Insurance special purpose vehicles

All entities that wish to be established as an insurance special purpose vehicle (ISPV) must be approved by the Prudential Regulation Authority (PRA)
Subject to any transitional relief, forms and templates applicable before 11pm Thursday 31 December 2020 should be read in conjunction with Supervisory Statement (SS) 2/19, which sets out how the PRA expects firms to interpret EU-based references in reporting and disclosure requirements and regulatory transactions forms.

In this section

Overview

The information on this page is relevant to parties who wish to apply for authorisation for an insurance special purpose vehicle (ISPV). This page outlines the PRA’s approach to authorisation and supervision of ISPVs. None of the information on this page adds to or replaces the underlying legal requirements that ISPVs must meet.

Latest updates

18 December 2024: PRA CP15/24 – Proposed changes to the UK Insurance Special Purpose Vehicles (UK ISPV) regulatory framework virtual roundtable 22 January 2025

The PRA will be holding an industry roundtable in respect of CP15/24 – Proposed changes to the UK Insurance Special Purpose Vehicles (UK ISPV) regulatory framework. The purpose of the roundtable is for the PRA to gather stakeholder views on key thematic issues relating to CP15/24, and to provide stakeholders (where possible) more clarity on policy proposals to assist with providing any planned responses to the consultation. The PRA is however open to understanding details of any other changes which could improve the functioning of the market. The roundtable will be held on 22 January 2025, 2pm to 4pm and attendees are expected to have read CP15/24 in advance. Please kindly note that this event is not open to media.

This roundtable is most relevant to:

  1. Experienced cedants in life and non-life ILS structures (144A cat bonds, sidecars, collateralised reinsurance).
  2. Life and non-life re/insurers with an understanding of SPVs and the ILS market.
  3. Experienced sponsors of multi-cedant ILS platforms.
  4. Reinsurance Brokers active in the alternative reinsurance market.
  5. Specialised ILS Fund Managers active in the private ILS space (e.g. Collateralised Reinsurance, private cat bonds, sidecars).
  6. Broker Dealers/Investment banks active in the primary 144A cat bond market
  7. Law firms active in the ILS market.

Please confirm your intention to attend by emailing CP15_24@bankofengland.co.uk with the relevant name(s) and email address(es) by 10 January 2025. We would welcome up to two attendees per organisation. We will provide participants with further details and Microsoft Teams joining instructions ahead of the meeting.

15 November 2024: The changes proposed in CP5/24 on the restatement of Solvency II assimilated law into the PRA Rulebook and other policy materials have now been implemented via PS15/24.  As set out on this page on 22 April 2024, the PRA is now consulting on reforms to the UK ISPV regime via CP15/24 - Proposed changes to the UK Insurance Special Purpose Vehicle (UK ISPV) regulatory framework.  

CP15/24 proposes changes to the PRA Rulebook and other policy materials in line with our primary and secondary statutory objectives. These proposals reflect the PRA’s continued commitment to reform the functioning of the UK ISPV policy framework, which was subject to industry engagement in December 2023. The proposed reforms will make it easier for a wider range of current market practices to be undertaken in the UK.  They will also streamline and speed up the application and approval processes; and clarify the PRA’s expectations of UK insurers who cede risks to Special Purpose Vehicles, wherever they are established. The proposals also introduce a new accelerated pathway for certain UK ISPV applications (e.g. some types of catastrophe bonds) which meet the criteria set out in the PRA’s proposed new statement of policy – ‘Approach to authorising and supervising UK insurance special purpose vehicles’. Under the accelerated pathway, in collaboration with the FCA, the PRA proposes to consider completed applications and, where satisfied, issue approvals within 10 working days (rather than the current 4–6-week process) of being submitted to the PRA. 

The PRA also recognises that some changes which could be useful to the functioning of the UK ISPV Framework are not within its power to implement on its own. The PRA will continue to engage with the necessary stakeholders to determine the best way to proceed on such issues.  

