Insurance update

Which? super complaint

On 29 September the consumer advocacy group, Which?, launched a “super-complaint” aimed at pressurising the FCA into take further action in the retail non-life insurance market.

Which? claims that three features of the home insurance and travel insurance markets harm consumers:

• poor claims handling – including areas highlighted in the FCA’s 2025 claims-handling report, as well as other areas that Which? considers the FCA overlooked in that report
• inappropriate sales processes – in particular where these lead to misunderstandings on the part of consumers as to the scope of their cover under the policies sold
• a lack of application and enforcement of FCA rules and other relevant law. 

The super-complaint refers extensively to the FCA’s July 2025 home and travel claims handling report. In that report, the FCA set out examples of good practice and examples of areas for improvement, and commented that it would provide individual feedback to all firms within the review. It also set out its expectation that firms consider whether their policies are meeting customer needs and whether action is needed to improve the clarity of policy wordings. Which?, however, considers that the FCA is taking insufficient action to ensure that the insurers within the scope of the report and other insurers selling home and travel insurance are complying fully with their regulatory obligations, pointing to the absence of any publicised enforcement action or follow up market study.

Some of the issues Which? identifies with regard to consumer understanding of policy terms include:

• a commonly held belief that insurance products must meet minimum cover requirements under regulation
• reliance on comparison sites, which only highlight key policy terms
• an absence of easily accessible information about claims acceptance rates for different insurers.

Which? also thinks that the FCA should be addressing wider relevant laws such as those relating to unfair terms, unfair commercial practices and requirements of insurance legislation. It cites a number of examples of policy wordings in home and travel policies which it considers are inconsistent with requirements under the Insurance Act 2015 and the Consumer Insurance (Disclosure and Representations) Act 2012, and which potentially put the relevant firms in breach of requirements under ICOBS and the Consumer Duty.

The FCA has a programme of ongoing work already in this area and in July had published a “roadmap” for retail insurance which set out proposed next steps, including in respect of home and travel insurance claims-handling. It has 90 days from the launch of the super-complaint in which to publish its reasoned response setting out what action it proposes to take. Possible actions include enforcement against insurers, agreeing voluntary changes with the industry, conducting further investigations/market studies, or recommending action by the Government. The FCA could also, however, conclude that no action is required beyond the measures it is already putting in place.

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The Matching Adjustment Investment Accelerator

On 23 October the PRA published its policy statement and final rules for the introduction of a “Matching Adjustment Investment Accelerator” (“MAIA”). This follows its April 2025 consultation, which we discussed in our Insurance Update.

The new regime came into effect on 27 October. Under the MAIA framework, firms with an existing matching adjustment (“MA”) permission will be able to apply for an MAIA permission. Once received, this which will allow the firm to include “new assets” in its relevant portfolio of assets without needing to first obtain a variation of its MA permission to alter the scope. The firm would be required to apply for a variation of the MA permission within 24 months of inclusion of the new assets. For these purposes, a “new asset” is one with features that are not within the scope of the firm’s existing MA permission.

The PRA expects firms to include an appropriate exposure limit to its use of the MAIA permission in its application, with this limit forming part of the permission. The PRA expects that, in general, an appropriate MAIA exposure limit would be the lower of: (i) 5% of the best estimate liabilities of the MA portfolio; and (ii) an amount proposed by the firm which is no greater than £2 billion (in each case, considered across the Group).

Firms making use of the MAIA permission will need to:

• have in place an effective written contingency plan in respect of any “new assets” included in the MA portfolio, setting out the steps the firm will take if it is required to remove the new asset from the portfolio
• establish a written policy to ensure ongoing compliance with the PRA’s rules in respect of use of the MAIA, which must be approved by the board
• provide a report on use of the MAIA to the PRA on an annual basis.

The policy statement identifies a number of areas where changes were made to the final rules and guidance following feedback on the consultation. Key changes include:

• extending the time limit for submission of the MAIA use report from 14 weeks after a firm’s financial year end to 18 weeks after, to introduce a gap after other annual reporting deadlines
• some changes to the guidance in (revised) SS7/18 on assessing asset eligibility, including removing the expectations that it would generally be inappropriate to include in the MA portfolio using the MAIA permission (i) assets where the assessment of their MA eligibility is more complex; and (ii) internally restructured assets
• changes to the guidance on contingency planning to allow short or medium term (but not immediate) sales of MAIA assets to be included in plans in some circumstances
• introducing a limited exception to the general approach in the PRA’s (revised) supervisory statement on Funded Reinsurance (SS5/24) that firms cannot assume recapture of an asset into the MA portfolio using an MAIA permission.

Areas where the PRA has chosen not to make changes in response to feedback include the overall MAIA exposure limits (referred to above).

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Third Country Branches

On 16 September the PRA published a consultation (CP20/25) on proposed changes to the regime for third country branches of overseas insurers. This follows on from changes introduced at the end of 2024 as part of the review of UK Solvency II, including the removal of branch capital requirements.

The most significant change is a proposed increase in the “subsidiarisation threshold” above which the PRA may expect a third-country undertaking to establish a subsidiary rather than a third country branch. This will involve a change to the PRA’s Statement of Policy on its Approach to insurance branch authorisation and supervision to amend the threshold from £500 to £600 million of insurance liabilities covered by the Financial Services Compensation Scheme. The PRA is proposing this change largely to counteract the “prudential drag” caused by inflation.

Other proposed changes include:

• changing the quarterly and annual reporting requirements for third country branches to absorb the current “modification by consent” applicable to category 3 and 4 third country branches. This will be replaced with a quantitative threshold determining whether branches can benefit from reduced reporting requirements
• reinstating two annual reporting templates for smaller third country branches but discontinuing quarterly reporting for these branches
• excluding pure reinsurance branches from the prudent person principle, replacing the existing modification by consent which achieves the same effect
• amending the requirements for third country branch ORSAs, to reflect the fact that branch capital requirements are no longer calculated
• addressing EIOPA Branch Guidelines which were not addressed as part of the 2024 changes, to either restate or disapply them.

The consultation closes on 16 December 2025.

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