Insurance regulatory update - BDO UK

Welcome to the February 2026 Insurance Regulatory eBulletin. This aims to keep you updated with significant regulatory developments up to the end of January 2026.

This month our experts have explored the PRA's significant milestone for insurers with Solvent Exit Planning ahead of the 30 June 2026 deadline. From which all insurers within scope must have a compliant Solvent Exit Analysis (SEA) in place. The extensive work required for these expectations is proving to be complex and time-consuming for many insurers.

Our tax experts have also explored HMRC's recent programme of cross tax, audit led reviews targeting operational tax compliance—with the insurance sector, one of three sectors prioritised for review. This marks a meaningful shift towards more intensive, system focused, multi day onsite assessments.

The PRA published the Berne Financial Services Agreement (BFSA): Effective from January 2026, this agreement between the UK and Switzerland enhances cross-border market access for financial services. The PRA, FCA and European Supervisory Authorities released an MoU to coordinate oversight activities for critical ICT third-party service providers in the EU and UK. Finally, and as covered in last month’s newsletter, they published their supervision priorities for 2026.

The FCA updated guidance for firms to prevent and recover from disruption, with new reporting requirements proposed. It reviewed smaller mutual life insurers' adherence to Consumer Duty standards, finding issues with target market definitions and value assessments. The FCA also published updated guidance on addressing bribery risks, issued a consultation paper to explore AI's future impact on retail financial services, and issued a market study into pure protection policy distribution to retail customers.

The Financial Reporting Council (FRC) outlined its priorities for 2026, focusing on enhancing corporate governance standards. The Information Commissioner's Office (ICO) issued a Memorandum of Understanding with the UK government was to improve data protection standards and transparency.

HM Treasury highlighted a Post-Quantum Cryptography Roadmap in which the G7 Cyber Expert Group published a roadmap addressing cryptographic risks from quantum computing. It issued Financial Sanctions Guidance with Updated guidance on ransomware payments and related enforcement actions. Finally, it published an update on progress versus the Women in Finance Charter – this update gives an update on increasing female representation in senior management roles.

EIOPA published several reports and guidelines, including stress testing for ESG risks and supervisory statements related to private equity in insurance. These updates reflect ongoing efforts to enhance regulatory frameworks, improve operational resilience, and address emerging risks in the financial sector.

I hope you will find this edition is helpful in keeping yourself abreast of recent Regulatory activity. Please do not hesitate to contact myself or your usual BDO contact if you have any concerns over any matter highlighted in this update. For more information about our audit, tax and advisory services to the insurance sector, visit our insurance services page.

In January, the PRA wrote to the Prime Minister on steps taken to support the Government’s growth agenda, and its view of progress made on 4 out of the 5 actions highlighted by PRA in December 2024. It made a supervisory statement updating expectations for banks’ and insurers’ climate related risk management, alongside a Policy Statement clarifying governance, risk, scenarios and proportionality. It opened a consultation on post implementation adjustments to Solvency UK reporting and disclosure, and updated SS2/25 on transferring risk to SPVs.

The PRA published its supervisory priorities for 2026, while in December 2025, the FCA extended UK–Gibraltar passporting and we are happy to discuss implications with our clients. EIOPA proposed ‘PROTECT’, a natural catastrophe risk awareness and prevention tool and provided a fact sheet to the market. They also launched a number of consultations around the Insurance Recovery and Resolution Directive. Finally, we note that the FRC have highlighted that that non‑Big Four firms now audit 40% of Public Interest Entities (PIEs).

In November, the PRA's 2025 Life Insurance Stress Test showed market resilience under severe conditions. The Berne Financial Services Agreement was set out, providing guidelines for cross-border services between the UK and Switzerland, with the FCA publishing the relevant instrument to take effect from 1 January 2026. The PRA also hosted a CRO roundtable on AI and Machine Learning.