CP20/25 – Insurance third-country branches: policy implementation and other updates

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Responses are requested by 16 December 2025.

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Responses can be sent by email to: CP20_25@bankofengland.co.uk.

Alternatively, please address any comments or enquiries to:
Yevgine Asatryan, Prudential Policy
Bank of England
Threadneedle Street
London
EC2R 8AH

1: Overview

1.1 The Prudential Regulation Authority (PRA) significantly revised its third-country branch policies by introducing greater proportionality through the Solvency II review, as well as consolidating and clarifying existing policies under PS8/24^{footnote [1]}. These reforms were intended to support the attractiveness of the UK to international insurers wishing to operate as branches in the UK, while maintaining robust regulatory standards. It is the PRA’s view that, subject to certain safeguards, the ability of financial services firms to branch into other countries is an important component of an open world economy, which in turn benefits the UK economy and furthers the PRA’s secondary competitiveness and growth objective (SCGO).

1.2 Key policy changes implemented in 2024 included:

• removal of requirements to calculate branch capital and risk margin, and to localise assets;
• a significant reduction of reporting requirements (~50%^{footnote [2]});
• introduction of three Modifications by Consent to waive/modify reporting and other requirements for various cohorts;
• publication of risk appetites to clarify the PRA’s approach to branch authorisation and supervision.

1.3 Drawing on experience gained through the rollout of the reforms outlined above, this CP sets out a discrete set of proposals to address newly identified inconsistencies across various areas of those reforms, further streamline the policy framework, and clarify further the expectations for branches. Additionally, the PRA proposes to increase the indicative subsidiarisation threshold for insurance third-country branches. In aggregate, this CP is expected to further support the secondary competitiveness and growth of the UK economy.

1.4 The PRA proposes to:

• Increase the threshold of insurance liabilities covered by the Financial Services Compensation Scheme (FSCS) above which the PRA may expect the third-country insurance undertaking to establish a subsidiary, rather than a third-country branch (subsidiarisation threshold), from £500 million to £600 million;
• Make new rules based on quantitative thresholds, which will:
  • replace the modification by consent (MbC) of Solvency II Reporting 2.2(1) for third country insurance branches (reporting MbC)
  • amend the reporting requirements currently set out in the reporting MbC
• Amend existing rules to permanently embed the relief currently provided through the modification by consent for pure reinsurance branches (pure reinsurance branch MbC);
• Clarify the expectations for third-country branch undertakings for completing an Own Risk and Self Assessment (ORSA) report and the Resolution Report;
• Restate selected relevant remaining EIOPA Branch Guidelines on the Supervision of branches of third-country insurance undertakings (Branch Guidelines) in rules and in the PRA’s policies, and disapply the remaining Branch Guidelines;
• Address minor inconsistencies across various third-country branch policy areas.

1.5 The proposals in this CP would result in changes to PRA Rulebook – Third Country Branches and Reporting Parts, and the following PRA supervisory statements and statements of policy:

• Supervisory Statement 44/15 – Solvency II: third-country insurance and pure reinsurance branches (SS44/15, appendix 1)
• Statement of Policy 7/24 – The PRA’s approach to insurance branch authorisation and supervision (Branch SoP, appendix 2)
• Statement of Policy 6/24 – Solvency II regulatory reporting waivers (appendix 3)
• Supervisory Statement 19/16 – Solvency II: ORSA (SS19/16, appendix 4)
• Supervisory Statement 41/15 – Solvency II: applying EIOPA Set 2, System of Governance and ORSA Guidelines (SS41/15, appendix 5)
• Third Country Branches and Reporting Parts of the PRA Rulebook (appendix 6)

1.6 Table 1 contains the detailed proposals by affected policy materials, including implementation dates.

Table 1: Summary of CP proposals

1.7 The CP is relevant to all third-country branch undertakings (as defined in the PRA Rulebook) and any insurance undertaking that is not headquartered in the UK or Gibraltar and is seeking to operate as a branch in the UK. These proposals do not apply to Swiss general insurers, as defined in the PRA Rulebook, to which different requirements apply.

1.8 The PRA considers that the proposals set out in this CP will advance its primary objectives by further supporting implementation of the revised third-country branch policies. The proposals aim to address inconsistencies, streamline the policy framework, clarify expectations and enhance regulatory transparency.

