On 15 July 2025, HM Treasury (HMT) published a consultation paper on proposing new flexibilities to promote innovation and facilitate a wider range of transaction structures within the Risk Transformation Regulations.
The Risk Transformation Regulations 2017 (RTR) cover the issuance of insurance linked securities (ILS) and the use of protected cell companies (PCC). The consultation focuses on opening up access to direct funding from investors in capital markets through ILS and follows up on the commitment of the Government’s consultation published today on captive insurance to propose a wider use of PCCs.
In the consultation paper, HMT outlines the following proposals:
- Legislative changes to allow the Prudential Regulation Authority (PRA) more flexibility to make rules on appropriate funding options without undermining its primary objectives for transformer vehicles ‘fully funded’ requirements per Section 284A of the Financial Services and Markets Act 2000 (FSMA 2000).
- Bringing non-insurers within scope for the assumption of risks under Article 13A Regulated Activities Order. The PRA and Financial Conduct Authority may introduce additional rules to mitigate potential arbitrage or conduct risks that could arise.
- Remove the requirement on the PRA to incorporate a limitation on the scope of regulated activities in all cases, the PRA would retain the power under FSMA 2000 to introduce limitations.
- Remove PRA restriction to extend PCCs under Regulation 43 RTR to more than one contractual arrangement.
- Remove the prohibition for PCCs under Regulation 57 RTR to allow PCCs to effect and carry out contracts of insurance.
- Removing the requirement for PCC applications to include risk transformation per Regulation 15 RTR.
The deadline for comments on the consultation paper is 8 October 2025.