REG Reviews- January 2025
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Welcome to your New Year Edition of REG Reviews!
Last month, the BoE planned for tougher liquidity rules, insurers and brokers joined forces to prioritise better consumer outcomes, reforms to pension support were explored to close advice gap, smaller firms were urged to focus on their ESG impact and legacy systems still prove a challenge for many insurers.
Read these articles and many more as we bring you all the important news and views in the insurance and financial services world…
REGULATORY
BoE Plans Tougher Liquidity Rules for UK Insurers
The Bank of England (BoE) is proposing stricter liquidity reporting rules for large UK life insurers, responding to gaps revealed during recent market disruptions like the COVID-19 pandemic and the 2022 mini-Budget crisis.
The new rules would require insurers with assets over £20bn and derivatives contracts exceeding £10bn to submit monthly reports detailing cash flows, liquid assets, and the impact of market or credit changes. In times of market stress, insurers would need to report some data daily.
The BoE’s Prudential Regulation Authority (PRA) identified “critical gaps” in current reporting systems, which rely on quarterly updates.
During the 2022 liability-driven investment (LDI) crisis, insurers faced significant outflows to meet margin calls on derivatives contracts, yet the regulator had to rely on data that was three months out of date. This event prompted a £65bn intervention by the BoE to stabilise markets.
The PRA estimates that nine insurers will be affected by the changes, which could require substantial investment in systems, collateral management, and treasury operations.
The industry is expected to face an upfront cost of £11m and ongoing annual costs of £3.6m, though the PRA believes the benefits of better liquidity oversight outweigh these costs.
Global regulators have also increased their scrutiny of derivatives use in the non-banking financial sector. The PRA highlighted that UK life insurers’ derivatives exposure has doubled since 2018 to £1.4tn, creating significant liquidity risks from potential margin calls.
The new rules, scheduled to come into force in December 2025, aim to improve resilience in the insurance sector and reduce risks during periods of market volatility. The Association of British Insurers has recognised the importance of the changes and plans to review the proposed reporting templates in detail.
These measures reflect growing efforts to ensure the insurance industry is better prepared for future financial shocks.
FINANCE
Lloyd’s Estimates $13.6 Trillion Impact from Future Pandemics
COVID-19 has been a major cost to many businesses and individuals, disturbing economic and geopolitical stability.
According to Lloyd’s and the Cambridge Centre for Risk research, a new, more deadly pandemic could cause the world’s economy to lose an average of $13.6 trillion over five years.
The research has also examined two other hypothetical risk models of less consequential epidemics comparable to previous outbreaks like Sars and Mers.
The mildest situation could lead to a loss of $7.3 trillion and $41.7 trillion in case of an extreme event, which equals a loss of 6.4% in global GDP.
From an insurance perspective, Rebekah Clement, corporate affairs director at Lloyd’s, stresses; “Our research shows that insurance is more than a financial safeguard; it is a critical enabler of societal resilience and recovery, and the insurance industry is well-equipped to help businesses and governments prepare for future pandemics with different complexities and variables.”
She also added; “As well as paying claims, insurers can support with advice on proactive measures to lessen the impact of potential crisis and can mobilise resources and expertise to support rapid emergency response and containment efforts.”
Lloyd’s also emphasised a pandemic insurance product introduced by Munich Re and International SOS in 2024, which protects individuals from income reductions and assists with health and safety costs.
The research also pointed out the potential of insurance to cover vaccines and event cancellations. It identified sectors most vulnerable to future disruptions, including hospitality, tourism, retail, and healthcare—industries severely impacted by the COVID-19 pandemic.
So how will the insurance sector innovate further in the wake of any future pandemic or health emergency?
TECHNOLOGY
Amazon Teams Up with Anthropic to Build AI Supercomputer
Amazon is constructing, in partnership with the AI game changer Anthropic, one of the globe’s most prominent artificial intelligence supercomputers.
