Welcome to the UKGI weekly regulation update service for Aviva ABC brokers

Context

The FCA has published a new web page in relation to non-financial misconduct (NFM) in financial services in readiness for the new rules and guidance to help tackle NFM.  The FCA is explaining what firms should do before the changes come into effect on 1^st September 2026.

Key points to note and next actions

The web page:

• includes a reminder about what NFM is;
• explains how NFM is covered within FCA requirements, both in COCON and in the Fitness and Propriety Sourcebook (FIT);
• explains that the new Handbook guidance (PS25/23) will help firms apply COCON and FIT with clarity and confidence, and that it covers:
  • the boundary between work and private life,how NFM can breach the conduct rules,reasonable steps for managers, and
  • fitness and propriety assessments, including private life, social media and unproven allegations; and
• sets out what firms should do before 1September 2026, and what they do not need to do.

Context

The FCA has set out the next phase of smarter, more effective regulation by publishing its annual work programme for 2026-27, the second year of its current five-year strategy.  The work programme outlines plans for using AI to speed up authorisations, testing new tools to identify key risks earlier, with people remaining at the heart of decision-making.

Key points to note and next actions

Alongside the four strategic themes of being a smarter regulator, supporting growth, helping consumers navigate financial lives, and fighting financial crime, the FCA will progress a number of cross-cutting projects including AML supervision reform.  The programme details the FCA’s plans under each of the four strategic themes, and outlines major initiatives to simplify processes, remove friction where appropriate, and help firms operate more efficiently:

• Integrating AI into regulatory workflows – enabling the FCA to detect harm more effectively and speed up regulatory decision-making. 
• Using generative AI to review documents received from firms – supporting faster decisions. Following successful testing, the FCA will begin rolling out across authorisations and supervision. 
• Using a new sandbox environment to test automated data feeds between the FCA and firms – reducing manual effort and improving the timeliness and reliability of intelligence.
• Investing in smarter case handling – using analytics and digital tools to quickly identify the greatest sources of harm and triage intelligence more efficiently.
• Expanding the Supercharged Sandbox – opening to a new cohort of firms and giving them access to high-quality synthetic data so innovative, AI-driven financial products can be safely tested. 
• Reducing burdens on firms – removing three more regular data returns, reducing the frequency of another, and moving more regulatory tasks onto My FCA, so firms can manage everything in one place. 
• Improving firms’ experience of regulation – with faster authorisation timelines, simplified digital forms, and a new scorecard to better understand and respond to what firms need. 

From an insurance perspective, the FCA states that it will progress work set out in its response to the Which? super complaint:

• analysing how different sales processes affect consumer outcomes;
• finding new ways to improve consumer understanding of their cover;
• considering how the FCA captures claims outcomes as part of its post-implementation review of value measures rules; and
• reviewing how home and travel insurance firms oversee third parties involved in claims handling.

The FCA will conclude its pure protection Market Study, will look at ways to reduce the protection gap, and improve consumer awareness and claims experience. It will also examine further claims ratios and incentives for consumers to switch products, and will monitor annual percentage rates in premium finance and act where it has concerns about fair value.

Context

The FCA has updated its Perimeter Report, which sets out the most significant current issues the FCA sees at the edge of its remit (its ‘perimeter’) and the actions needed in response, including where legislative change may be needed to better protect consumers and markets.  The FCA perimeter sets out what it does and does not regulate.

Key points to note

The FCA is asking for government action on fifteen areas where changes to its perimeter are needed, including:

• Exemptions in the Financial Promotion Order: the removal of self-certification and higher thresholds for high net worth/sophisticated investors, to close consumer protection gaps.
• Trustees: tightening the regime for when trustees require authorisation, to reduce consumer harm and financial crime risks.
• Sports and non-financial spread betting: clarity from the Treasury on the regulatory boundary for these products, which the FCA considers better suited to a distinct regulatory framework.
• Payments: changes to modernise the regulatory framework so it is agile enough to mitigate new and existing risks (e.g., financial crime) and support innovation.

