The PRA consults on reforms to the UK Insurance Special Purpose Vehicle regulatory framework

News release

Today, the Prudential Regulation Authority (PRA) published consultation paper (CP) 15/24 proposing reforms to the UK Insurance Special Purpose Vehicle (UK ISPV) regulatory framework, through a combination of changes to the finalised PRA rules and policy materials also published today in policy statement (PS) 15/24 that will replace Solvency II assimilated law.

The proposed reforms are intended to enhance the safety and soundness of the insurance sector by making more diversified reinsurance capital available to cedants while also furthering the PRA’s secondary competitiveness and growth objective by making authorisation of UK ISPVs faster and easier. 

The proposals introduce a new accelerated pathway for certain UK ISPV applications (e.g. some types of catastrophe bonds) which meet the criteria set out in the PRA’s proposed new statement of policy – Approach to authorising and supervising UK insurance special purpose vehicles. Under the accelerated pathway, in collaboration with the Financial Conduct Authority (FCA), the PRA proposes to consider applications and, where satisfied, issue approvals within 10 working days (rather than the current 4–6-week process) of an application being submitted to the PRA and deemed complete.  In addition, the proposed reforms will make it easier for a wider range of current market practices to be undertaken in the UK, while also streamlining and speeding up the standard application and approval processes. The reforms will also clarify the PRA’s expectations of UK insurers who cede risks to Special Purpose Vehicles, wherever they are established.

Sam Woods the Deputy Governor for prudential regulation said:

‘These reforms will deliver a much faster turn-around time for approval of new Insurance Special Purpose Vehicles in the UK, supporting growth and competitiveness while maintaining safety and soundness.’

To help inform these proposals the PRA convened a number of discussions with industry, including a subject expert group, to gather a broad range of information and explore options for proposed reforms.  

Next steps

The PRA invites feedback on the proposals set out in this consultation and welcomes further discussion from stakeholders to help inform its final policy decisions. The consultation period closes on 14 February 2025. Please address any comments or enquiries to CP15_24@bankofengland.co.uk. The PRA proposes to publish final policy for firms in mid-2025.

The current requirements on UK ISPVs derive from a combination of the PRA’s final policy outlined in PS15/24 and UK legislation. The PRA is working actively with stakeholders to agree the most effective approach to introducing further reforms to the UK ISPV framework. 
The PRA is grateful for the input received to date and looks forward to further constructive engagement and feedback during the consultation period.