New Insurer Start-up Unit

From a regulatory perspective, an insurer is a firm with a ‘Part 4A permission’ that includes the activities of effecting contracts of insurance or carrying out contracts of insurance. The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 sets out a list of relevant regulated activities (see Chapter III Insurance) but does not attempt an exhaustive definition of a contract of insurance. Potential applicants should refer to section 6 of the FCA’s Perimeter Guidance Manual (PERG 6 - FCA Handbook) for Guidance on the identification of contracts of insurance. The section Guidance on insurance mediation activities in section 5 may also be helpful (PERG 5 - FCA Handbook).

The UK insurance market covers various lines of business, to list a few: 

Non-life class of business: 

• Accident and sickness 
• Motor vehicle liability and other motor vehicle insurance 
• Fire and other damage to property 
• Marine, aviation and railway rolling sock 
• General Liability 
• Credit and suretyship 
• Other classes 

Life class of business: 

• Life and annuity 
• Marriage and birth
• Linked long term 
• Permanent health 
• Capital redemption 
• Pension fund management 
• Collective insurance 

Depending on the area of the insurance market you plan to enter, there may be alternatives which allow you to offer similar products through another insurer without becoming a direct insurer yourself. For example, if you are interested in working in a niche area of the market or perhaps prefer to test your product first, operating as an intermediary under some form of delegated authority from an existing insurer e.g. as a managing general agent (MGA) may be more appropriate. There are a range of intermediaries, and the most appropriate route will depend on a number of factors, e.g. through which sales channels the insurance will be sold. Information on how to apply for intermediary activities can be accessed via the following link to the FCA website: apply to become a consumer investments firm. 

A firm wanting to sell regulated products but not wishing to become directly authorised can also agree with a PRA and/or FCA authorised firm to become its appointed representative (AR). Insurance mediation activities that an appointed representative can carry out are set out in the FCA handbook, however, the AR is limited to only carrying out the regulated activities the authorised firm has permission to undertake. A prospective AR will undergo fitness and propriety checks and will have to follow the rules and procedures as set by the authorised firm. Rules relating to appointed representatives are set out in SUP 12 of the FCA Handbook and applicants can also get further information about the application process via the following link to the FCA website: become an appointed representative.

Will my firm be subject to the Solvency II Directive? 

Within the United Kingdom, newly authorised insurers and reinsurers will be subject to the Solvency II regime if they meet all the conditions stated in PRA Rulebook. Insurance General Application | Prudential Regulation Authority Handbook & Rulebook.

Firms that are not subject to the Solvency II regime are known as ‘Non-Directive Firms’ and are subject to different rules around key areas such as capital requirements, governance requirements, and reporting requirements. Applicants should consider whether their firm will be subject to the Solvency II regime when preparing any application and plan accordingly. 

What business will your insurer carry out?

Before contacting us, you should familiarise yourself with the PRA’s expectations around key topics such as governance and financial resources. Further information on financial planning may be found in SS4/18, while the PRA’s expectations regarding governance are detailed in SS5/16. The full range of PRA publications containing guidance on a broad range of topics may be found at Prudential regulation publications.

It is important that you consider the following key areas, as these are things we will initially want to focus on in our review.

• Regulatory business plan
• Senior management, the board and governance
• Financial resources
• IT strategy
• Reinsurance
• Resolution
• Outsourcing

What if your firm is already authorised?

If your firm is already authorised by the FCA, e.g. as an intermediary, you will need to apply to the PRA and FCA to vary your permissions to add insurance activities. While this is legally a different regulatory transaction to a new authorisation, you will need to follow the same process as a new firm applying to be an insurer (because of the substantive change to your business model) and we encourage you to start pre-application with us as normal to help the process of varying your permissions run smoothly.

When can I call myself an Insurer?

A firm cannot call itself an insurer until it has been authorised.  The use of certain sensitive words such as ‘Insurance’ and ‘Insurer’, ‘reassurer, ‘reinsurance’, ‘reassurance’, ’reinsurer’, ‘underwriter’ and ‘underwriting’ in registered company names is controlled by legislation in order to prevent the public from being misled. You should seek the FCA’s consent before using domain names that include sensitive words, checking the guidance found at sensitive business names.