Key new issues highlighted in this year’s report that fall outside the FCA’s perimeter and may pose risks to consumers include:

• ‘Annex 1 firms’ that are only regulated for money laundering purposes and not subject to the FCA’s wider rules, that also create risks for regulated firms doing business with them.
• The growing use of general-purpose AI for guidance on borrowing, saving and investing.
• Speculative prediction market products, which have expanded rapidly overseas.

The current Perimeter Report is made up of 29 entries, with only two insurance-related issues:

• The first relates to captive insurance, an issue first raised in November 2024, where the FCA is considering changes to provide for a regulatory framework that supports the development of the UK as an internationally competitive marketplace for captive insurance.
• The second relates to a definition of ‘insurance’, which was first raised in 2019.
  • Legislation does not currently provide a complete definition of insurance, so court decisions on whether particular contracts amount to insurance help determine where the FCA’s remit applies.
  • The FCA has seen a range of insurance arrangements where it believes currently unauthorised participants should need FSMA authorisation. There has sometimes been uncertainty about whether certain contracts should be classed as insurance.
  • The FCA has identified previous instances of products being promoted as warranties or service contracts which it considers should properly be classed as insurance contracts.

These situations may risk retail and commercial customers not receiving all regulatory protections and increases the likelihood of unregulated firms undertaking activities without the necessary authorisation.  However, this is not a regulatory priority for this year, but the FCA keeps these risks under review, including the need to consult on guidance setting out the FCA’s approach in this area (in addition to our existing PERG 6 guidance).

Context

The FCA has published its fees and levies Consultation for 2026/27.  The FCA is proposing to increase minimum and flat rate fees, as well as application fees, by 1%.  This is in line with the increase in the FCA’s Ongoing Regulatory Activities (ORA) budget (1.1%).  This is the lowest rise in the ORA fees budget since 2017/18 and the lowest AFR increase in a decade.  The 0.7% AFR increase reflects what the FCA needs to collect from firms in fees. The budget sets out how that funding is allocated across the FCA’s ongoing regulatory work, exceptional projects and core operating costs.  In 2026/27, this is £788.9m, £5.4m more than last year.

Key points to note

• The FCA’s annual budget is driven by its core operating activities (the ORA), the exceptional projects it undertakes, and capital expenditure to develop technology and information systems and implement new regulatory and operational requirements.
• To keep fee increases to a minimum, we have kept our budgeted headcount flat, which accounts for around two-thirds of our costs, and have looked to absorb inflationary increases and cost uplifts by finding efficiencies and identifying savings in our budget.
• The actual fees we levy will reflect the AFR net of rebates from financial penalties we collect (forecast at £72.8m).  Find out how to calculate your annual fee.
• Individual fee blocks – proposed annual levies.
  • General insurance distribution – a proposed annual levy of £39.4m, representing a £0.5m (1.4%) increase on last year.
  • Consumer credit firms will see an increase of 1.6%.
  • Funeral plan intermediaries and providers will see an increase of 0.8%.
  • Principal firms will see an increase in the AR / IAR levy of 4.6%.
• Minimum and flat-rate fees will increase by 1%.
• Application, transaction and notification fees will increase by 1%, in line with the increase in the ORA, rounded to the nearest £10.
• The FCA is asking for comments on this CP by 30 April 2026.  Firms can use the online response form.

Context

FSCS has announced the publication of its new five-year strategy setting out its priorities for 2026-2031.  The Strategy will focus on three core priorities of delivering timely, high quality customer outcomes, a strong purpose and performance‑led culture, and value for consumers, industry and the wider financial system.

Key points to note and next actions

The Strategy sets out:

• the FSCS vision of being accessible and efficient for customers, valued by industry, and a cornerstone of UK financial stability; and
• what it sees as its purpose in supporting financial stability, which in turn gives consumers confidence, continuity and compensation when financial services firms fail.

