PRA consults on updated guidance for friendly society amalgamations and transfers
CP12/26 – Insurance friendly societies amalgamations and transfers | Bank of England
In July, the PRA published a Consultation Paper (CP12/26) setting out proposed updates to its guidance on friendly society amalgamations and transfers under Part VIII of the Friendly Societies Act 1992. The consultation follows feedback from firms and advisers that the existing process can be complex to navigate, particularly for smaller societies and those with limited experience of restructuring transactions.
The proposals do not introduce new regulatory requirements. Instead, they aim to set out more clearly the PRA’s existing approach, including a clearer and more structured description of the typical stages involved in an amalgamation or transfer. The PRA also proposes additional guidance on areas where it exercises statutory discretion, including when a transferee member vote may be dispensed with and the factors it may consider when deciding whether to require an independent actuary’s report (which may be less likely to be required where both participants are Category 4 firms).
The consultation also aims to give firms greater visibility of likely process timelines, costs and regulatory expectations, helping societies plan transactions more effectively. The PRA states that clearer guidance should reduce unnecessary friction in restructuring activity while maintaining appropriate protections for members and policyholders. The consultation closes on 22 October 2026, with final guidance expected to be published before April 2027.
For smaller societies, the costs of a transfer can be largely fixed regardless of transaction size. Where consolidation is in members’ interests, a disproportionate process can therefore become a barrier to otherwise sensible transactions. Cara Spinks, Broadstone’s Head of Life and Health, commented: “For friendly societies, the challenge is often less about the formal requirements themselves and more about the cost, complexity and uncertainty that can surround a Part VIII process. Greater clarity on the PRA’s expectations, likely timelines and areas of discretion should help societies understand the process earlier, identify potential issues sooner and plan transactions with greater confidence.”
Law Commission review update
The Law Commission has provided a further update on its review of the Friendly Societies Acts 1974 and 1992. The review remains relevant for societies considering future governance arrangements, modernisation and structural change. It has indicated that its final report and draft Bill are expected to be published in Autumn 2026, potentially as early as September.
Technology, AI and operational resilience remain in focus
The Mills Review: AI and the future of retail financial services
UK financial system strengthened with new safeguards for major technology providers – GOV.UK
Financial Services AI Adoption Plan – GOV.UK
July brought a series of publications highlighting the increasing regulatory and policy focus on AI adoption, cyber resilience and firms’ dependence on major technology providers.
The FCA’s Mills Review considers how AI could reshape retail financial services by 2030. The review anticipates wider use of increasingly autonomous AI systems across customer service, underwriting, claims, compliance and other activities, while highlighting potential risks relating to consumer outcomes, fraud and cyber security. It also identifies opportunities, including improved consumer outcomes, greater productivity and enhanced financial inclusion. It also sets out a number of recommendations for the FCA as it considers how its regulatory approach may evolve alongside technological developments.
Alongside this, HM Treasury published its Financial Services AI Adoption Plan, which aims to support wider adoption of AI across the sector. The Plan focuses on areas including regulatory clarity, operational resilience, skills and talent, and the preparedness of firms and regulators for emerging AI-enabled and agentic services. It sets out a series of recommendations for government, regulators and industry aimed at addressing barriers to adoption while maintaining trust and financial stability. The Government has welcomed the recommendations and will consider next steps with industry and regulators.
Operational resilience remained a key theme in HM Treasury’s report, The Value of Resilience. The report presents evidence that investment in cyber and operational resilience can support not only risk reduction but also faster recovery from disruption, stronger financial performance and long-term growth. It highlights the increasing importance of resilience as firms continue their digital transformation programmes and adopt new technologies, including AI.
In a related development, the Government announced the designation of four major cloud and technology providers (Amazon Web Services, Google Cloud, Microsoft and Oracle) as Critical Third Parties, bringing them under direct oversight by the Bank of England, PRA and FCA. The designation reflects regulators’ increasing focus on concentration risk arising from firms’ shared dependence on a small number of technology providers.
Keep Britain Working programme gathers momentum
Keep Britain Working continues drive to stop people falling out of the workforce – GOV.UK
Major expansion of community mental health support across England
The Government’s Keep Britain Working programme reached a new milestone in July, with almost 200 organisations signing up as “Vanguards” to test approaches aimed at reducing workforce exits linked to ill-health and disability. The initiative forms part of the implementation of Sir Charlie Mayfield’s independent review into the role employers can play in tackling health-related economic inactivity.
