UK’s PRA to continue reforming ILS and cat bond frameworks to enhance competitiveness

The Prudential Regulation Authority (PRA) of the Bank of England has confirmed that it will continue to work with the HM Treasury on further reforms to enhance insurance-linked securities (ILS) and catastrophe bond frameworks in the United Kingdom in order to amplify competitiveness within the market.

Today, the Prudential Regulation Authority published its business plan for 2026/27 and highlighted continued development of its insurance-linked securities (ILS) and alternative reinsurance capital frameworks.

In November 2024, we reported that the UK’s Prudential Regulation Authority was consulting on reforms to approval timelines for the insurance special purpose vehicle (ISPV) regulatory regime, which includes an accelerated pathway for certain catastrophe bond applications and a 10-day target for approvals of certain ILS arrangements.

Then, in July 2025, in its published consultation, the UK Government confirmed that the PRA will from 2026 begin reporting on ISPV approval timelines.

Around the same time, the PRA finalised policy changes to the UK framework for ISPVs, aiming to facilitate a broader spectrum of existing global market practices within the UK. These changes are designed to simplify and expedite the application and approval processes, while also clarifying the PRA’s expectations for UK insurers that transfer risks to ISPVs, regardless of their location.

In its announcement today, the Prudential Regulation Authority (PRA), said: “During 2026/27, the PRA will continue to work with HMT on further reforms to ensure that the regulatory and legislative frameworks are aligned to support an internationally competitive sector while advancing the PRA’s objectives.”

Meanwhile, in November 2025, the Prudential Regulation Authority also published a discussion paper to gather feedback on how the UK’s ISPV or ILS structures can play a role towards bringing in alternative capital to support life risks and reinsurance throughout the UK market.

This didn’t come as a surprise as the PRA had indicated a while before that the discussion paper was coming, as during her speech at the 30th Annual Bank of America Financials CEO Conference in London Vicky White of the PRA, had highlighted how the regulator will work with industry and HMT on identifying alternative capital options which will consider how the ISPV framework (or other structures) could be made more accessible to UK life insurers

These forms of alternative capital options includes both sidecars and catastrophe bonds.

The PRA confirmed that the discussion paper closed in early February, and going forward it will now seek to identify any potential changes to the existing insurance regulatory framework to facilitate and attract new forms of capital while maintaining strong protection for policyholders.

“Over the coming year, we will engage with industry and other stakeholders as we progress our objectives and deliver our strategic priorities. This engagement will include working closely with HM Treasury on reforms to the ring-fencing regime, supporting meaningful reform while maintaining an effective ring-fence,” the PRA said in its statement.

“We are currently considering responses to our discussion paper on broadening UK life insurers’ access to alternative capital, with the aim of enabling new sources of capital that support economic growth while safeguarding policyholder protection. We are also working with the FCA to develop a proportionate authorisation process and a new regulatory framework for captive insurers, and to implement reforms to the Senior Managers and Certification Regime to reduce costs for banks and insurers without diluting accountability.”

Sam Woods, Deputy Governor, Prudential Regulation, Chief Executive of the PRA, commented: “Over the coming year, we will engage with industry and other stakeholders as we progress our objectives and deliver our strategic priorities. This engagement will include working closely with HM Treasury on reforms to the ring-fencing regime, supporting meaningful reform while maintaining an effective ring-fence.

“We are currently considering responses to our discussion paper on broadening UK life insurers’ access to alternative capital, with the aim of enabling new sources of capital that support economic growth while safeguarding policyholder protection. We are also working with the FCA to develop a proportionate authorisation process and a new regulatory framework for captive insurers, and to implement reforms to the Senior Managers and Certification Regime to reduce costs for banks and insurers without diluting accountability.”

Also read: 

– PRA seeks feedback on potential for UK life ILS, including cat bonds and sidecars

– UK reforms enable “much faster turn-around time” of ISPV approvals: PRA.

– UK Gov confirms new cat bond, ISPV timelines. Launches new consultation to enhance ILS regime.

– UK ILS reforms more likely to take activity from other jurisdictions than generate net-new: Fitch.

– Bank of England to explore potential for UK ILS iSPV structure in life risks and FundedRe