The CP is open for responses till 14 February 2025 and any responses should be sent via email to CP15_24@bankofengland.co.uk.

22 April 2024: The PRA published CP5/24 – Review of Solvency II: Restatement of Assimilated Law on 22 April, setting out its proposals to restate into the PRA Rulebook the regulations previously contained in the Solvency II regulations. Chapter 13 – Insurance Special Purpose Vehicles sets out proposals to restate regulations relating to UK ISPVs from the Solvency II Commission Delegated Regulation (EU) 2015/35 and Commission Implementing Regulation 2015/462 to the PRA Rulebook and other policy materials. These proposals do not, however, reflect the PRA’s continued intention to reform the functioning of the UK ISPV framework, which was subject to industry engagement in December 2023.

The requirements on UK ISPVs will in future derive from a combination of the PRA Rulebook and UK legislation. The PRA notes that some of the significant changes discussed with industry, such as multiple contractual arrangements and the limited use of letters of credit as part of the funding of an ISPV, are likely to require legislative changes. The PRA is fully committed to reforming the UK ISPV framework in line with our primary and secondary statutory objectives to the full extent allowed within the current and future legislative frameworks. We are working actively with HM Treasury to agree the most effective approach to introducing reforms.

The PRA expects to consult on reforms to the regime once the changes included CP5/24 have been finalised. We will provide further information as work progresses during the remainder of the year.

20 December 2023: The PRA engaged with a subject expert group with participation from various industry bodies and market participants on 13 December 2023, and the summary of the first meeting was published. The group discussed the policy proposals and implementation of regulatory reforms to the existing supervisory regime for ISPVs. The PRA shall openly and constructively engage with the subject expert group for the period it is constituted; and expects to draw on the input generated by the subject expert group, before seeking the views of wider industry and other interested parties through a formal public consultation process in due course.

1 December 2023: The PRA has initiated the development of policy proposals and implementation of regulatory reforms to the existing supervisory regime for ISPVs. This aims to ensure the regime remains suitable in the context of the PRA’s statutory objectives, while implementing greater flexibility in line with the industry’s needs. In order to achieve the broadest participation in this process, the PRA has set up a subject expert group with planned participation from various industry bodies (for example, the LMG and the ABI) and market participants. The PRA shall openly and constructively engage with the subject expert group for the period it is constituted; and expects to draw on the input generated by the subject expert group, before seeking the views of wider industry and other interested parties through a formal public consultation process in due course.

16 December 2022: We published PS12/22 ‘Insurance special purpose vehicles: Further updates to authorisation and supervision’, including an accompanying update to SS8/17 ‘Authorisation and supervision of insurance special purpose vehicles’.

22 May 2020: We published PS13/20 ‘Insurance special purpose vehicles: Updates to authorisation and supervision’, including an accompanying update to SS8/17 ‘Authorisation and supervision of insurance special purpose vehicles’, an update to the Rulebook, and an updated MISPV New Risk Assumption Notification Form available below.

Introduction

Parties wishing to operate in the UK as an ISPV must apply to the PRA for a ‘Part 4A Permission’ under FSMA, to undertake the regulated activity of ‘insurance risk transformation’ (as defined in Regulation 13A of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544)).

The PRA and the Financial Conduct Authority (FCA) have joint responsibility for the authorisation of ISPVs. The PRA will lead and make the final decision on the application, however, we can only grant approval for an ISPV with the FCA’s consent. Although jointly authorised, there is a single administrative process with just one set of forms for making an application. Once authorised, the ISPV will be supervised on an ongoing basis by both the PRA and the FCA.

Note: All references made to ISPVs on this page are equally applicable to multi-arrangement insurance special purpose vehicles (MISPVs), unless otherwise specified. 