The programme brings together employers, local authorities and other organisations to explore measures designed to help individuals remain in work or return to work more quickly following periods of ill-health. Areas of focus include earlier intervention, workplace adjustments, personalised stay-in-work and return-to-work plans and improved data on health and employment outcomes. A new Workplace Health Intelligence Unit is also being established to track sickness absence, return-to-work outcomes and disability participation.
The programme reflects a growing policy focus on early intervention, workforce health and the role employers can play in reducing health-related economic inactivity.
In a related development, the Government announced a £343 million expansion of community mental health services in England, including 100 new community mental health centres and 59 dedicated mental health emergency departments. The first sites are expected to open from autumn 2026, with further facilities following from March 2027. The investment is intended to improve access to early support and reduce mental health-related crises, supporting wider efforts to improve workforce participation.
PRA consults on a new UK captive insurance regime
CP11/26 – A tailored regime for captive insurance | Bank of England
The PRA and FCA have launched consultations on a proposed bespoke regulatory framework for UK captive insurers, representing a significant step in the Government’s ambition to establish the UK as a competitive captive insurance domicile. The proposals would create a distinct regulatory regime for captives, sitting outside Solvency UK and designed to reflect the specific risk profile of businesses insuring risks within their own corporate groups.
Key features of the proposed framework include lower capital and reporting requirements, a streamlined authorisation process with a target decision timeframe of four to six weeks, and proportionate governance expectations. Initially, the regime would apply to single-parent captives, with the PRA indicating that further developments may follow in future, including potential consideration of protected cell company structures.
The PRA and FCA believe the proposals could help strengthen the UK’s competitiveness in the global captive insurance market, while maintaining appropriate prudential and conduct safeguards. The consultation closes on 14 October 2026, with implementation currently envisaged for mid-2027.
Cormac Bradley, Senior Actuarial Director at Broadstone, commented that the consultation “marks a new chapter for UK insurance” noting that the proposals are “not simply a lighter version of Solvency UK, but a distinct, captive-specific regime built around the realities of financing intra-group risk.”
He also added: “What stands out is the shift away from formulaic regulation toward a more judgement-based approach. This should mean simpler capital expectations, materially reduced reporting, and faster authorisation. If delivered, it could shape a real UK captive domicile appeal.”
Bradley described the consultation as “the starter’s gun” for organisations reviewing whether a captive could support their risk financing strategy, while noting that firms still need a clear strategy, robust governance and a well-supported capital rationale to secure regulatory approval.
FCA publishes further Consumer Duty good practice guidance
Outcomes monitoring: good practice and areas for improvement | FCA
Consumer support outcome: good practices and areas for improvement | FCA
Products and services: good practice and areas for improvement | FCA
Complaints and root cause analysis: good practice and areas for improvement | FCA
Price and Value Outcome: Good and Poor Practice | FCA
The FCA continued its programme of Consumer Duty supervisory feedback during July, publishing a series of “good practice and areas for improvement” papers covering products and services, outcomes monitoring, consumer support, complaints and root cause analysis, and the price and value outcome. The publications provide further insight into how the FCA expects firms to evidence good customer outcomes as Consumer Duty becomes embedded across the sector.
Across the publications, several common themes emerge. The FCA continues to emphasise the importance of firms demonstrating a clear understanding of customer needs, maintaining robust governance and oversight frameworks, and using management information (MI) to identify, monitor and address customer harm. The regulator expects firms to demonstrate that actions are delivering measurable improvements in customer outcomes.
Particular areas of focus include the quality of outcomes monitoring, the effectiveness of product governance arrangements, the use of complaints and root cause analysis to drive improvements, and the assessment of whether products and services continue to deliver fair value. Good practice is characterised by outcome-focused MI, clear accountability and effective challenge, while weaknesses arise where firms rely on high-level metrics, insufficiently granular customer data or limited evidence that issues have been addressed.
Taken together, the publications reinforce the FCA’s focus on evidencing customer outcomes, effective governance and the use of MI to identify and address harm. While they do not introduce new regulatory requirements, they provide additional insight into how the regulator is assessing practical implementation of the Duty.
Rob Kerry, Actuarial Director at Broadstone, commented: “The FCA’s latest Consumer Duty publications are a useful reminder that implementation is not a one-off exercise. Firms need to be able to show that their governance, MI and product review processes are actively identifying where customer outcomes may fall short, and that this insight is leading to practical action. For insurers and intermediaries, the challenge is not simply producing more data, but using the right data to evidence fair value, effective support and good outcomes across different customer groups.”
Important Information
This newsletter is for general information purposes only and should not be relied upon as professional advice. Readers should seek appropriate advice before taking any action based on the information contained herein.