What are the next steps?

As mentioned earlier, when you are ready to start the process, you should contact the NISU team by emailing NewInsurerStartupUnit@bankofengland.co.uk to discuss your application and we will arrange an initial pre-application meeting. The NISU team are ready to help you become a UK authorised insurer.

The pre-application stage helps the firm to:

• Meet the NISU team
• Understand how the authorisation process works
• Understand regulatory expectations of the firm, in particular, the PRA and FCA Threshold Conditions
• Submit an application that is as complete as possible when the firm is ready to formally apply for authorisation
• Identify any particular concerns that we might have early on and help you to decide whether you want to spend time and money on an application that may not progress further

It helps the NISU Team to:

• Meet the firm and understand their business proposal
• Identify any concerns, which will be communicated quickly to the firm and gives the firm the opportunity to resolve them before submitting an application
• Deal with the firm’s application quickly once it has been submitted

The table below outlines what we expect from firms during the pre-application process and what you can expect from the NISU team.

Please note that the NISU team do not provide a consultancy service or legal advice.

We offer a maximum of three meetings for standard applications. However, additional meetings may be arranged if a firm’s proposal involves innovative or particularly complex IT systems. These meetings include the initial meeting, feedback meeting, and challenge session. Established firms, such as those seeking to open new branches or subsidiaries in the UK, may require fewer meetings.

Initial meeting

The initial meeting is held after the submission of a high-level business plan summarising your plans. You need to send us materials for discussion a minimum of 10 working days before we meet. Once you have sent us your materials, we will arrange the meeting at a mutually convenient time and agree on the agenda for the meeting.

The business plan should not be a ‘sales pitch’ as the regulators will have a different focus, and you should aim to provide an explanation of why you want to be an insurer and your business strategy including: 

• Business plan – products, target market, customer types
• Sources of funding – how will the business be funded and details of any investors and/or funding in place
• Project plan – an overview and timeline of your plan to set up the new insurer. (This is particularly important if new IT systems are required)
• Owner and controllers – details of proposed owners and controllers
• Corporate governance – details of structure, board, senior management and governance arrangements

The initial meeting provides an opportunity for firms to discuss their plans with us and ask questions about the authorisation process. It provides the NISU team with the opportunity to raise any concerns with the proposed business at an early stage. 

The NISU team will then provide written feedback to the firm within 10 working days of the meeting to enable the firm to respond to and resolve any issues. You should continue to develop your business proposition and incorporate responses to our feedback into the next version

Feedback meeting 
The feedback meeting will be held after the firm has submitted, and we have reviewed, a more detailed business plan, which includes the firm’s response to the feedback from the initial meeting. This meeting provides an opportunity to gain a more comprehensive understanding of the firm’s proposed business model. You need to send us materials for discussion a minimum of 10 working days before we meet. After the meeting, the NISU team will provide written feedback to the firm which we expect the firm to address in their subsequent business plan. 

At the end of the feedback meeting, we will discuss the actions you will need to complete if you want to progress to the next stage. Within 10 working days of the meeting, we will send you our formal feedback in a letter. You should continue to develop your business plan and incorporate responses to our feedback into the next version.

Challenge session
The challenge session are the culmination of the pre-application application process. This final meeting is held just before a firm submits an application. The aim of the meeting is to discuss your proposals in depth and provide detailed challenge on the content of the final business plan. At this stage, your business plan should be fully developed and will form the basis of the discussion at the challenge session where we will offer an honest and open assessment of your plans. You need to send us materials for discussion a minimum of 15 working days before we meet. Once you have sent us your materials, we will arrange the meetings at a mutually convenient time.

Firms can expect rigorous challenge on their proposed business model. The aim is to identify any remaining issues that need to be addressed before you submit your application. The challenge session will be attended by your case officers along with senior representatives and specialists from both regulators. We expect several of your executives and, where possible, non-executives to attend. You should expect the meeting to last about two hours.

