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

Context

The FCA has published a review of how firms are designing products and services to better meet customer needs.  The report highlights positive steps firms have taken to improve how they design, monitor and distribute products and services under the Consumer Duty to deliver good outcomes. It also highlights extra insight and examples for smaller firms to help them apply the Consumer Duty in a proportionate and practical way.  The FCA has also updated existing good practice reviews on consumer support, complaints and root cause analysis and the price and value outcome with additional insight and examples, and what appears to be updated commentary for smaller firms.

Key points to note and next actions

• The report comments on the cost of poorly designed products, on the fact that progress has been made but there is more to do, on product and service design and target markets, on monitoring and review, on distribution and third-party oversight, and on the FCA supporting firms to deliver better outcomes.
• The FCA focused on the overarching requirements of the Duty for the products and services outcome across product and service design and target market, testing, monitoring and review over the life cycle of a product or service, distribution and third parties, and customers in vulnerable circumstances.
• Good practice and areas for improvement are outlined under each of the main headings in the report.
• For smaller firms:
  • The review acknowledges that smaller firms may have fewer resources and may therefore apply the Duty in a way that fits their size and customer base. To support them in doing so, the FCA included examples of good practice from smaller firms.
  • In relation to adapting products or services and customer journeys for different customer segments, the FCA gives examples of some smaller firms recording customer data and making good use of it to understand the needs, characteristics and objectives of their target market.
  • In relation to outcomes-focused, customer-centric MI, some smaller firms effectively collate a range of data to understand outcomes.
  • In relation to monitoring, and limitations in monitoring, the FCA saw a smaller firm appearing to rely almost entirely on complaint volumes as an indicator of customer outcomes. While complaints data can be a valuable source of insight, firms should develop MI that goes beyond complaints data to gain better insight and assurance on customer outcomes.  Firms should use their judgement to identify relevant sources of data to give them the insights they need to assess whether they are delivering good outcomes.
  • In relation to structured engagement with distributors, a pragmatic approach is to establish clear data-sharing expectations, setting out the type of information firms require from third parties to understand if their activities continue to support good customer outcomes, the standards the information should meet, and how it should be shared.
  • In relation to intervening on out-of-target market distribution, the report states that one smaller firm identified, through a routine review of its distribution channels, that some individuals whose situation did not yet trigger a requirement to consider tailored support (because their debt was not yet unmanageable) were self-referring for this service via their website. As a result, the firm reminded its debt advisors of how to approach these situations, made updates to online content, and embedded other improvements to prevent recurrence. The firm saw fewer of these customers self-referring.

Context

The FCA has published a Consultation Paper, CP26/29, alongside a Consultation from the PRA, on a new, bespoke, and proportionate regulatory framework for captive insurers in the UK.  Captive insurance is a method of self-insurance, where a business uses a regulated insurance subsidiary to finance risks from its own resources rather than paying premiums to a third-party insurer.