1.9 The proposals in this CP would advance the PRA’s secondary objective of facilitating effective competition by enabling branches approaching the current subsidiarisation threshold to avoid subsidiarisation costs in the near future. For the same reasons, the PRA considers that the proposals would also advance its secondary objective of facilitating international competitiveness and growth of the UK economy, by enhancing the UK’s attractiveness as a destination for overseas insurance undertakings. By simplifying and clarifying the regulatory reporting framework for third-country branch undertakings, the proposals overall aim to reduce burden and thereby support growth and operational efficiency.

1.10 The PRA estimates that the subsidiarisation threshold increase proposal set out in this CP would deliver at least a £4 million direct net benefit to the industry over the near term. The remaining proposals would result in annualised^{footnote [3]} costs of £0.1 million. The assumptions underlying the cost benefit analysis (CBA) are based on PRA subject matter expert estimates.

1.11 The increase in the subsidiarisation threshold would allow third-country branch undertakings where the third-country branch is approaching the current £500 million threshold to avoid subsidiarisation or other remedial costs in the near future.

1.12 The main direct costs associated with the other proposals would stem from reinstating two annual templates for most branches (other than pure reinsurance branches). However, this cost would be partially offset by the proposal to discontinue quarterly reporting for this cohort. Additionally, the proposals concerning Branch Guidelines would result in the introduction of several new or revised rules, as three of the existing EIOPA Branch Guidelines would be restated in the PRA Rulebook. Nonetheless, the associated costs for firms are expected to be minimal, given that third-country branch undertakings are already expected to comply with these guidelines as set out in SS44/15. The PRA also proposes a new rule that third-country branch undertakings must hold branch provisions to cover branch assets. The PRA does not expect firms to incur any costs due to this proposal, as it is a clarification of an existing implication of the current rules. Further details on the CBA are provided in the following chapters.

1.13 In addition, the proposals to absorb two MbCs into the rules are expected to improve the PRA’s operational efficiency and effectiveness by reducing the resources currently required to administer the reporting relief through MbCs.

1.14 The PRA’s Cost Benefit Analysis Panel was not consulted on the CBA, as the estimated direct impact on insurers falls below the materiality threshold of +/-£10 million published in the SoP14/24: The PRA’s Approach to Cost Benefit Analysis.

Implementation

1.15 The PRA proposes that the implementation date for most of the changes resulting from this CP be 31 December 2026, as shown in table 1.

Responses and next steps

1.16 This consultation closes on 16 December 2025. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP20_25@bankofengland.co.uk.

1.17 When providing your response, please tell us whether or not you consent to the PRA publishing your name, and/or the name of your organisation, as a respondent to this CP.

1.18 Please also indicate in your response if you believe any of the proposals in this consultation paper are likely to impact persons who share protected characteristics under the Equality Act 2010, and if so, please explain which groups and what the impact on such groups might be.

2: Third-country branch subsidiarisation threshold

2.1 The PRA currently expects third-country branch insurance undertakings to subsidiarise in the UK if their liabilities covered by the FSCS are projected to exceed £500 million in the near future, as set out in the PRA’s approach to insurance branch authorisation SoP7/24 (paragraphs 2.27-2.32). This subsidiarisation threshold was introduced in 2018 and has remained unchanged since its implementation.

2.2 When setting this threshold, the PRA considered a number of factors, including the FSCS levy cap which is £600 million annually for general insurance (GI) ^{footnote [4]}. The levy cap limits the amount the FSCS can charge the industry^{footnote [5]} annually to cover the costs of compensation in case of failures.

2.3 Over time, thresholds that are set in nominal terms can ‘tighten’ as inflation and other factors increase the nominal size of the economy – capturing a different set of firms than originally intended; this is known as prudential drag. For example, in the period since 2018, inflation has been significant, and this has caused some branches to approach the subsidiarisation threshold without substantial real growth. Accordingly, the PRA is proposing to increase the subsidiarisation threshold from £500 million to £600 million.

2.4 This proposed uplift will significantly mitigate the prudential drag since 2018, while ensuring that the maximum cost to the FSCS of a single third-country branch undertaking failure would not exceed the maximum annual FSCS levy cap for GI. The increased threshold will allow branches approaching the current threshold to continue operating under their current business models, with no material increase to the risks to the PRA’s objectives.