Upon completion, it is believed to be about five times bigger than the cluster deployed to build Anthropic’s existent top performing model as reported by Wired.
Amazon claims its Trainium 2-powered supercomputer, featuring hundreds of thousands of its latest AI chips, will be the world’s largest AI machine once finished.
This project, which is named ‘Project Rainer’ has been announced by CEO of Amazon Web Services, Matt Garman, at the firm’s ‘Re:Invent’ conference in Las Vegas on December 3rd – capitalising on Amazon’s great strides in becoming the next leader in generative AI.
Moreover, Garman also shared that AWS’s new clusters are about 40% cheaper than Nvidia GPU based clusters, which reinforces accessibility and affordability for many companies that are using Amazon’s cloud for generative AI purposes and for those who want to use AWS’s clusters exclusively to train their AI models.
Amazon, traditionally seen as trailing behind competitors like Microsoft and Google in generative AI, has made a bold move by investing $8 billion into Anthropic.
This investment underscores Amazon’s commitment to catching up in the AI race, alongside launching new tools through its AWS Bedrock platform to support generative AI.
While Nvidia might still be dominating the AI training market, it risks falling behind in the future due to the increased competition it’s facing, according to CEO and Chief Analyst at Moore Insight & Strategy, Patrick Moorehead.
While competitors focus on frontier AI like ChatGPT, Amazon is positioning itself as a platform to help businesses build practical, commercially viable AI solutions.
Increasingly, AWS customers are shifting from experimental AI projects to deploying real-world applications.
Ultimately, Garman adds that large language models are traditionally imperfect and at risk of errors. For insurers, Amazon’s new tool could improve accuracy and preciseness to mitigate risks.
Amazon’s new AI supercomputer will become available to use for customers in 2025 and only the future will tell how effective and powerful this new technology is for both insurers and other industries.
REGULATORY
Insurers & Brokers Join Forces to Enhance SME Customer Outcomes
As the financial services sector navigates the evolving demands of Consumer Duty, the recent findings from the FCA’s review of board reports underscore the industry’s responsibility to prioritise customer outcomes.
Simultaneously, a groundbreaking collaborative initiative involving insurers and brokers is paving the way for enhanced support for small and medium-sized enterprises (SMEs). Together, these efforts reflect a sector increasingly committed to aligning compliance with innovation to deliver meaningful value to customers.
The FCA’s first annual review of Consumer Duty board reports revealed a spectrum of practices across financial firms. The regulator applauded firms that demonstrated a clear commitment to embedding customer-centric governance, with robust data and a focus on outcomes.
However, significant gaps were noted, particularly around data quality, distribution chain collaboration, and actionable improvement plans.
One key observation was the need for greater board engagement in scrutinising these reports. The FCA noted; “Some governing bodies were not fully engaging with the report and the issues it raised.” This highlights the necessity of ensuring that compliance frameworks translate into tangible actions for customers.
Another challenge was the disconnect in distribution chains. Firms often failed to provide evidence of adequate collaboration with third parties. This mirrors a broader issue in the insurance sector: the gap between resources and access to customer insights, especially in intermediated markets like SMEs.
This gap is precisely what the recent Consumer Duty survey spearheaded by leading insurers and brokers aims to address. Companies like Allianz, Aviva, AXA UK, RSA, and Zurich, alongside brokers such as Gallagher and Howden, are working together to deepen their understanding of SME vulnerabilities and refine strategies to meet customer needs.
David Nichols, Head of Retail at Zurich, described the survey as “a fantastic opportunity for insurers and brokers to collaborate in understanding how we can best support SME customers that are facing vulnerabilities.”
This sentiment echoes the FCA’s call for a more unified approach across distribution chains to improve customer outcomes.
The collaborative approach also leverages complementary strengths. While brokers maintain direct relationships with end-policyholders, insurers bring the resources and scale to analyse findings comprehensively. By pooling expertise, the industry is addressing a critical gap in insights that can drive actionable strategies.