Key points to note and next actions

• Currently there are no captive insurers established in the UK, and businesses wishing to use this structure typically set up captives in other jurisdictions.
• The FCA’s proposals would introduce a proportionate conduct framework for single-parent captives – sometimes called ‘pure’ captives – that reflects their distinct business model and lower risk profile.
• This consultation will be of interest to those entities considering establishing a captive insurer in the UK; existing insurers and reinsurers, particularly those exploring captive insurance structures, ceding business to them or reinsuring them; and insurance intermediaries providing, or planning to provide, insurance and risk management services to corporates.
• The regulators are proposing a regulatory framework that removes or tailors several requirements that apply to conventional insurers that are not appropriate to the captive business model or its risk profile.
• HM Treasury, in its Consultation, defined two types of captive insurer – ‘Reinsurance basis’ and ‘Direct basis’.  The FCA proposes a single type of captive, which can write insurance business on both a direct basis, subject to the lines of business limitations, or on a reinsurance basis.
• Captive insurers will only benefit from the regime where they do not write certain categories of business that the FCA considers would carry additional risks of harming third parties, or that would require additional consumer protections. In particular, captives would not be permitted on a direct basis to enter contracts with, or cover, individuals or entities eligible to refer complaints to FOS, including:
  • consumers;
  • small and medium-sized enterprises (SMEs) that fall outside the Handbook definition of ‘large commercial customers’; or
  • policy stakeholders as defined in the FCA Handbook Glossary, including leaseholders under a multi-occupancy building insurance policy.
• Table 1 in paragraph 2.10 of CP26/29 provides a summary of the lines of business captives can write.
• The regulators are proposing a streamlined and proportionate approach to authorisation for captives, reflecting their more limited and lower-risk business model.
• Captive insurers will be dual-regulated firms that hold permissions to effect and carry out contracts of insurance as principal (together with any other necessary permissions).
• To encourage growth of the sector, the regulators are committing to determining complete applications within 4 to 6 weeks of receiving them. This applies to captive insurers that will carry on permissible business lines.
• Chapter 3 of the Consultation (‘Application of FCA rules, governance, supervision and fees’) sets out the FCA’s proposals on:
  • which of the Handbook rules would apply to captive insurers;
  • how the FCA proposes to hold them accountable;
  • how the FCA proposes to supervise them; and
  • its proposed fee structure.
• The table in paragraph 3.4 sets out those parts of its Handbook rules the FCA is proposing to apply or not apply to captive insurers.
• Chapter 3 also includes details of the corporate governance and accountability of captive insurers, captive management, supervision and reporting, and fees (application and periodic).
• There will be a new Glossary definition of ‘captive insurer’, with proposed amendments to the Glossary definitions of ‘retail market business’ (to exclude insurance business carried on by a captive insurer (where that insurance business is in scope of the firm’s Permissions) – effectively removing captive insurance from the scope of Consumer Duty), and ‘Solvency II firm’ (to capture a captive insurer within this definition for the purposes of the SYSC and INSPRU Sourcebooks).
• There will be a new Section SYSC 3.5 ‘Additional requirements for captive insurers’.
• Neither MIPRU nor ICOBS will apply to a captive insurer.
• The regulators’ parallel 3-month consultations will close on Wednesday 14 October 2026, with implementation expected in mid-2027, after both regulators publish their final rules and policies.
• At a later stage, both regulators intend to further consult to extend the regime to protected cell companies (PCCs) once the necessary legislation is in place.

Context

The Bank of England (the Bank), the PRA and the FCA started overseeing the first critical third parties (CTPs) on Monday 13 July 2026, following designation by the Treasury.  CTPs are technology and other service providers whose services underpin the UK financial system. The Treasury has announced its first designations of four global cloud services and technology providers:

• Amazon Web Services EMEA SARL.
• Google Cloud EMEA Limited.
• Microsoft Ireland Operations Ltd.
• Oracle Corporation UK Limited.

Key points to note and next actions

• CTPs must identify and manage risks to their critical services effectively, and maintain open, timely communication with regulators and the firms that rely on them, particularly during major incidents.
• The FCA has, in a new web page, set out why CTPs matter, summarised the new oversight regime, explained what the regime means for CTPs, and explained how CTPs are ‘designated’.

Context

The FCA has published its latest annual response letter to the Treasury’s November 2024 ‘remit letter’.  The letter is accompanied by an Annex, mapping Government recommendations to FCA strategy and delivery.  The examples set out in the Annex are illustrative and intended to demonstrate strategic alignment, where relevant, with the Government’s recommendations, its Financial Services Growth and Competitiveness Strategy and the Leeds Reforms, and delivery – rather than provide an exhaustive account of FCA activity.

Key points to note and next actions

The letter sets out that:

• Supporting sustainable growth and innovation requires clear and proportionate judgments about risk.
• The FCA’s approach is grounded in a focus on outcomes and material harm; intervening decisively where risks threaten consumer protection, market integrity or confidence, while allowing space for responsible risk-taking and innovation that can support investment, productivity and longer-term economic growth.
• This approach enables the FCA to target regulatory effort where it has greatest impact.
• Trade-offs inherent in pursuing growth will become more explicit, with a corresponding acceptance that not all harm can be prevented.
• These are not decisions for the regulator alone, but for the whole system. They often involve broader, fundamental policy choices, and not simply regulatory ones.
• The Government should be clear about how it wishes growth to be balanced against the overall risk appetite and associated risk metrics for the regulatory system, providing a stable and enduring framework that allows us to adapt to a challenging external environment.

