UK Law and Practice Contributed by: Clare Swirski, E. Drew Dutton, Hugo Laing and Rosamund Wood, Debevoise & Plimpton LLP
industry and co-operating with each other and the Bank of England (BoE) to monitor the use of new technologies, assess emerging regulatory risk and test firms’ operational resilience and cyber-resilience through stress tests – and to enforce penalties when regulatory and data breaches occur. Geopolitical Instability Ongoing geopolitical instability, most notably in the form of the Russia-Ukraine and Israel-Gaza conflicts, have had significant financial implications for the (re) insurance market, as well as the broader global econ- omy, for example by accelerating the inflationary pres- sures already in place due to the COVID-19 pandemic. (Re)insurers are particularly focused on the potential resurgence of military conflicts. With such economic pressures affecting global markets, demand for tak- ing out insurance contracts will be depressed, and financial performance of the insurance industry will be affected. The Russia-Ukraine conflict has also created new sanctions compliance regulation across the mar- ket that (re)insurance companies must comply with. 11.2 New Products or Alternative Solutions Blockchain Several distributed ledger technologies (DLTs), like blockchain, offer a high standard of protection against cybersecurity risk. The ability to protect data from cyber-attacks or malicious tampering is not only beneficial from a business risk point of view, but also makes a product based on DLT more attractive to consumers. However, regulators must balance inno- vation against risks to markets and customers. For example, weaknesses in DLT have been revealed through a series of cyber-attacks against digital cur- rencies that use DLT. To manage the policy and regulatory implications of DLT and crypto-assets in financial services, in March 2018, the BoE, the FCA and HM Treasury created the Cryptoassets Taskforce, which published a report in October 2018 detailing specific actions to be taken by regulatory authorities to mitigate the risks that accom- pany the potential benefits of DLT. In April 2022, HM Treasury published a response to a previous consul- tation on the UK’s regulatory approach to crypto- assets and stablecoins, which sets out, among other things, the UK’s approach to stablecoin regulation,
the wholesale uses of crypto-assets and new market developments in the space. The Financial Services and Markets Act 2023 (the “FSMA 2023”) clarified that crypto-assets are within the scope of the regulatory regime in the FSMA 2000, and a new crypto-asset financial promotions regime, created by the FCA, came into force on 8 October 2023. In December 2024 the PRA published a data request, which consisted of a data collection on firms’ expo- sures to tokenised assets, stablecoins and other crypto-assets, to help inform the PRA’s policy-mak- ing. Firms were asked to submit information by March 2025. The data collected was used to support the PRA and the Bank of England in calibrating their crypto- asset prudential treatment, analysing policy options, and monitoring the financial stability implications of these assets. 12. Developments in Insurance Law 12.1 Significant Legislative or Regulatory Developments UK Solvency II Review Following the UK’s exit from the EU, HM Treasury and the UK regulators conducted a review of the Solvency II regime in the UK (referred to as Solvency UK). In April 2022, HM Treasury published a new consulta- tion paper on the UK’s Solvency II review, setting out a package of proposed reforms. Following this con- sultation, in November 2022, HM Treasury issued a paper setting out the government’s final reform pack- age. Throughout 2023 and the first half of 2024, HM Treasury, the PRA and the FCA published various leg- islative texts and regulatory guidance, most notably the HM Treasury draft statutory instruments on the risk margin and matching adjustment (MA) in June 2023, and the PRA’s policy statement in February 2024. The final restatement of the assimilated law was published in November 2024. The key areas of reform included: • reducing the risk margin significantly (a 65% reduc- tion for long-term life insurance business and a 30% reduction for general insurance business) and enabling a modified cost-of-capital approach to its
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