The FCA’s findings and the SME Consumer Duty survey illustrate a shared objective: ensuring that all customers, including SMEs, receive the support and protection they need in an increasingly complex landscape. This alignment is especially vital as SMEs often face unique vulnerabilities, such as economic pressures, limited resources, and evolving risks.
Margaret Scott, Director of Business Transformation at Allianz, emphasised the broader value of the survey; “The insights will help refine strategies across the sector to improve outcomes for SME customers.”
Similarly, Jon Walker, Chief Executive at AXA Commercial, highlighted the significance of understanding vulnerabilities, stating; “Protecting what matters most to our customers is our key aim.”
The convergence of insights from the FCA’s review and the collaborative SME survey represents a pivotal moment for the insurance sector. These initiatives exemplify how regulatory frameworks and industry innovation can work hand-in-hand to prioritise customer needs.
As the sector continues to evolve, insurers, brokers, and governing bodies must focus on embedding customer-centric cultures, leveraging high-quality data, and fostering collaboration across the value chain.
REG Exchanges helps insurers and brokers streamline Consumer Duty adherence and reporting by automating data acquisition, sharing and analysis across the full supply chain…Learn more
ESG
The Impact of Business Size On Brokers’ ESG Commitment
Investing in sustainability and ESG initiatives is essential, and while many firms recognise the significance of these efforts, smaller players often face challenges in implementing them due to the high costs, despite their interest in tackling these issues.
Larger insurance corporations and brokers typically have comprehensive sustainability programs in place, from utilising wind energy to partnering with charities and engaging in tree planting.
For these organisations, budget and workforce aren’t significant barriers to ESG investment.
However, smaller brokers often lack the same resources, limiting their capacity to make similar commitments.
This doesn’t mean that smaller firms aren’t investing in ESG; every small step towards sustainability counts, regardless of scale.
This is evident in the practices of Ash Tree Insurance Brokers and Pantaenius, two smaller brokers who are dedicated to sustainability due to their industries’ vulnerability to climate change.
Ash Tree, for instance, uses low-emission vehicles, reuses office equipment, and charges clients for paper communications to fund tree planting. Pantaenius, a yacht broker, follows the Green Blue Boating Pledge and focuses on reducing its internal carbon footprint.
Both businesses demonstrate that even small, practical actions can contribute to a reduced environmental impact.
This reflects a broader trend among family-run companies that prioritise long-term sustainability over short-term gains.
Nick Houghton, CEO of JMG Group, shared with Insurance Times, “Smaller brokers care deeply about sustainability and support local businesses and charities. The key difference is that they often don’t have a formal written policy.”
Research from Multi Quote Time, an insurance comparison portal, revealed that around 60% of regional brokers recognise the importance of sustainability but feel overwhelmed by the complexity of implementing such projects.
According to Eamonn Turley, CEO of Multi Quote Time, three key barriers prevent smaller firms from developing ESG and sustainability plans:
Limited financial resources
Lack of clear regulatory guidance
Uncertainty regarding the direct business benefits of sustainability investments
Moreover, the absence of client pressure to adopt sustainability initiatives often causes smaller brokers to prioritise more pressing issues, such as regulatory compliance, as highlighted by Lea Cheesbrough, CEO of Movo Partnership.
Despite these obstacles, progress is being made. With Biba offering guidance and the FCA continually updating ESG regulations, smaller firms need to view sustainability as a strategic opportunity and begin developing plans for the years ahead.
No matter how small the investment or plan, every step that brokers take towards a more sustainable future makes a difference.
CYBER
What's Shaping the Cyber Insurance Market?
The cyber insurance sector faces the challenge of keeping pace with evolving cyber threats, making it difficult to pinpoint the market’s current state, reports Insurance Business.
Speaking as UK Cyber Practice Leader for Marsh, Serena France-Hayhurst shared insights on pricing and terms during an expert panel.