At the end of the challenge session, we will discuss next steps and actions with you and within 10 working days of the meeting, we will send you our formal feedback in a letter. If you go on to submit an application, you should finalise your business plan and incorporate responses to our feedback from the challenge session.

The meetings will typically be held at the PRA’s office in London. The meetings can be held in person or virtual. We will send you an agenda before all meetings which will centre on your explanation of the materials that you have sent us and the attendees from each regulator.

Our aim is that the pre-application process will give the firm a clearer understanding of our regulatory expectations, and the opportunity to resolve any potential problems before an application is submitted. Once the application is submitted, it is expected to be of sufficiently high quality to enable the NISU team to reach a decision more quickly.

Pre-application timeframes 
The pace at which a firm progresses through the pre-application stage is up to the firm. Please read through the application forms and supporting notes as you may find them helpful when preparing for the meetings.  

The NISU team expect to be kept up to date on your progress and will endeavour to hold pre-application meetings in a timely manner. If, however, we do not hear from a firm for six months after a meeting we will assume that you do not want to proceed with your application and close our file.

Please contact the NISU inbox at NewInsurerStartupUnit@bankofengland.co.uk and submit a high-level regulatory business plan along with your request for a pre-application meeting. We will then organise the meeting with you. The firm’s advisors or consultants are welcome to attend the pre-application meetings, but we do not expect them to speak on the firm’s behalf.

Please note that the pre-application stage is optional. If you choose not to use it, you can send your application directly to the NISU inbox at NewInsurerStartupunit@bankofengland.co.uk. We will then use our statutory powers as set out in FSMA to reach a decision on your application. If you have any questions about the pre-application process, please contact the NISU team, and we will be happy to assist.

Your Business Plan should cover the following points as a minimum:

• business plan – details of products, delivery channels and target market
• business viability – competitive advantage, market research and how your firm will make money
• financial resources – financial projections (for three years), capital management strategy (as appropriate)
• sources of funding – proposed funding model
• owners and controllers – proposed owners and controllers
• corporate governance – structure, board, senior management and governance arrangements
• risk management – risk management and control framework
• customer journey – products, pricing, complaint handling and on-boarding arrangements (including Anti-Money Laundering/Know Your Customer processes)
• outsourcing - details of key outsourcing arrangements
• IT infrastructure and systems and timescales for implementation and testing recovery and resolution plans (if appropriate)
• policies and procedures – operational and regulatory policies and procedures
• business continuity – business continuity plans (if appropriate)
• scope of permissions – details of the regulated activities you wish to undertake reinsurance arrangements
• project plan – project plan for setting up the insurer

• Insurers checklist and declaration (doc)
• Insurers core details application form (for subsidiaries and start-ups only) (doc)
• Insurers core details application form - notes (for subsidiaries and start-ups only) (doc)
• Supplement for insurance firms (for subsidiaries and start ups only) (doc)
• Supplement for insurance firms - notes (for subsidiaries and start-ups only) (doc)
• Supplement (including core details) for insurance firms (For third country branches only) (doc)
• Supplement (including core details) for insurance firms - notes (For third country branches only) (doc)
• Supplement for Lloyd's managing agents (doc)
• Supplement for Lloyd's managing agents - notes (doc)

• Owners and influencers appendix (doc)
• Owners and influencers appendix: notes (doc)
• Corporate controllers form (docx)
• Partnership controllers form (docx)
• Individual controllers form (docx)
• Trust controllers form (docx)

• IT self-assessment questionnaire: insurers (xlsm)
• Detailed IT controls form: insurers (xlsm)

• Waivers and modifications applications (pdf)
• Application form: Solvency II approval (pdf)

• Form A – Long: Application to perform controlled functions (long) (pdf)
• Form A – Short: Application to perform controlled functions (short) (pdf)
• SOR: Statement of responsibilities (pdf)
• Form M: Notification of non-executive director or key function holder (pdf)