From Gatekeeper to Enabler: How the PRA is rewriting the rules for insurance innovation
Since its inception, the Prudential Regulation Authority (PRA) has been seen as the guardian of financial stability — focused on safety, soundness, and keeping insurers in check. But times are changing. The PRA is now adapting to a new environment and with the UK government's growth agenda and a new competitiveness objective, it is no longer just guarding the gate, but expected to also actively encourage innovation and let it through.
In recent speeches, senior PRA leaders like Shoib Khan (Director, Insurance Supervision), Vicky White (Director, Prudential Policy) and David Bailey (Executive Director, Prudential Policy) have made it clear: they want the UK insurance sector to thrive, evolve, and innovate, but without compromising on resilience. In this blog we look at how the PRA is implementing this innovation mandate in practice.
Making Regulation Work for Innovators
One of the biggest shifts is how the PRA is streamlining its processes. Think faster approvals, fewer reporting burdens, and more flexibility for startups. For example, the PRA has trimmed down Solvency II reporting requirements and introduced a “mobilisation” phase for new insurers - essentially giving them a soft launch window to get up and running before they become fully authorised.
In his speech at the Insurance Innovators Summit, Shoaib Khan summed it up well: “Efficiency gains free up resources at firms that can be reinvested in innovation”. In other words, less time on paperwork means more time building new products, platforms, and risk models, investing in new technologies, and entering new markets without unnecessary delay.
Trust and Tailoring: The UK-Specific Approach
Even as it opens the door to innovation, the PRA is doubling down on trust in UK’s prudential standards. It wants the industry—and the public—to know that safety and soundness of the system always come first but supporting innovation is a means to strengthen the system rather than to weaken it. It wants investors, customers and international observers to be reassured that the UK isn’t trading away prudence for novelty but rather achieving both. Vicky White, in her speech at the Annual Bank of America Financials CEO Conference emphasised that the goal is “safe growth and innovation,” not a free-for-all.
That’s why the PRA is adapting rules and supervision to reflect the distinctive features of the UK market and the opportunities it presents. David Bailey, when speaking at Risk Live Europe event earlier this year, pointed out that the regulator is now willing to adjust rules to fit the UK market, rather than unquestioningly follow international standards. This includes reforms to Solvency UK, creation of a New Insurer Start-up Unit to help new insurance ventures navigate authorisation (reducing barriers to entry for innovative players), and piloting “accelerated pathway” for wholesale insurers and a “concierge” service to attract international insurers. All these moves reflect UK-specific priorities: the London insurance market’s global role and the desire to make the UK a more attractive hub for insurance business.
Big Innovative Reforms You Should Know About
To translate these themes into action, the PRA has either rolled out - or is planning - major reforms that could reshape the insurance landscape. A few such key reforms that merit your attention include:
| Reform | Status | What It Does | Why It Matters |
| Matching Adjustment Investment Accelerator | Launched in October 2025 | It lets life insurers get capital relief faster for eligible assets without prior PRA approval. This removes a regulatory timing bottleneck so firms can invest in productive assets more quickly and still benefit from the Matching Adjustment | Speeds up investment in UK infrastructure and productive finance |
| Insurance Special Purpose Vehicles (ISPV) Regime Overhaul | Implemented in July 2025 (with certain further enhancements pending) | It streamlines rules for ISPVs, the vehicles used for insurance-linked securities (ILS) like cat bonds | Makes it easier to raise alternative capital, like cat bonds |
| New Captive Insurance Regime | In development, and proposed to be implemented in 2027 | This new regime aims to create a UK-specific framework to help non-insurance corporates better incubate and manage new risks domestically through corporate captives | Establishes an internationally competitive captive regime, allowing businesses who self-insure to access the UK insurance market expertise |
| Life Insurance Innovation | Under review | Explores new structures such as life ISPVs and other similar vehicles to bring alternative long-term capital into the life insurance sector safely | Could unlock new funding models for annuity writers |
These reforms aren’t just tweaks - they’re strategic moves to help insurers innovate while staying within a robust regulatory framework. As always, however, the key will be in both the implementation of new rules but also the approach of the regulator, which must be consistent with the aims of recent speeches – responsive, proportionate and sensitive to business needs and timelines.
InsurTech and AI: A Pragmatic Approach
The PRA’s stance on AI is refreshingly balanced. David Bailey in his speech at Risk Live Europe event described PRA's approach as “open, flexible, and technology agnostic.” Instead of rushing out new rules, the PRA is relying on existing standards - like model risk and outsourcing guidelines - to cover AI applications. That means insurers can experiment with AI-driven underwriting or claims automation provided they are aligned with the current law and regulations. And the PRA is staying plugged into global conversations, working with the International Association of Insurance Supervisors (IAIS) and other bodies to monitor developments.
On the InsurTech front, the PRA is supporting new ventures through initiatives like the New Insurer Start-up Unit and points to successes like Lloyd’s Lab (a sandbox accelerator run by the Lloyd’s market), which has helped launch over 150 InsurTech solutions. While this is an initiative of the market, not the regulator, PRA officials cite it to illustrate that regulation has not been a roadblock.
Through these, the PRA appears to be signalling to the industry: bring us your new ideas and we will work with you flexibly. And indeed, by relying on broad principles and engaging in early dialogue (roundtables, consortiums, sandboxes, etc.), the PRA is attempting to future-proof its regulatory framework so that it remains relevant but not stifling, as technology in insurance rapidly progresses.
Innovation Inside the PRA
It’s not just the industry that’s innovating, the PRA is modernising itself too. From using AI to analyse claims reserving to piloting generative tools for summarising meeting notes, the regulator is becoming more data-driven and efficient. They’re also engaging with industry in new ways - think roundtables, expert groups, and informal feedback sessions. This shift from formal consultations to real conversations is helping the PRA stay ahead of the curve.
What’s Next?
The PRA continues to lay the groundwork. Through these targeted reforms the PRA is actively removing obstacles and creating channels for innovation. Now it’s up to insurers, investors, entrepreneurs and advisors to come up with new ideas and drive them forward under the supportive umbrella the PRA has tried to provide. As Shoib Khan said at the Insurance Innovators Summit: “We feel we're doing our bit. The next step is for you—the market—to light the blue touch paper of innovation”. With the regulator signaling openness, flexibility, and a willingness to collaborate, the UK insurance sector has a real opportunity to lead the way in responsible innovation.