2.5 This proposed increase is intended to mitigate the risk of prudential drag in a proportionate and timely way. The PRA expects to revisit its approach to its risk appetite in relation to subsidiarisation for insurance branches in due course, which may involve further increasing the threshold. As part of any future review, the PRA will consider whether the threshold’s alignment to the FSCS GI levy cap remains appropriate, noting that considerations may be different for insurance and banking sectors^{footnote [6]}, as insurance claims typically crystalise across several years following an insurer failure. The PRA welcomes views in this consultation to inform this future review.

PRA objectives analysis

2.6 The PRA considers that the proposed uplift would broadly maintain its existing branch risk appetite by accounting for a large part of cumulative inflation since the threshold was introduced. Following a review of branches approaching the current threshold, the PRA has concluded that the proposed increase would not materially impact its primary objectives of safety and soundness and policyholder protection. While there may be some increased exposure to the FSCS and the industry in the event of failure, due to a higher maximum loss, the potential cost of failure of a single insurer with a UK branch would remain within the maximum FSCS annual levy cap for GI (£600 million). Furthermore, due to the nature of insurance liabilities, where claims are typically settled over several years, the incremental cost to the FSCS, met by industry, is expected to be low, further mitigating risks to financial stability and policyholders. As the amount that the FSCS pays out annually for GI claims has consistently remained well below the maximum levy amount, the PRA considers that FSCS coverage remains adequate to absorb any incremental increases from the failure of a branch, should it materialise.

2.7 This proposal advances the PRA’s secondary objective of facilitating effective competition by enabling branches approaching the threshold, to continue to operate as branches without the need for subsidiarisation in the near future. For the same reason, the PRA considers that the proposal would also advance its secondary objective of facilitating international competitiveness and growth of the UK economy, by enhancing the UK’s attractiveness as a destination for overseas insurance undertakings wishing to operate as a third-country branch.

Cost benefit analysis (CBA)

Benefits

2.8 The proposal would generate one-off and ongoing direct benefits for third-country branch undertakings where the third-country branch is approaching the current indicative £500m threshold. These branches would be able to avoid costs of subsidiarisation or other remediating actions in the near future. This is expected to generate an upfront direct cost savings (benefits) of at least £4 million for these firms over the near term. This proposal could also yield broader economic benefits by enhancing the UK’s international competitiveness and attracting overseas investments.

Costs

2.9 There may be some increased exposure to the FSCS and the industry, due to a higher maximum loss, in the event of a third-country branch undertaking failure. However, the associated incremental increase to FSCS levies from such a failure would be low. This is due to the nature of insurance liabilities whereby, in case of failures, payouts are distributed over several years, mitigating the financial impact.

3. Absorption of MbCs into PRA Rulebook

3.1 The current reporting framework for third-country insurance branches is heavily reliant on the use of waivers. While this approach allows for flexibility, it is inefficient to maintain rule requirements that are routinely waived for most of the firms to which they apply. In particular, “modifications by consent”, offered by the PRA to cohorts of firms, should be reserved for exceptional circumstances^{footnote [7]}. Moreover, this approach introduces unnecessary complexity and administrative burden for both firms and the PRA. Accordingly, the PRA proposes to simplify the framework by:

• absorbing the reporting MbC for category 3 and 4 branches into the PRA Rulebook on the basis of quantitative thresholds, and
• absorbing the pure reinsurance branch MbC into the PRA Rulebook.

Reporting MbC for category 3 and 4 branches

3.2 This MbC currently provides quarterly and annual reporting relief to category 3 and 4 third-country insurance branches. The scope of the MbC is set out in the SII Regulatory Waivers SoP6/24.^{footnote [8]}

3.3 At present, nearly all direct^{footnote [9]} third-country insurance branches supervised by the PRA are eligible for this MbC, as the vast majority fall into categories 3 or 4. This widespread reliance on waivers is inconsistent with best practices in policymaking and does not represent an efficient use of regulatory or industry resources.

3.4 The PRA therefore proposes to absorb this MbC into the Reporting Part of the PRA Rulebook. This proposal would replace the current use of firm categories^{footnote [10]} with quantitative thresholds, as categories can include an element of supervisory subjectivity and are unsuitable for rule-making. Under the proposed rules, only branches (excluding pure reinsurance branches) with at least £1 billion in gross written premiums or £2 billion in branch provisions (based on the annual regulatory data for the preceding financial year), would be required to submit the full reporting suite applicable to third-country branch undertakings. The remaining branches would report a subset of these templates consistent with the current reporting MbC and as amended by the proposals in chapter 4 (Appendix 8).

