CP20/25 – Insurance third-country branches: policy implementation and other updates
Executive Summary
CP20/25 is a PRA consultation paper published on 16 September 2025 that proposes targeted updates to the regulatory framework governing third-country insurance branches operating in the UK. The consultation addresses inconsistencies introduced during the Solvency II review, clarifies supervisory expectations, and increases the subsidiarisation threshold—matters that directly affect the operational and compliance costs of non-UK insurers seeking to maintain branch operations rather than establish subsidiaries in the UK market.
What Changed
The consultation proposes four primary regulatory modifications: Subsidiarisation Threshold Increase The PRA proposes raising the FSCS liability threshold above which third-country branches must establish a UK subsidiary from £500 million to £600 million. The PRA attributes this increase to inflation rather than organic growth, aiming to prevent branches from artificially approaching the current threshold and incurring unnecessary subsidiarisation costs. ORSA Reporting Clarification Current guidance will be updated to clarify that third-country branches must submit an Own Risk and Self Assessment (ORSA) report for the insurance undertaking (the legal entity) rather than the branch alone, including a high-level summary of solvency position, capital buffer rationale, and stress testing res
Suggested Considerations
- *Threshold Assessment: Larger third-country branches must reassess whether their liabilities, forecast for the coming three years, mean they need to become subsidiaries given the proposed increased subsidiarisation threshold.
- *Reporting Requirement Review: Branches should review updated guidance on ORSA submissions to ensure they provide the undertaking-level ORSA (rather than branch-specific ORSA) with required high-level summaries of solvency position, capital buffer rationale, and stress testing results.
- *Quantitative Metrics Compliance: Given new quantitative metrics replacing previous PRA firm categorisation, branches should review what requirements will apply to them to ensure they do not inadvertently misreport.
- *Three-Year Notification Obligation: Branches should establish processes to notify the PRA where it is projected that they may exceed the subsidiarisation threshold within the next three years.
- *Asset Holding Verification: Confirm that branch assets are held in respect of branch provisions and that assets backing direct insurance liabilities are available, as required by the new rule.
- *Consultation Response Consideration: Firms should evaluate whether to submit formal responses to the consultation by 16 December 2025, particularly regarding firm-specific contextual factors relevant to subsidiarisation risk assessment.
Key Dates
Compliance Impact
Urgency Rating: HIGH
Who is Affected
References
AI-generated analysis. May contain errors or omissions — verify with the original PRA source before acting. Full disclaimer.
Summary
Consultation paper 20/25