The Annex provides updates in relation to six specific Government recommendations, and on reducing the regulatory burden on firms and improving efficiency, enabling informed and responsible risk-taking, and tackling financial crime.

Context

The FSCP has published its 2025/26 Annual Report.  The FSCP is a statutory body set up under the Financial Services and Markets Act 2000 to represent the interests of financial services ‘consumers’, and when it refers to ‘consumers’, this includes private individuals as well as small businesses. It is independent of the FCA, but its members are appointed by the FCA and are recruited through open competition.

Key points to note and next actions

The Report explains and sets out the FSCP’s vision (that financial markets work well for consumers – both individuals and small businesses – and consumer harm does not occur), aims (to ensure the voice of the consumer is heard, duly considered and appropriately actioned by the FCA and by policymakers and industry) and priorities (e.g., keeping consumers front and centre, protecting against harm, safeguarding consumer interests during regulatory change).

The Report goes on to include commentary on the following topics:

• Digital markets.
• Innovation and technology.
• Growth, rebalancing risk and market sustainability.
• Vulnerable consumers and financial inclusion.
• SMEs and micro-businesses as financial consumers.
• Redress, accountability and consumer protection.
• Engagement, influence and consumer voice.
• FSCP research and recommendations.
• A look ahead.

Context

FOS has published its Annual Report and Accounts for the year ending 31 March 2026, which give details about FOS’ progress against its strategic aims and objectives, together with information about its financial performance and its audited accounts.

Key points to note and next actions

• 316,675 new enquiries were received, down from 449,933 in 2024/25.
• FOS opened 214,872 new cases, down from 305,918 in 2024/25
• FOS resolved 77% (excluding motor finance cases) of cases within six months up from 72% in 2024/25.
• FOS reported an 80% overall people engagement score (up from 76% in 2024/25)
• 18% of cases were brought by CMCs and other professional representatives (50% in 2024/25)
• FOS received 271 responses to its consultations including its Plans and Budget, and modernising redress consultations.
• Cost per case at £1,174 (£1,029 in 2024/25).
• FOS had an average of 2,491 FTE employees during the year and 642 in its flexible contractor workforce.
• FOS maintained a presence across the UK with just under one quarter of colleagues working outside London (24% in 2024/25).
• 59% of customers who came to FOS directly said they had confidence in its end‑to‑end service (up from, but in effect the same as, 58% in 2024/25).
• FOS received:
  • complaints about 3,322 financial businesses (3,344 in 2024/25);
  • 24,975 complaints about irresponsible and unaffordable lending (71,682 in 2024/25);
  • 24,364 complaints about motor finance commission (73,328 in 2024/25); and
  • 30,428 complaints about fraud and scams (35,416 in 2024/25).

Context

The ICO is seeking views on its draft corporate strategy, ahead of its transition later this year from a single Information Commissioner model to a Commission structure with a non-executive Chair, Board and separate CEO.  The new Commission will take over all the functions and responsibilities of the ICO to become the UK’s independent data protection regulator. This change modernises the ICO, strengthening resilience and bringing greater diversity to its strategic direction.  The date of transition to this new model is yet to be confirmed but is anticipated to be the autumn of this year. The new Information Commission, as required under the Data Use and Access Act, will then be in a position to prepare and publish its first strategy.