3.5 Threshold-based reporting may incentivise firms to understate best estimates to remain under the threshold. The PRA has considered this risk but does not think it is substantial, as reserving policies are usually set at legal entity level.

3.6 The proposed thresholds are based on 2024 year-end data and three-year projections. They are expected to cover almost all of the approximately one hundred affected third-country branch undertakings. Under the proposed thresholds, only two or three of the largest branches would be required to transition to full reporting.

3.7 The PRA has considered alternative options for the size of the proposed thresholds. The PRA notes that the intent of the thresholds is to ensure that larger branches are subject to full reporting in order to support appropriate monitoring and supervision, as larger branches pose commensurately higher risks to the PRA’s objectives than smaller branches. However, to maintain the current reporting status for 100% of the branches currently making use of the MbC, the thresholds would need to increase substantially, e.g. more than tripling the proposed GWP threshold. The PRA considers that such high thresholds would generally not be prudent.

Pure reinsurance branch MbC

3.8 This MbC currently provides relief to pure reinsurance branches from Third Country Branches 8.1-8.3 on investments. These rules require branches to comply with the Investments Part of the Rulebook, specifically the Prudent Person Principle (PPP). The proposal is to amend the rules so that these investment rules no longer apply to pure reinsurance branches, thereby eliminating the need for this MbC.

3.9 The PRA has historically granted such relief to pure reinsurance branches, as their policyholders are insurers (entities considered more sophisticated than retail policyholders) and FSCS protection does not apply. This rationale has underpinned the PRA’s approach for many years for all pure reinsurance branches (first via individual waivers and then via the MbC). Additionally, cedants are subject to PRA expectations around credit risk and counterparty exposure management, which further supports policyholder protection. As such, the PRA considers it appropriate to exclude pure reinsurance branches from the scope of application of the PPP.

PRA objectives analysis

3.10 The proposals in this chapter would simplify and streamline the policy framework, supporting operational efficiency and growth, thereby advancing all the PRA’s statutory objectives.

Cost benefit analysis

Benefits

3.11 The proposed simplification of the policy framework would reduce compliance costs for branches and improve regulatory transparency, with almost all^{footnote [11]} reporting requirements in the PRA rules. In addition, this proposal avoids the need to implement the changes set out in chapter 4 of this CP into the reporting MbC, which would otherwise require updating all existing directions issued to firms under this MbC. Avoiding this exercise is estimated to save industry up to £0.7 million on an annualised basis, and reduce the resource burden on the PRA. Under the proposed thresholds, two or three branches would be required to transition to full reporting, which would ensure that the PRA has appropriate oversight of those branches to support effective supervision.

Costs

3.12 Under the proposed thresholds, two or three branches would be required to transition to full reporting. The PRA estimates the total costs associated with this transition to be approximately £0.1 million on an annualised basis, and welcomes feedback in this regard.

4. Reporting amendments for smaller branches

4.1 The PRA proposes to adjust reporting requirements for smaller branches (excluding pure reinsurance branches) - currently set out in the reporting MbC for category 3 and 4 branches, which is proposed to be absorbed into the PRA Rulebook (see chapter 3) - as follows:

1. Reinstate two annual reporting templates. The templates are IR.19.01.01 (non-life insurance claims) and IR.20.01.01 (development of the distribution of the claims incurred).
2. Discontinue requiring quarterly reporting for this cohort.

4.2 The Solvency II review significantly simplified the reporting framework for third-country branch undertakings. In particular, reporting requirements for third-country branch undertakings were reduced by ~50%^{footnote [12]}. This streamlining has inadvertently resulted in the loss of important data, arising from legacy oversights in SS44/15, exacerbated by the extension of reporting relief to category 3 branches following the SII review.

4.3 The PRA has carefully considered this data gap and determined that reinstating the two annual templates is necessary to support the PRA’s primary objectives, while accepting the loss of other less critical information.

4.4 The second proposal covers the discontinuation of quarterly reporting. Currently, the reporting MbC requires the branch balance sheet template in quarter 2 of the firm’s financial year. Further analysis has concluded that this template in isolation offers relatively limited prudential benefits compared to the cost of the quarterly submission for the firms.

