improving consumer outcomes remains a central focus. Planned activity includes continued supervision of firms’ conduct and governance, alongside work to improve transparency and the quality of communications. The FCA will support firms offering targeted support to help consumers make informed financial decisions. In April, we set out our perspective on targeted support and the practical considerations for mutuals and other firms as the new service went live. The FCA intend to conclude the pure protection Market Study focusing on reducing the protection gap, improving consumer awareness and claims experience and examining further claims ratios and incentives for consumers to switch products.
Fighting financial crime
The Work Programme reiterates the FCA’s commitment to reducing and preventing financial crime. This includes supervisory activity focused on firms’ systems and controls, the use of data to identify potential risks, and enforcement action where appropriate.
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FCA annual work programme 2026/27
Consumer understanding: good practice and areas for improvement
In March 2026, the FCA published Consumer understanding: good practice and areas for improvement, setting out findings from its review of how firms are delivering the consumer understanding outcome under the Consumer Duty. The publication draws on supervisory work across a range of retail financial services firms, including insurance, and highlights examples of practices that support consumer understanding, alongside areas where firms commonly fall short.
The FCA emphasises the importance of firms using customer testing, data and feedback to assess how communications are performing in practice, and of governance arrangements that provide oversight of communication quality and outcomes. It is intended to support firms’ ongoing work to embed the Consumer Duty by illustrating practical examples observed by the FCA.
The FCA explains that consumer understanding relates to whether communications equip customers with the information they need, at the right time, and in a way they can understand, to make effective decisions.
The publication outlines examples of good practice where firms design communications with a clear customer focus, use plain language, avoid unnecessary complexity and tailor information to the needs of different customer groups. This includes clear explanations of key product features, costs, exclusions and risks, as well as the use of layered or targeted communications to help consumers navigate complex information.
The FCA also identifies areas for improvement observed during its supervisory work. These are unsurprisingly contrary to the examples of good practice and include overly technical or legalistic language, important information being obscured or presented too late in the customer journey, and a lack of testing to ensure that communications are understood by the intended audience. The publication notes instances where firms rely heavily on compliance with disclosure requirements without sufficient consideration of whether communications genuinely support consumer understanding.
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Consumer understanding: good practice and areas for improvement
PRA Business plan 2026/27
The PRA’s Business Plan for 2026/27 sets out its supervisory priorities for banks and insurers, aligned to its statutory objectives of safety and soundness, policyholder protection and, where relevant, secondary competition and growth objectives.
Cross sector themes include financial resilience, risk management, governance and operational resilience, alongside targeted work by firm type.
The PRA highlights continued supervisory focus on capital adequacy, balance sheet resilience and risk transfer arrangements, particularly in the context of evolving business models and market conditions. This includes assessing the impact on solvency, liquidity and the ability to meet long term policyholder obligations, alongside work on Solvency UK, internal models and stress testing.
As trailed in the business plan, on 29 April 2026, the PRA stated the commitment to consult on a new insurance captives regime in Summer 2026 and published a consultation on proposed changes to UK Solvency UK firms’ use of funded reinsurance (FundedRe). The proposed changes are designed to remove an unintended regulatory advantage, so FundedRe is treated in line with its true economic risks rather than being favoured by the rules. The aim is to support resilience and fair competition by encouraging appropriately strong collateral and clear risk recognition, while keeping the framework simple and consistent across firms. By reducing these distortions, the PRA believes the approach can support sustainable growth and help ensure investment decisions are driven by genuine economic value, including continued support for productive UK assets. The proposals apply to UK Solvency UK firms using funded reinsurance and would not apply to arrangements that fully transfer all risks by 30 September 2026, with the revised requirements proposed to take effect from 1 July 2027.
Referencing the development of a regulatory framework for mutuals, the PRA confirms ongoing engagement with the sector, including updates to policy and guidance and work to support mutual insurers during consolidations.
Climate change is also mentioned across sectors, with supervised firms reminded of the early June deadline under the PRA’s climate supervisory statement SS5/25 – effectively, a readiness and credibility checkpoint.
The document also provides a high level overview of planned activity across general insurance and banking, as well as internal priorities such as data, analytics and supervisory effectiveness.
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Prudential Regulation Authority Business Plan 2026/27