She said; “Starting with rates, there have been continued rate reductions at primary and total program level at minus 8%, so nearly three-quarters of clients saw a price reduction.”
She adds; “We expect this to continue towards the end of the year, as insurers try to meet growth targets.”
Serena noted that restricted capacity is boosting competition in the cyber insurance market.
Primary markets offer larger limits, like Canopius’s $25 million primary coverage. Lloyd’s association, such as Trium Cyber and Beazley, are also expanding capacity through group structures.
Additionally, follow-on capacity is gaining traction for its cost efficiency, a trend expected to grow in 2025.
Moreover, Serena reported that insurers are increasingly targeting the SME sector for 2025. New market entrants are simplifying the process with streamlined digital quoting and fewer questions.
They’re also incorporating tools like customer telemetry and external threat tests, signalling a broader investment in advanced technologies across insurance portfolios.
Based on Marsh’s UK Cyber Compound Rate Movement graph, Serena explained that a premium of $100,000 in 2018 would now cost $264,000, highlighting how rates have significantly risen despite insurers claiming a return to pre-2018 pricing.
Finally, Serena noted that industries like professional services and retail/wholesale have increased their insurance limits, with some clients reinvesting savings from rate reductions to expand coverage, reflecting a broader trend of rising limits and changing primary rate movements.
REGULATORY
FCA Consults on New Private Market Platform for Investors
The Financial Conduct Authority (FCA) has proposed the creation of a new platform, the Private Intermittent Securities and Capital Exchange System (PISCES), to facilitate investment in private companies.
According to the FCA, this platform would provide a “regulated environment” for shares of private firms, helping businesses access public market capital more easily.
It is designed to address the gap in private market access and offer investors opportunities to invest earlier in a company’s lifecycle.
The FCA’s goal with PISCES is to “increase competition and drive innovation” in the market while ensuring that “appropriate safeguards” are in place to protect investors.
The consultation process is crucial for gathering feedback from industry participants to refine the proposal and balance the needs of both investors and businesses.
The FCA also stressed the importance of educating investors about the risks involved in private market investments, aiming to create an environment where participants are well-informed.
The proposal reflects broader efforts to modernise financial markets, ensuring that they remain dynamic and accessible to a wider range of investors.
By providing private companies with an alternative route to raising capital and giving investors more choice, PISCES could significantly impact the financial landscape.
It will also help address challenges companies face in securing funding as they scale. The consultation seeks to ensure that the system meets the needs of all stakeholders, including private firms, investors, and regulatory bodies.
This initiative is part of broader UK market reforms designed to enhance competition, transparency, and innovation.
TECHNOLOGY
Insurers Struggling with Legacy Technology Issues
While many insurers have made huge leaps in adopting new technology and implementing digital transformation, many are still struggling with legacy systems issues.
The regulatory burden that the market faces only intensify these complications, particularly with the launch of Consumer Duty and Fair Value.
According to REG’s recent research, 28% of the general insurance (GI) market are battling with manual processes and multiple data siloes, which in turn put a strain on regulatory adherence efficacy.
Moreover, 69% of the GI market also believe that the regulatory burden has increased over the past couple of years.
The 2024 Industry Trends Report published by Earnix in November 2024 reports that “modernising legacy technology systems is the biggest challenge for insurers today”.
Importantly, 49% of the 431 global insurance executives surveyed reported that they are falling behind on their digital transformation efforts to modernise legacy systems.
Earnix also discovered that relying on legacy systems could lose insurers’ market share and revenue but also impact how well they control business operations.
Replacing legacy technology isn’t just an internal operations matter, it also allows to serve customers better and create positive customer experiences.
According to Shirley Woolham, Chief Executive at Minster Law; “legacy systems can slow down digitisation efforts and create inconsistent customer experiences at different points in the customer journey.”
She added; “While replacing [legacy systems] can be costly, time consuming and can sometimes risk service disruption, doing so is critical to meeting customer expectations and complying with Consumer Duty rules.”
