PRA updates the rules for insurance third-country branches

What does this mean?

The Subsidiarisation threshold

The PRA has committed to increasing the subsidiarisation threshold from £500m to £600m of FSCS liabilities. This means that a third-country branch which has liabilities which are subject to FSCS above £600m will be expected to be authorised as a subsidiary in the UK. 

The PRA state that it will consider individual cases close to the threshold on their own merits, taking into account specific circumstances and mitigation, such as business transfers, limitations on new business, or a demonstrable run-off profile. The PRA also reiterates that the £600m threshold may on occasion allow branches to temporarily exceed this, where there is an agreed glidepath of firms coming back within the threshold. The PRA should be engaged directly in such cases to discuss whether the PRA deems subsidiarisation appropriate.

There is no required timetable for recalculating liabilities for the purpose of assessing against the threshold. However, firms are expected to have a sufficiently reliable forward-looking projection of liabilities to be able to identify when this threshold may be breached in the future. This change comes into force as of the PS being published on 21 May 2026.

Rulebook amendments

Reinstating two annual reporting templates and discontinuing quarterly reporting:

Annual reporting templates IR.19.01.01 (non-life insurance claims) and IR.20.01.01 (development of the distribution of the claims incurred) will be reinstated for all third-country branches. The PRA have confirmed that firms may apply for a waiver if they consider that these templates are disproportionate for their business. This is likely to be the case only for a minority of branches, in particular where the cost of reporting is disproportionately high, or where branches are fully reinsured to UK parents, meaning that the reporting would not serve any additional benefit to the PRA’s objectives. 

Quarterly reporting for all branches, not just the smaller branches (category 3 and 4) originally set out in the consultation, namely the need for a branch balance sheet in Q2 of the branch financial year, will cease. This comes into effect as of 31 December 2026.

Absorbing Modifications by Consent into PRA rulebook:

Although quarterly reporting will no longer be required for any third country branch, branches which have at least £1bn in gross written premiums or £2 bn in branch provisions will be subject to the full suite of annual reporting, set out here. Firms which will be subject to the full suite of annual reports will be subject to them from 31 December 2027.

The current reporting process for third country and pure reinsurance branches is heavily governed by Modifications by Consent (MbC). The PRA has confirmed that pure reinsurers now no longer require MbC relief for complying with the Investments Part of the PRA Rulebook, specifically the Prudent Person Principle (PPP). 

Restating EIOPA Branch Guidelines:

The PRA will restate and disapply some guidelines which do not apply to the UK or are covered materially by other policy or supervisory statements. An appendix of these changes is available here. These changes will be made on 31 December 2026.

Branch ORSA and Resolution Reports Clarification:

Removal of branch capital holding and reporting requirements had left many firms unclear on what should be included in branch Own Risk and Solvency Assessments (ORSA). 

The PRA confirms that the current guidance has been updated to clarify that it should be sent an ORSA for the insurance undertaking (i.e. the legal entity, rather than the branch), including a high level summary of the undertaking’s solvency position, rationale for capital buffers and an overview of the stress testing results, which can be in the form of a ‘branch annexe’.  

In addition, the PRA clarified that the requirements for triennial resolution reports have not changed. However, branches in the UK which do not write UK risks do not need to produce a resolution report. This exemption comes via an updated modification by consent. Branches which write solely non-UK risk who have not been contacted by the PRA directly on this should reach out to their supervisors.   

What do firms need to do?

Firms should assess whether they are likely to approach or go over the subsidiarisation threshold in the coming three years so that any expectation of subsidiarisation is fully anticipated. If there is only a minor and temporary breach of the threshold, with mitigation in place, those branches should engage their supervisors to explore whether they can continue as a branch in such circumstances. . 

While the reporting burden overall is being reduced, firms captured by the full suite of annual reports should make full use of the implementation time given to ensure they are able to gather the data required and accurately report this on time. 

Next steps

The increase in subsidiarisation threshold is effective immediately from 21 May 2026. 

Pure reinsurance branch MbCs will cease on 31 December 2026.

Reporting MbCs will be expressly revoked by the PRA as at 31 December, as per the published revocation notice.  

Firms which will be subject to the full suite of annual reports will be subject to them from 31 December 2027.