The FCA PS25/21 Policy Statement introduces significant changes to UK insurance regulation, aiming to enhance firm autonomy whilst emphasising the need for strong governance and preparation for future changes to ensure compliance and capitalise on new opportunities.
The Financial Conduct Authority’s Policy Statement PS25/21 marks one of the most significant developments in UK insurance regulation in recent years. These changes respond to extensive industry feedback and reflect the FCA’s commitment to creating a framework that is proportionate, flexible, and aligned with the realities of a rapidly evolving market.
Whilst the reforms simplify certain aspects of the rules, they introduce a new dynamic: firms now have greater autonomy in how they apply regulatory requirements. This autonomy, however, comes with heightened responsibility. Decisions must be proportionate, defensible, and aligned with the FCA’s principles of fairness, transparency, and consumer protection.
Key Changes in PS25/21
Customer Segmentation and the SME Watershed
The FCA has introduced clearer differentiation between retail consumers, smaller commercial customers, and larger commercial customers. Aligning thresholds with the DISP eligible complainant definition removes ambiguity and ensures complaint handling reflects the unique needs of each segment. The clarification around policies with multiple policyholders is particularly important for complex commercial arrangements.
Training and Competence
The removal of the blanket 15-hour CPD requirement gives firms the chance to transform their approach to professional development. Instead of meeting a generic target, businesses can now design tailored, role-specific training programmes that genuinely enhance capability and performance. This flexibility allows firms to align CPD with strategic objectives, invest in specialist skills, and create a culture of continuous improvement that benefits both the organisation and its people. Done well, this shift can turn compliance into a competitive advantage.
Product Governance and Co-Manufacturing
Firms can now appoint a single lead insurer for product governance, reducing duplication and improving efficiency. However, intermediaries remain excluded from the lead role, reflecting the FCA’s cautious stance to protect consumer outcomes and data integrity. Governance structures must be robust and transparent to avoid compliance and reputational risks.
Bespoke Contracts and Review Frequency
The expansion of the bespoke contracts exclusion and removal of the blanket 12-month review requirement allow firms to adopt risk-based review cycles. This flexibility is welcome but must be supported by clear frameworks and documented decision-making to demonstrate proportionality without complacency.
Employers’ Liability Reporting
Streamlined EL reporting reduces administrative burden while retaining safeguards such as director’s certificates and audit reports. Firms benefit from less red tape but must maintain strong governance and data integrity.
Future Regulatory Direction
The FCA has signalled further consultations on international conduct rules and reporting simplification. Firms should anticipate ongoing evolution and prepare for additional changes in 2026 and beyond.
What This Means for Firms
PS25/21 is not just a compliance update; it represents a strategic shift towards outcome-focused regulation. Greater autonomy offers opportunities for efficiency and innovation, but it also demands stronger governance, risk-based frameworks, and clear documentation. Firms that fail to act risk falling behind or facing regulatory scrutiny.
How Thistle Initiatives Can Help
At Thistle Initiatives, we help firms turn regulatory change into a competitive advantage. Our team provides expert interpretation of FCA requirements, designs governance structures that support autonomy without compromising compliance, and delivers practical implementation support. From reviewing product governance and complaint handling frameworks to developing tailored training programmes and horizon scanning for future changes, we ensure firms are ready to meet regulatory expectations confidently.
PS25/21 is a positive step – but making the most of it requires work. Contact us today to discuss how we can help your business navigate these reforms and unlock the benefits of greater flexibility.
Meet the Expert
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Matthew Horton, Manager 
Matt is a seasoned compliance professional with a proven track record of leading regulatory strategy and governance across multiple financial sectors. He has held senior roles, including Head of Compliance at his previous firms. Matt brings deep expertise in designing and implementing three lines of defence compliance frameworks for organisations operating in insurance, electronic money institutions (EMI), credit, and mortgage broking. His experience extends to board advisory, where he provides strategic oversight on risk management and regulatory adherence.