Applying for authorisation as an ISPV

There are five key stages to becoming authorised as an ISPV:

  1. Getting started
  2. Pre-application
  3. Application
  4. Assessment
  5. Authorisation

1. Getting started

Before submitting an application, we encourage parties to read Supervisory Statement 8/17 – ‘Authorisation and supervision of insurance special purpose vehicles’ (SS8/17) and the FAQs, and familiarise themselves with the relevant legal and policy material (set out in Chapter 1 of SS8/17) that form the requirements ISPVs must meet.

The applicant will need to demonstrate it meets all the conditions for authorisation listed in Article 318 of the Commission Delegated Regulation (EU) 2015/35 (the ‘Delegated Regulation’). Particular importance is placed on compliance with Articles 319-321 of the Delegated Regulation, which relate to the requirements on the ISPV to be ‘fully funded’, ensure ‘effective risk transfer’ and ensure subordination of the ‘rights of the providers of debt or financing mechanisms’. Additionally, an MISPV must also demonstrate compliance with Article 7 of Commission Implementing Regulation (EU) 2015/462 (the ‘Implementing Regulation’).

In SS8/17 and the ‘FCA Statement – authorising and supervising insurance special purpose vehicles’ the PRA and FCA, respectively, outline their approach and expectations to authorising ISPVs, including the relevant parts of the PRA Rulebook and FCA Handbook, respectively, which must be met. Further, the ISPV must also meet the relevant provisions in the Risk Transformation Regulations 2017 (RTR), and FSMA, including the PRA and FCA Threshold Conditions.

For any queries on matters not included in the above please email: ISPVMailbox@bankofengland.co.uk.

More information and guidance on the requirements ISPVs must meet, the responsibilities of the PRA and FCA, the parties which may apply for an ISPV, and other useful material can be found in the FAQs and SS8/17. Links to these documents are available under Key resources below. 

2. Pre-application

An application may be submitted at any time, but the PRA and FCA offer prospective applicants the possibility of a joint pre-application meeting prior to formal submission. This is not a mandatory part of the authorisation process, but in our experience it can make the review process quicker and simpler once a formal application is subsequently submitted.

The aim of a pre-application meeting is to:

  • Allow a preliminary discussion of the proposal, including any plans for future transactions in the case of an MISPV.
  • Ensure a clear understanding of the application process and requirements.
  • To determine if the proposals meet the criteria for a standard application and be handled via the green channel (See FAQs)
  • Identify any key issues or novel proposals which might form priority areas for review.
  • Understand the target timeframes for approval.
  • Discuss and agree working arrangements between the prospective applicant and the regulators during the application stage.

To initiate a pre-application meeting, please email: ISPVMailbox@bankofengland.co.uk.

3. Application

Parties should submit their application for authorisation using the required forms. These forms and accompanying guidance can be found in the Key resources section. As outlined in the ISPV Application Form, an application should be submitted electronically to ISPVMailbox@bankofengland.co.uk, and include the:

  • ISPV Application Form itself;
  • appropriate supporting documents;
  • SMR Application Forms and accompanying documentation;
  • FCA Controlled Function Application Form(s) where applicable;
  • Application Form for Registration of Protected Cell Companies where applicable; and
  • remittance advice and payment details of the application fee if you have paid by BACS payment, or a cheque covering the application fee.

Note: In the UK, an MISPV must be incorporated as a Protected Cell Company (PCC) pursuant to Rule 4.2 of the Insurance Special Purpose Vehicles Part of the PRA Rulebook.

4. Assessment

The PRA will acknowledge receipt of the application and forward it on to the FCA. The PRA and FCA will be in touch regularly with the applicant during their assessment to explain what progress is being made. If there are any concerns or questions, these will be communicated to the applicant at the earliest opportunity. Applicants are offered the possibility to have regular joint calls with both the PRA and FCA to discuss progress and address questions.

The PRA and FCA will assess applications against the requirements set out in the Getting started section. During the assessment stage we will discuss with the applicant the progress of our review and explain the date by which we expect to be able to make a decision.

