March 4, 2026

UK Financial Conduct Authority Reveals Its Regulatory Priorities for the Insurance Sector in 2026

Sebastian Barling, Robert Chaplin, George F. Gray, Caroline Jaffer, Dev Jain, Connor Williamson Skadden, Arps, Slate, Meagher & Flom LLP + Follow Contact LinkedIn Facebook X Send Embed

Executive Summary

• What’s new: The FCA has released its 2026 regulatory priorities report for the UK insurance sector, the first edition of this new annual publication.
• Why it matters: The report replaces multiple, discrete portfolio letters and is designed to provide clarity for all UK insurers on key areas of focus for the FCA over the coming year.
• What to do next: Firms should consider reviewing the list of priorities, assessing their current practices and preparing for engagement with the regulator in the areas mentioned, which include claim handling practices, access to insurance, and the risks and opportunities associated with new technologies. __________

Introduction

On 24 February 2026, the UK Financial Conduct Authority (FCA) published its first Regulatory Priorities report for the UK insurance sector. With the introduction of this new annual publication, which replaces the numerous, individual portfolio letters historically published, the FCA is aiming to make its expectations clearer, more predictable and easier for firms to navigate.

The report addresses work recently completed by the FCA relevant to the insurance sector, as well as work that is ongoing or due to take place over the next 12 months. In addition, it seeks to cover the full range of the FCA’s activities — including supervision, policy matters and enforcement.

The report sets out four key insurance priorities for the FCA, as summarised below.

Improving Consumer Understanding, Claims Handling and Service Quality

As a continuation of one of the FCA’s priorities from 2025, the regulator intends to take further steps to address a common issue raised by consumers and consumer bodies — namely poor claims experiences (see, for example, the consumer group Which?’s super complaint and the FCA’s response). With this in mind, the FCA has reiterated that insurers are expected to communicate with consumers clearly on the scope of their cover, including any limitations and exclusions, test the effectiveness of those communications and monitor, on an ongoing basis, whether products and services deliver on their promises. Claims should also be dealt with in a prompt, fair and transparent manner.

The FCA will, over the next 12 months, actively monitor consumer outcomes regarding claims handling, and has communicated a willingness to intervene where standards fall short, which may include taking enforcement action. The FCA will also support industry initiatives, such as the Association of British Insurers’ work on storm claims and cash settlements, and intends to expand its review of firms’ oversight of outsourced claims processes to ensure consistent service quality across the market. In addition, the FCA expects to issue a consultation paper in 2026 on incorporating the requirements of the Digital Markets, Competition and Consumers Act 2024 into the FCA Handbook.

Relatedly, the FCA intends to monitor developments in pet insurance and private medical insurance, with the report noting that the regulator has identified price increases and issues with consumer understanding in respect of both types of products. This is another area where there may be regulatory action in 2026.

Increasing Access to Insurance

Expanding access to insurance is another central priority for the FCA in 2026, with a particular emphasis on supporting vulnerable consumers who are not able to access appropriate products for an affordable price.

The FCA’s initiatives in this area sit alongside the work the regulator is already doing with the government and industry stakeholders to address barriers to access, as highlighted in the Financial Inclusion Strategy and the Motor Insurance Taskforce reports. Initiatives include increasing the uptake of home contents insurance among social renters and improving underwriting decisions for travel insurance for those with pre-existing mental health conditions (where in many cases the premium payable can be prohibitively expensive).

The FCA is also monitoring the affordability of insurance, as evidenced by its work on premium finance, and is committed to closing the protection gap by encouraging firms to review their products and distribution strategies. Firms are expected to review and engage with these reports, deliver good outcomes for consumers in line with the Consumer Duty, and consider how their products and services can better meet the needs of underserved groups.

Supporting Growth and Innovation

The report recognises that a growing and innovative insurance market is vital for the UK’s global competitiveness and resilience in the face of emerging risks. To this end, the FCA is encouraging insurers to embrace the responsible adoption of new technologies, including artificial intelligence (AI), and to develop products that address emerging risks. In particular, the FCA has reiterated that firms can test new ideas in the FCA’s AI Lab and Sandbox.

Over the next 12 months, the FCA has the following specific aims in this area:

• Evaluate the risks and opportunities of AI for insurance, assess how firms are using AI in their operations and identify barriers to adoption.
• Improve its own understanding of the risks, opportunities and barriers to policyholders purchasing cyber insurance.
• Alongside the Prudential Regulatory Authority (PRA), consult on a regulatory framework for captive insurance, expected to be introduced in 2027. See our 16 July 2025 alert, “ UK’s Proposed New Captive Insurer Regime: Key Developments and Next Steps.”

Simplifying Regulation

The report further reiterates the FCA’s recognition that the regulatory framework for insurance has, in certain areas at least, become unduly burdensome and complex. In 2026, the regulator is committed to simplifying rules and data requirements, reducing unnecessary burdens on firms and, ultimately, finding an appropriate balance between growth and consumer outcomes.

Specific initiatives in this area include (among other things):

• Implementing the next steps set out in Policy Statement 25/21, “Simplifying the insurance rules,” which include removing some product-specific rules, rationalising conflicts of interest rules, consulting on disapplying the Consumer Duty to non-UK business, and on the international scope of ICOBS and PROD 4, and consulting on further simplification of insurance rules and reporting, including Guaranteed Asset Protection Insurance rules and information disclosure requirements.
• Review, jointly with HM Treasury and the PRA, the Senior Managers and Certification Regime to make it more proportionate and efficient. Firms operating in the UK insurance sector should read the report with interest, carefully review the priorities set out above and consider whether any action is required in order to meet the FCA’s expectations.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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