PRA objectives analysis

4.5 The absence of information from these two annual templates has created reserving data gaps for approximately one fifth of the UK non-life insurance market. These templates support both firm-specific and horizontal supervision, helping the PRA identify reserving trends and emerging risks. This is important for the advancement of the PRA’s primary objectives, as reserving issues are a common cause of insurance failures.

4.6 Conversely, the removal of quarterly reporting for this cohort is not expected to materially impact the PRA’s ability to meet its primary objectives. It will reduce the reporting burden for the firms and supports the PRA’s secondary objectives by lowering operational costs and improving the UK’s attractiveness to third-country insurance firms.

Cost benefit analysis

Benefits

4.7 The reinstatement of the two annual templates would enhance the PRA’s ability to monitor reserving risks and support effective supervision, thereby reducing the likelihood of firm failures. While it is difficult to quantify this benefit, the PRA expects a material improvement in its ability of identifying reserving risks and accordingly reducing likelihood of failures.

Costs

4.8 The first proposal would result in one-off implementation and ongoing compliance costs to firms, while the second proposal would deliver ongoing cost savings. The PRA has estimated that the ongoing cost savings from the latter would nearly offset the ongoing cost of the former, and hence the net impact of the two proposals would stem from the initial implementation exercise.

4.9 A key consideration in the CBA regarding the first proposal is that most affected third-country branches are part of EEA-based undertakings, which already produce similar data at legal entity level, mitigating the incremental cost. The PRA estimates the total direct cost to the industry to be around £0.8 million on an annualised basis, stemming largely from a one-off systems update. The impact on individual firms could vary based on their size, systems and operational sophistication.

5. Guidance updates and restatement of remaining EIOPA Branch Guidelines

Guidance updates

5.1 The PRA proposes to provide additional guidance in response to frequent queries from firms during the first year of implementation of updated third-country branch policies, following the Solvency II review. In particular, following the deletion of the branch capital requirement, firms have requested guidance on the expected content of the branch Own Risk and Solvency Assessment (ORSA) report. The PRA has also received many queries about the contents of the recently introduced resolution report.

ORSA guidance

5.2 Branches are required to conduct and report an ORSA, as set out in Third Country Branches and Conditions Governing Business 3.8, with the scope limited to matters relevant to the branch operations (Third Country Branches 7.3). SS44/15 (chapter 9) sets out that, where appropriate, the PRA will consider the submission of an undertaking ORSA with a branch-specific addendum in lieu of a branch-specific ORSA.

5.3 Following removal of branch capital requirements, the content of a branch-specific ORSA has become unclear, as by definition ORSAs revolve around solvency.

5.4 The PRA therefore proposes to amend chapter 9 in SS44/15 by adding guidance for branch-specific ORSAs. The main amendment (with a consequential amendment in paragraph 4.2 of SS44/15) sets out that the ORSA should include a high-level summary of the undertaking’s solvency position, including a rationale for capital buffers and an overview of stress testing results. This information would enable the PRA to form a proportionate view of the undertaking’s solvency and resilience, ensuring adequacy of worldwide financial resources, as set out in Chapter 13 of the Third Country Branches Part of the Rulebook.

Resolution report guidance

5.5 The resolution report is a triennial requirement for branches introduced during the SII review (Article 49 of chapter 2A of the Reporting Part of the Rulebook), with guidance provided in SS44/15 (chapter 3). It must include an analysis, supported by a legal opinion, of the winding-up regime applicable to the third-country branch undertaking.

5.6 Prior to the SII review, third-country branch undertakings were required to submit a regular supervisory report (RSR), which had to include similar content as outlined in EIOPA’s Branch Guidelines (Technical Annex 1^{footnote [13]}). In response to firms’ queries on the content of the report, the PRA proposes to update the guidance in SS44/15 as follows:

• Clarify that pure reinsurance branches are not expected to calculate available assets, as the asset availability definition in SS44/15 3.4A (which the PRA proposes to convert into a rule with certain modifications as set out in paragraph 5.11) is not relevant to reinsurance policyholders;
• Add content in SS44/15 to clarify expectations for the resolution report content, based on restating relevant parts of Branch Guideline 26 from the EIOPA Branch Guidelines.