Key points to note and next actions

• In June 2025, the UK Data Use and Access Act confirmed the ICO’s transition from a single Information Commissioner model to a Commission structure.
• It aims to provide a bridge from the present Information Commissioner’s Office “ICO2025” strategy to their future Information Commission governance model. It provides direction and clarity to ICO stakeholders and staff during an important transition for the organisation.
• Views are sought from all interested parties. The survey is open until 23.59 on 23 August 2026 and respondents can comment on the consultation through Citizen Space.
• The Strategy document comments on the ICO’s statutory duties, its purpose, its intended strategic outcomes, risks and priorities (regulatory and transformational), its regulatory approach, and how it will measure and monitor its progress.
• Both the ICO and the Department for Science, Innovation and Technology have announced seven new Non-Exec Director appointments to the Board of the new Information Commission.  The new NEDs will “…bring a broad range of experience from across business, technology, regulation, governance and public service.”

Context

On 14 July 2026 the Chancellor Rachel Reeves delivered her annual Mansion House speech, setting out the Government’s economic strategy, delivery of the Financial Services Growth and Competitiveness strategy and the steps being taken to ensure the financial services sector is helping to drive growth across the economy.  Alongside the speech, HM Treasury published a “Financial Services One Year On: Delivering the Financial Services Growth and Competitiveness Strategy” report, and also published an AI Adoption Plan for financial services.

Key points to note and next actions

• The Chancellor set out the impact of the Government’s strategy including taking steps to address cost of living pressures, driving growth across the UK’s nations and regions
• There were announcements on plans to unlock lending and investment in the economy through an SME lending package, to give thousands of small businesses additional support in accessing finance, with an expansion of the Growth Guarantee Scheme, and additional funding to back innovative SME’s and start-ups
• The speech also highlighted reforms to support the UK’s financial services sector by positioning it at the forefront of innovation and to ensure it is supporting all parts of the UK.
• The Financial Services Growth and Competitiveness Strategy (the FS Strategy), published in July 2025 as part of the Industrial Strategy, set out a ten-year plan for the UK to be the world’s centre of choice for financial services investment now and in 2035. The government committed to reporting annually on progress delivering the FS Strategy. The ‘One year on’ document sets out key milestones achieved in the first year.
• Reeves acknowledged that financial services was already at the cutting edge of AI adoption, and HM Treasury has published an adoption plan focused on next steps for the government, regulators and industry to accelerate safe AI adoption and innovation in the financial services sector.

Context

HM Treasury has published the Annual Report from the Financial Services Regulators Complaints Commissioner for the year ended 31 March 2026.  It has also published the responses to the report from the FCA and the PRA,

Key points to note and next actions

• The Financial Regulators Complaints Commissioner (the “Commissioner”) provides an independent review of complaints about the UK financial services regulators. The role was established by Parliament to support transparency, accountability and confidence in regulatory decision‑making. The Commissioner considers complaints about the FCA and the Prudential Regulation Authority, as well as certain complaints against the Bank of England.
• 650 complaints and enquiries were closed, of which 82% were about the FCA, 17% were general enquiries, 1.4% were about the PRA, 0.2% were about the Payment Services Regulator (PSR).
• 210 allegations were investigated of which 24 were upheld; there were 16 disagreements with the decision set out in the FCA’s original decision letter.
• 96.3% of preliminary reports on individual complaints were issued within the Commissioner’s service levels.
• The Commissioner set out 34 remedies for the FCA, with the FCA not accepting three of them.
• In the year, the Commissioner closed 46 fewer complaints and enquiries (650) than the Commissioner received (696).
• A wide variety of themes are explored in the Report, and it is fair to assume that (based on the fact that some 84% of the Commissioner’s efforts involve the FCA) that these re issues arising for the FCA:

• The Commissioner commented on the FCA’s intervention in the Guaranteed Asset Protection insurance market (GAP), including whether it was appropriate to allow a period during which GAP insurance was unavailable to consumers. The Commissioner concluded that the FCA had balanced a range of competing considerations, including the need to ensure fair value while supporting effective market functioning, and did not uphold the complaint.
• There were also two complaints regarding the FCA’s handling of motor finance. The FCA has ruled that one of the complaints is ineligible, citing possible time-bar restrictions. This is being reviewed, to see whether this determination is accurate, and the Commissioner is also reviewing the other case.