The Strategy is to be delivered using a three-point plan:

• Build a scalable, cost-efficient customer claims model, by simplifying processes and building resilience to adapt to changing demands.
• Embed a ‘purpose and performance’ culture, defining and embedding a clear cultural framework that supports the delivery of FSCS priorities, which will match its sense of purpose with the highest standards of delivery.
• Be a responsible steward of the levy, by controlling costs, thoughtfully managing risk, maximising recoveries and ensuring that consumer awareness of FSCS work continues.

The Strategy document also explores what success would look like in 2031.

Context

The CMA has published its first detailed implementation plan under its new 2026 to 2029 Strategy, which set out five core objectives.  These five objectives underpin the priorities for the next year and key elements of the CMA’s ongoing transformation programme that are laid out in the Annual Plan.  The Strategy centres on promoting competition and protecting consumers with a clear end goal of improving household prosperity.  The CMA has also published a summary of responses to its draft Plan consultation.

Key points to note

Through the execution of its Annual Plan, the CMA will build on a strong track record of change delivery last year, and will continue to deliver impactful outcomes through its existing casework.  The Plan covers:

• Implementation (how the CMA works, Government reforms, consumer protection, markets, advocacy, competition enforcement, and the Digital Markets Competition Regime).
• Working with our stakeholders (stakeholder engagement, working with other regulators, and international cooperation).
• Evolving how the CMA operates (resource for 2026 to 2027, agility and productivity, and digital transformation).
• Delivering impact and measuring performance (accountability for delivering against this Annual Plan, measuring the CMA’s impact, and tracking CMA performance).

The CMA will report against delivery of the priorities in this Annual Plan in its 2026 to 2027 Annual Report and Accounts.

Context

Lloyd’s has published its 2025 Annual Report and Results, including a summary presentation, statements from the Chair and the CEO, and its new Strategy.  The announcement states that the Lloyd’s market has delivered a strong full year performance, a very strong balance sheet, and increased capital.

Key points to note and next actions

• The Lloyd’s market produced strong results in 2025 with profits of £10.6bn (+10.1%), gross written premium of £57.9bn (+4.2%) and a combined ratio of 87.6% (+0.7pp).
• Underwriting and investment returns have resulted in further strengthening of the balance sheet with total capital reaching £49.8bn (+5.7%) and the central solvency ratio increasing to 496%.
• Lloyd’s has launched a new five-year ‘advance and protect’ strategy to sharpen the market’s financial edge and maximise its unique capital advantage.
• The Chief Executive’s (Patrick Tiernan) statement says that Lloyd’s remains committed to supporting the re-platforming of the market to a resilient, cloud-based operational infrastructure, increasing operational resilience and reducing costs.  In that context, he says that Blueprint Two was a courageous undertaking but, despite the efforts of many skilled and committed people, the project has not yielded the benefits that were originally envisioned. A decision has been taken, therefore, to retire some of the project’s original vision.  The technology being deployed by market participants has advanced markedly since Blueprint Two was first conceived, so Lloyd’s and its partners will move forward with a revised plan.

• Addressing culture, Tiernan states that it is not listed as a strategic driver, but that this is deliberate. Culture is not a separate initiative or workstream. It is the context in which every strategic choice is made at Lloyd’s.  The culture Lloyd’s will build will “…be visible in the decisions we take and the standards we uphold. We will celebrate the behaviours that strengthen Lloyd’s — taking the risk, making it happen and owning the outcome. And we will challenge those that fall short.”
• Tiernan states that, over time, these shared beliefs will become self-reinforcing. That discipline is beginning to take hold, and Lloyd’s will work together to embed it more firmly. It will influence how leadership and performance are assessed and rewarded.  As the body that oversees the culture of the Lloyd’s market, Tiernan states that Lloyd’s must hold itself to the highest possible standard. “Credibility starts at home.”