UK Law and Practice Contributed by: Clare Swirski, E. Drew Dutton, Hugo Laing and Rosamund Wood, Debevoise & Plimpton LLP
ject is the regulatory sandbox, which in August 2021 moved to an “always open” model, meaning applica- tions are now accepted all year round, and the FCA has received over 630 applications since its launch and accepted 23 firms. The project involves early, open and honest communication between insurtech firms and their respective regulators, who provide indi- vidual guidance, potential modification of rules and letters of no enforcement action for a limited dura- tion. The FCA closely monitors the pilot and receives information regarding current innovations. Furthermore, the PRA has, as part of its ongo- ing review of Solvency II, proposed a “mobilisation regime” allowing new insurance firms to operate with business restrictions (for example, limits on the type of business written) for 12 months, during which time the firm would benefit from lower capital requirements. In March 2022, the UK’s Department for International Trade launched the UK-US Insurtech Corridor with the US Department of Commerce, Connecticut Insurance and Financial Services (among others). The corridor is intended to remove barriers to doing business as an insurtech in the UK and the United States. 11. Emerging Risks and New Products 11.1 Emerging Risks Affecting the Insurance Market As a centre for the global (re)insurance industry, the UK industry – particularly Lloyd’s and the London mar- ket – is focused on the many emerging risks common to those in the rest of the world, including catastrophe and environmental risks from climate change, cyber- security risk, geopolitical instability, energy risk and the changing risk profile of common types of insur- ance, such as motor and liability, with the develop- ment of automation and AI (see also 12.1 Significant Legal or Regulatory Developments ). Climate Change Climate change ranks amongst the top emerging risks identified by the UK and global (re)insurance indus- try. The UK government has indicated its commit- ment to the green economy, and the PRA and FCA have shown that they are aware of the risks facing
the industry from climate change. The UK Solvency II review included specific considerations for supporting the green economy – although it stopped short of spe- cific capital treatment for such investments. Similarly, the risks arising from climate change remain a key priority for the International Association of Insurance Supervisors, of which the PRA is a member. In April 2025, the PRA published a consultation paper on updating the supervisory statement (SS3/19) on enhancing banks’ and insurers’ approaches to man- aging climate-related risks (CP10/25). Key proposals include explicitly integrating climate risk into overall governance structures, calling for increased risk man- agement including having climate-specific risk appe- tite statements with clear metrics, limits and scenario analysis input, and introducing requirements for better internal reporting and disclosure. Practically, this is introducing a higher bar for firms and a need to con- duct gap analyses. Whilst not creating new rules, the aim is for the proposals to be phased in by early 2026. Cyber-Risk UK businesses have a heightened awareness of the threat that cybercrime poses, following several recent high-profile data breaches. UK cyber insurance claims tripled in 2024. In the government’s Cyber Security Breaches Survey 2025, it was reported that 43% of businesses and 30% of charities reported having experienced some kind of cybersecurity breach or attack in the 12 months to June 2025 (with a higher incidence among medium and large firms), underscor- ing both the persistence and concentration of cyber exposure. Whilst (re)insurers face cyber-risks them- selves, there is also an opportunity for them to offer cyber-risk insurance protection to others. Following the Jaguar Land Rover (JLR) cyber inci- dent, which impacted JLR’s internal IT, causing global manufacturing shutdowns, halting production for five weeks and costing GBP1.9 billion, the FCA conse- quently warned that the UK is “potentially massively underinsuring” against systemic cyber and opera- tional risks. The PRA and FCA are alive to the risks that finan- cial services firms such as (re)insurers face from cyberthreats. The PRA and FCA are engaging with
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