It is clear that legacy systems create friction and slow down business, leading to a higher amount of missed opportunities within the insurance market and unsatisfied customers.
That’s where RegTech comes in; technology allowing insurance businesses to automate counterparty risk monitoring; enabling them to uphold compliance and focus more on strategic initiatives and customer experience.
REG ROUNDUP
"Legacy systems hinder operations in numerous ways—from fragmented data siloes and slow, unreliable data collection processes to negative customer experiences. Most critically, legacy technology makes it increasingly difficult for insurers to keep pace with the constantly evolving regulatory landscape, which can result in reputational damage, costly fines, and missed business opportunities.
RegTech offers a reliable, long-term solution that delivers peace of mind. It accelerates due diligence, processes, ensuring firms remain fully compliant. Moreover, it provides continuous 24/7 oversight of counterparty activity, whilst accelerating and streamlining the sharing of information across distribution chains to bolster compliance with Consumer Duty.
For the insurance industry to thrive, embracing digital transformation is essential. By modernising key operations, insurers can enhance efficiency, streamline compliance, and gain a competitive edge. This shift not only improves oversight but also elevates customer service, enabling insurers to meet the demands of both the market and their clients."
ESG
Outdated Norms Challenge Growing Gender Allyship in London Market
The insurance sector, historically male-dominated, has made significant progress toward inclusivity. Women now play a pivotal role in shaping the success of the industry, driving innovation, leadership, and growth.
As the market continues its journey toward greater equality, the contributions of women are becoming increasingly recognised as essential to its ongoing transformation and success.
Today, many men in London’s insurance market are also challenging the “old boys’ club” stereotype by supporting female colleagues and promoting equality, a senior executive told Insurance Times.
An anonymous professional who works in underwriting said; “The men I work alongside now are more mindful of what is and isn’t appropriate.”
Despite these improvements, unproper physical and verbal behaviour such as abusive language towards women still persists, particularly in work social events and situations where alcohol is involved, according to the same source.
According to research carried out by the FCA in October 2024, sexual harassment is more common among London market intermediaries than in other areas of financial services.
As reported by the watchdog, the number of reported non-financial misconduct incidents considerably increased by 134% in the space of only three years. Moreover, the number of allegations reported by intermediaries in the sector rose from 89 to 246.
Among London market intermediaries, 16% reported experiencing sexual harassment, compared to 13% for insurers, 6% for wholesale banks, and 14% for wholesale brokers.
Another major issue with many of the reported misbehaviours is that little to no action is ever taken, which could impact the number of incidents happening in the future and the safety of women in the market. This is particularly true for younger women who are less likely to speak up due to the fear of negative career repercussions.
Investing in proper training, establishing a culture of trust and respect and taking action against guilty individuals are necessary steps towards contributing to a safer and equal environment for both women and men working in the market.
TECHNOLOGY
AI Innovation Speeds Up Lung Cancer Detection
Greater Manchester hospitals are leading the way in adopting AI technology to accelerate the detection of lung cancer and other diseases. Over the coming months, seven NHS Trusts across the region will implement this advanced tool in collaboration with Greater Manchester Cancer Alliance, Greater Manchester Imaging Network, and global health tech firm Annalise.ai.
The urgency for faster diagnosis is acute in Greater Manchester, where lung cancer rates are 24% higher than the national average, and life expectancy is comparatively lower.
Andy Burnham, Mayor of Greater Manchester, expressed optimism; “This partnership is a step forward in getting people the treatment they need sooner. It’s fantastic to see Greater Manchester taking the lead in this vital area.”
The AI-powered system analyses chest X-rays, identifying up to 124 findings, including lung cancer. By detecting abnormalities within 60 seconds, the tool alerts medical professionals to prioritise suspicious cases. This rapid response streamlines the diagnostic process, improving efficiency and patient outcomes.