Scope of Permission

Under Regulation 7 of the RTR, the PRA is required to limit the scope of regulated activities which an ISPV may carry on. This is achieved by issuing a Scope of Permission (SOP) to the ISPV upon approval. During the assessment stage the contents of the SOP will be agreed on a case-by-case basis between the applicant and the PRA.

Where an ISPV wishes to perform activities that are outside its current SOP, it can apply to the PRA for approval for the SOP to be updated post-authorisation. An ISPV should do this by submitting an application for a variation of permission (VOP) using the ISPV VOP Application Form.

5. Authorisation

Once a decision on the application has been made the PRA will inform the applicant as soon as possible, via email or phone call.

Upon authorisation certain basic information about the ISPV will be uploaded to the Financial Services Register, and therefore these details will be in the public domain. The details uploaded include information on the ISPVs permitted regulated activities, any approved persons, eg SMF directors, and other basic details. It may take up to one working day for this information to show on the register. Note that the SOP is a not a public document and is therefore not uploaded.

Once authorised, the ISPV is responsible for ensuring its ongoing compliance with the requirements, and more detail on the supervisory and reporting requirements are outlined in the Ongoing supervisory and reporting requirements section below. In addition, there are notification requirements imposed on MISPVs and these are also outlined in the MISPV/PCC notification requirements section below.

Ongoing supervisory and reporting requirements

ISPVs will be subject to ongoing supervision by both the PRA and FCA, and will need to comply with the relevant Threshold Conditions and Solvency II requirements on a continuous basis. The ongoing assessment will be risk-based and take into account the particular nature of ISPVs compared to traditional insurance firms. A key source of information is the qualitative and quantitative reports submitted by ISPVs as part of the annual reporting cycle.

ISPVs are required to provide both a qualitative and quantitative report annually to the PRA. The latter requires the ISPV completing the EIOPA templates designed specifically for ISPVs.

The EIOPA templates described above can be found on the EIOPA webpage in the specific link labelled ‘Solvency 2 Annotated Templates’. The relevant ISPV templates are labelled in line with Annex II of the Implementing Regulation.

The ISPV must submit these templates using the Bank of England Electronic Data Submission (BEEDS) portal. The ISPV will be provided details of its BEEDS account at authorisation, however, for any queries please contact the BEEDS team at the following mailbox: BEEDSQueries@bankofengland.co.uk. 

See more information on the supervisory and reporting requirements in the FAQs and SS8/17.

MISPV/PCC notification requirements

As outlined above, the SOP determines the scope of activities which the ISPV may perform in the future without further approval. In the case of an MISPV, once authorised, it is able to assume new risks without needing to return to the PRA for pre-approval, as long as these remain within the terms of the SOP.

Note: as mentioned above, in the UK, an MISPV must be incorporated as a PCC (pursuant to Rule 4.2 of the Insurance Special Purpose Vehicles Part of the PRA Rulebook), and as such the terms ‘MISPV’ and ‘PCC’ refer to the same entity here.

MISPV New Risk Assumption Notification Form

Within 5 working days of assuming a new risk the MISPV must submit to the PRA an MISPV New Risk Assumption Form, provided in the ‘Useful links’ section. This form can be sent via email, as outlined in the instructions given in the form. See more information on this notification process in the FAQs and SS8/17.

Group of Cells Notification Form

Within 5 working days of creating, amending or cancelling arrangements between cells the MISPV must submit to the PRA the Group of Cells Notification Form, provided in the ‘Useful links’ section. This form can be sent via email, as outlined in the instructions given in the form. See more information on group of cells and this notification process can be found in SS8/17.

PCC FCA Notification Form

In accordance with the RTR (Regulation 59 and 188), within 10 working days of creating a new cell, the PCC must submit a PCC Notification Form, provided in the Key resources below.

Key resources

Rules/regulations

Guidance documents

Application forms

Notification forms

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This page was last updated 18 December 2024