Restatement of the remaining Branch Guidelines

5.7 As part of the SII review, the PRA assessed the continued relevance of a significant number of the EIOPA Branch Guidelines. In PS15/24 – Review of Solvency II: Restatement of assimilated law (PS15/24) (following proposals set out in CP12/23 – Review of Solvency II: Adapting to the UK insurance market), the PRA restated certain Branch Guidelines in PRA policies, determined that many other Branch Guidelines no longer apply, and clarified the expectation for third-country branch undertakings to comply with the remaining Branch Guidelines (as detailed in chapter 2 and appendix 1 of SS44/15) that are relevant to them.

5.8 In order to clarify the PRA’s expectations on third-country branch undertakings, the PRA has now analysed the rest of the EIOPA Branch Guidelines and proposes to restate some of the remaining Branch Guidelines and to disapply the rest. The proposals for disapplying certain guidelines are due to one or more of the following criteria: the content is already addressed in other policies, the Branch Guidelines are no longer relevant due to policy changes, or they offer limited benefit relative to the cost of continued implementation.

5.9 Some of the proposed restatements would result in Rulebook changes and are discussed in the next paragraphs. Appendix 7 includes a mapping table that lists all remaining Branch Guidelines alongside the corresponding policies the PRA proposes to update for restatement purposes, where applicable. Consequently, the PRA also proposes to update SS44/15, to remove the mapping table in appendix 1 and the references to the Branch Guidelines. In addition, the related reference to SS44/15 in SS41/15 would also be removed.

5.10 Branch Guideline 6 discusses determination of branch assets. In particular, it outlines that a third-country insurance undertaking should include in the branch balance sheet only the assets that are available according to specified criteria.

5.11 This Branch Guideline has already been partially implemented in SS44/15, paragraph 3.3. However, following the removal of branch capital requirements, the PRA considers it increasingly important to ensure that in the event of the third-country branch undertaking’s failure, UK policyholders are not disadvantaged compared to other third-country policyholders. Therefore, the PRA proposes to convert the existing expectation to hold available assets to cover the branch provisions for direct insurance obligations, into rules in the Third Country Branches Part of the Rulebook. The rules would be based on the asset availability criteria set out in the Branch Guideline and, in certain cases, be subject to statutory priority of preferred debts. Compared to the existing text in SS44/15, the proposed rule adopts a broader formulation (while maintaining alignment with the original Guideline), to capture a wider set of scenarios and jurisdictions. The PRA also proposes consequential changes in SS44/15 to reflect the conversion of existing asset availability policies to rules.

5.12 For clarity, the PRA also proposes a new rule in the Third Country Branches Part of the Rulebook, to require third-country branch undertakings to hold branch assets in respect of branch provisions. This rule complements the proposal in the previous paragraph, explicitly stating that undertakings must hold assets to back branch insurance and reinsurance liabilities, and that the assets held for the direct insurance liabilities must be available. The PRA views this as a clarification rather than a new requirement, consistent with Third Country Branches 6.1, Investments 3.1 and the feedback provided in response to CP12/23.

5.13 Branch Guideline 17 discusses branch accounting practices. The first part specifies how a third-country insurance undertaking should keep records and the second part recommends that the undertaking should produce and keep management accounts relating to the branch balance sheet.

5.14 The PRA proposes to incorporate this Branch Guideline in the Third Country Branches Part of the Rulebook. The PRA considers it important to maintain accurate records and management accounts, to ensure that in the event of a winding-up, control over available assets can be effectively established, protecting UK policyholders.

5.15 Branch Guideline 19 discusses the third-country branch undertaking security deposit. The PRA proposes to restate the part of the Branch Guideline which provides that the assets of the deposit should be of low volatility under all market conditions, by amending the Third Country Branches Part of the Rulebook. This requirement would mitigate the risks of value erosion in circumstances where the deposit may be used for enforcement and supervisory action. The PRA proposes to disapply the rest of Branch Guideline 19 concerning rights of set-off of the credit institution where the deposit is held, due to complexity of implementation.

Cost benefit analysis

Costs

5.16 The PRA expects that the costs associated with the proposal to elevate these three Branch Guidelines to rules would be minimal, as third-country branch undertakings are already expected to comply with them, as set out in SS44/15. The new rule proposed in 5.12 provides a clarification, therefore the PRA does not expect costs from its implementation.