The technology is already in use at Manchester NHS Foundation Trust, Stockport NHS Foundation Trust, and The Christie NHS Foundation Trust, with more sites to follow.
Dr Rhidian Bramley, Diagnostic and Innovation Lead at Greater Manchester Cancer Alliance, stated; “This collaboration represents a significant step in leveraging AI for patient care. Diagnosing cancer faster means better experiences and outcomes for patients.”
Health Secretary Wes Streeting praised the initiative, linking it to broader ambitions for a digital transformation of the NHS.
“This AI tool will save lives by speeding up diagnoses and ensuring patients receive timely treatment,” he said.
Dimitry Tran, Co-founder of Annalise.ai, highlighted the broader impact; “Rolling out our solution across Greater Manchester demonstrates a commitment to innovation and quality care. Covering a third of all chest X-rays in the UK, this initiative will significantly benefit patients and clinicians alike.”
By embracing AI technology, Greater Manchester is setting a powerful example for healthcare innovation, paving the way for faster diagnoses, better outcomes, and a more efficient NHS for the nation.
FINANCE
FCA Explores Pension Support Reforms to Close Advice Gap
The Financial Conduct Authority (FCA) has unveiled a consultation aimed at addressing the growing “advice gap” in the pensions sector, with proposed measures that could significantly reshape how millions of consumers access support for their retirement planning.
These initiatives come as part of a broader effort to ensure individuals can make informed decisions about their pensions, even if they lack access to full financial advice.
The advice gap refers to the lack of affordable and accessible financial advice for many consumers, particularly those with moderate pension pots who are unable or unwilling to pay for comprehensive financial planning.
According to the FCA, this gap has left millions of people navigating complex pension decisions without adequate guidance.
In its press release, the FCA stated; “Around 12 million people are actively contributing to a defined contribution pension. Millions more have a deferred pension, and many of these people could benefit from support.”
What’s Changing?
The FCA’s consultation proposes several targeted measures designed to increase the accessibility of support for pension-related decisions:
Expanding Guidance Services: The FCA is considering broadening the scope of guidance that firms can provide, allowing them to offer more tailored assistance without crossing the line into regulated financial advice.
Simplified Advice Models: By reducing regulatory burdens, the FCA aims to encourage firms to develop cost-effective, simplified advice models tailored to individuals with straightforward needs.
Improved Engagement with Pension Holders: Firms may be required to proactively engage with customers who are at risk of poor retirement outcomes, offering them clear and actionable support.
The FCA’s Executive Director of Consumers and Competition, Sheldon Mills, commented; “We want to make it easier for firms to provide support to consumers making decisions about their pensions. We also want consumers to have better information and support tailored to their needs, and accessible at the right time.”
Why It Matters?
These proposals are expected to benefit a wide range of consumers, particularly those approaching retirement who need help navigating decisions about drawdown options, annuities, or investment strategies.
The FCA’s measures also aim to foster greater trust in the financial advice market by making support more transparent and accessible.
Professional Adviser highlighted the challenge of balancing accessibility and protection, noting; “Consumers are often left in a position where they need help but can’t afford or don’t want to pay for regulated advice. These measures could provide a middle ground that works for both consumers and firms.”
For firms, the changes represent an opportunity to innovate and capture a segment of the market that has been underserved. By adopting simplified advice models, firms can enhance customer relationships and build long-term loyalty, while contributing to better retirement outcomes across the board.
Industry Reactions
While the proposals have been broadly welcomed as a step in the right direction, some concerns remain about their practical implementation.
Industry leaders have highlighted the importance of ensuring that any new measures maintain high standards of consumer protection, particularly as firms experiment with new advice delivery models.
Professional Adviser further noted; “The FCA will need to strike the right balance between encouraging innovation and maintaining robust consumer safeguards.”
The FCA’s consultation will remain open until 2025, providing stakeholders an opportunity to share their views on the proposed changes. Following this, the FCA will refine its approach and introduce final rules and guidance aimed at closing the advice gap effectively.