Chapter LAM01090
| Published date | 05 August 2019 |
| Record Number | LAM01090 |
| Court | HM Revenue & Customs |
Companies writing insurance business in the UK through a company or a branch in the UK are subject to prudential regulation by the PRA, while branches of EEA companies are regulated by the regulator in the home state. The UK leaving the EU may bring branches of EEA companies within PRA regulation. In the UK regulation of conduct is undertaken by the FCA.
Insurance regulation typically comes from two sources:
- The European Insurance and Occupational Pensions Authority (EIOPA) is the primary driver of European insurance regulation. Broadly speaking and subject to the EU legal process it writes a variety of prudential and conduct regulations into European Law using EU Directives. These are then accepted for implementation in U.K. law by the Government
- The Treasury and UK Government can also write UK insurance regulations independent of the EU
The PRA and FCA are responsible for ensuring that insurance regulation is appropriately drafted and followed. This is done through PRA rulebooks and FCA handbooks. The application of EU regulation is dependent on the status of the UK within the EU.
As well as regulation at the legal entity level, there is regulation at group level within the EEA with a lead regulator identified generally in the territory where the headquarters or main operating company is based.
For regulatory purposes insurance is divided between:
- long-term insurance, described in Part II Schedule 1 to the FSMA 2000 (Regulated Activities) Order SI 2001/544 (PDF 182KB) (‘RAO’)
- general business described in Part I Schedule 1 RAO
This distinction is recognised for tax purposes. FA12/S64 links the definition of a ‘contract of insurance’ and a ‘contract of long-term insurance’ for the purpose of Part 2 of FA12, to the definitions in FSMA 2000 (Regulated Activities) Order SI 2001/544. Further information on regulated insurers is available in the General Insurance Manual (GIM).
Regulation of life insurers has evolved over many years, to protect the interests of policyholders. Life insurance products may involve premiums paid up front with pay-outs taking place many years later – in the case of some pension products up to 50 years or more after the policy is first taken out. It is therefore particularly important that policyholders have assurance that the company will be able to meet their claims over such long time periods.
EU regulation under the Solvency II Directives introduced a new system of prudential regulation effective from 1 January 2016...
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