Benefits

5.17 The PRA anticipates reduction in the administrative and compliance burden for the industry over the longer term, due to clarity from absorbing or disapplying the remaining Branch Guidelines.

6. Other minor amendments

6.1 The PRA proposes several minor amendments to third-country branch policies to address inconsistencies and improve clarity for firms, which have minimal cost and benefit implications

6.2 The PRA proposes to address inconsistencies with the term “insurance policyholder” in SS44/15.

6.3 Due to an oversight in PS15/24, branches were included in the scope of SS19/16. The PRA proposes to rectify this oversight by removing the reference to third-country branches.

6.4 Third-country branch undertakings are currently eligible to apply for matching adjustment (MA) and volatility adjustment (VA) permissions. Given the removal of branch capital requirements and the limited practical use of these permissions, the PRA proposes to remove branch eligibility for VA permissions from the Rulebook (MA permissions eligibility is partly determined outside the PRA’s rules and policies). Related updates to reporting template and instructions will be addressed in a separate consultation.

6.5 The PRA also proposes an amendment in SS44/15 to clarify that third-country branch undertakings should notify the PRA where it is projected that they may exceed the subsidiarisation threshold within the next three years.

7. Other Legal Requirements

Have regards’ analysis

7.1 In developing these proposals, the PRA has had regard to, among other things, the Financial Services and Markets Act 2000 (FSMA) regulatory principles and the aspects of the Government’s economic policy as outlined in the HMT recommendation letter from November 2024. The following factors, to which the PRA is required to have regard, were significant in the PRA’s analysis of the proposal:

• Burden or restriction which is imposed on a person, or on the carrying on of an activity, should be proportionate to the benefits (regulatory principle) – the proposal to increase the subsidiarisation threshold is proportionate, as it will allow branches approaching the threshold primarily due to inflation to avoid subsidiarisation costs in the near future, while introducing a low incremental risk to the PRA’s primary objectives. The PRA considered reinstating further reporting templates to the reduced reporting currently set out in the reporting MbC for category 3 and 4 third-country branches, including detailed outwards reinsurance reporting templates. The PRA concluded that it would be disproportionate to require this cohort to complete those templates.
• Regulatory environment which facilitates growth (the PRC recommendations letter): the proposal to increase the subsidiarisation threshold supports a regulatory environment conducive to growth by reducing unnecessary costs and barriers for branches approaching the existing threshold.
• Maintaining and enhancing the UK’s position as a world-leading global finance hub (the PRC recommendations letter): by allowing third-country branch undertakings to write more business in the UK before being expected to subsidiarise, the proposal enhances the UK’s attractiveness as a location for international insurers.
• The need to use the PRA’s resources in the most efficient and economical way (FSMA regulatory principles): maintaining reporting policies via a combination of rules and waivers is not an efficient use of the PRA’s or industry’s resources. The proposals would ensure that almost all branch reporting requirements are set out in the Reporting rules and would reduce the administrative burden on the PRA.
• The desirability of the PRA exercising its functions in a way that recognises differences in the nature of businesses carried on by different persons (FSMA regulatory principles): the proposals maintain significant reporting relief for most branches, consistent with the PRA’s principle of tailoring requirements to the nature and scale of firms’ activities.
• Transparent exercise of the PRA’s functions (FSMA regulatory principles and Legislative and Regulatory Reform Act 2006): The proposals relating to branch guidelines aim to enhance industry’s understanding of the PRA’s supervisory approach to third-country branch undertakings, and to clarify the requirements and expectations applicable to firms.

7.2 The PRA has had regard to other factors as required. Where a specific ‘have regard’ is not addressed in this analysis, it is because the PRA considers that it is not a significant factor for these proposals.

Statutory Duty to Consult

7.3 In accordance with its statutory obligations under sections 138J and 138S of FSMA, the PRA is required to consult when introducing new rules or new standards instruments. When rule-making is not involved, the PRA also has a public law duty to consult widely where it would be fair to do so. 

7.4 The PRA consulted the Insurance Practitioner’s Panel about the main proposals in this CP. The Panel expressed its support for the proposals.

Impact on mutuals

7.5 The PRA considers that the proposed rule changes will have no differential impact on mutuals compared to other firms.

Equality and diversity

7.6 In developing its proposals, the PRA has had due regard to its obligation under s.149 of the Equality Act 2010. The PRA considers that the proposals do not give rise to equality and diversity implications.