Insurance in the United Kingdom
Insurance in the United Kingdom is a major part of the country's financial services industry, providing life, general and health insurance, as well as reinsurance, to households and businesses. The sector is among the largest in the world and the largest in Europe by premiums, and London is an important international centre for commercial insurance and reinsurance that includes the Lloyd's market.
The United Kingdom insurance market is commonly described in terms of three broad segments: personal and commercial lines insurance, wholesale insurance and life insurance, sold both directly and through intermediaries such as brokers and comparison websites. Insurance firms are mainly regulated under a "twin peaks" framework introduced in 2013, with the Prudential Regulation Authority responsible for prudential supervision and the Financial Conduct Authority responsible for conduct regulation and the integrity of financial markets, replacing the former Financial Services Authority.
The sector has been affected by a number of high-profile conduct issues. In particular, widespread mis-selling of payment protection insurance led to the largest consumer redress exercise in United Kingdom financial services, with tens of billions of pounds in compensation paid to customers and lasting changes to how insurance products are governed and supervised.
Overview of the UK insurance market
Market size and structure
The United Kingdom insurance and long term savings industry is one of the largest insurance markets in the world and the largest in Europe by premium income. In 2023 the sector wrote about £301 billion in gross premiums and members of the Association of British Insurers managed around £1.4 trillion in invested assets. Earlier ABI statistics indicate that the industry contributes around £30 billion each year to the United Kingdom economy, pays more than £16 billion in taxes and employs just over 300,000 people directly and in related services such as broking and other auxiliary activities.Life and long term savings business accounts for a large share of the sector by assets, with life insurers managing more than £2.3 trillion in customer assets across tens of millions of policies. Non life business, including motor, home, commercial property and liability insurance, produces a high volume of annual premiums and claims. Bank of England data show that United Kingdom authorised non life insurers generated about £124 billion of gross written premiums in 2023.
The London market, including Lloyd's of London and other specialist insurers and reinsurers, is an important global centre for wholesale insurance and reinsurance. Firms in this market underwrite large and complex risks for corporate and international clients and provide capacity to insurers in the United Kingdom and overseas. In 2023 the FCA described wholesale insurance as a fundamental enabler of the United Kingdom and global economy and noted that wholesale insurance firms in the United Kingdom wrote around £55 billion of gross written premiums in 2021. Insurance and reinsurance services also generate a significant export surplus for the United Kingdom.
Main lines of business and distribution
United Kingdom insurers write a wide range of life and non life products. Life and long term savings business includes protection policies such as term assurance and whole of life insurance, individual and workplace pensions and annuities, and investment and savings products such as unit linked policies. General insurance covers risks such as motor, home, commercial property, liability and travel insurance, as well as a variety of specialist covers. Wholesale insurers in the London market and at Lloyd's underwrite large and complex risks and provide reinsurance capacity to insurers in the United Kingdom and overseas.Insurance products are sold both directly and through a range of intermediaries. Many customers buy cover from insurers through insurance brokers and other intermediaries, including independent financial advisers for long term savings products. For retail general insurance, price comparison websites have become a key distribution channel, particularly for motor and home insurance. Insurance is also distributed through banks and building societies and through tied arrangements with major retailers and motoring organisations.
Surveys by the Financial Conduct Authority suggest that the great majority of adults in the United Kingdom hold at least one insurance product and that many shop around between providers at renewal, particularly for motor and home insurance. The mix of products and distribution channels continues to evolve, influenced by digital platforms, regulatory changes, competition and developments in the wider economy.
Climate risk and home insurance
Insurers and policymakers have highlighted climate change as an important driver of risk and claims in the UK home insurance market. Industry data show that weather related claims for damage to homes from storms, flooding and frozen pipes reached record levels in 2023 and again in 2024, reflecting a run of named storms and periods of severe cold. In 2024 UK insurers were reported to have paid around £585 million for climate related damage to homes and contents in a single year.Insurers have warned that more frequent and severe extreme weather could put pressure on the affordability and availability of home insurance, particularly in high risk areas, unless investment in flood defences and climate resilience keeps pace with rising risk.
Public-private risk sharing
Flood Re
Flood Re is a joint initiative between the UK Government and the insurance industry that aims to keep flood cover for homes at high risk of flooding available and affordable. The scheme began operating in April 2016 and allows participating insurers to cede the flood risk element of eligible household policies to a central reinsurance pool, in return for a premium set by reference to council tax bands. The pool is funded by these premiums and by a statutory levy on all providers of UK household home insurance, set at around £180 million a year.Flood Re is intended to be temporary and is scheduled to run until 2039, with the aim of supporting a transition to a market where the price of flood insurance fully reflects risk and where properties are more resilient to flooding. The scheme only covers domestic property meeting specified eligibility criteria, including broad cut-off dates for when properties were built, and does not apply to most commercial, buy-to-let or very high value homes. As a result, Flood Re sits alongside other measures such as flood defence investment and planning policy in managing flood risk for households.
Pool Re
Pool Re is the UK’s government backed terrorism reinsurer for commercial property in Great Britain. It was set up in 1993 by the insurance industry in cooperation with the Government following the Provisional IRA bombing of the Baltic Exchange in London in 1992, which had led to a shortage of affordable terrorism cover. Pool Re is a mutual reinsurer owned by its member insurers and Lloyd’s syndicates. Members retain an initial layer of terrorism losses then cede further losses to the Pool Re scheme.The scheme is underpinned by an unlimited, but repayable, guarantee from HM Treasury under the Reinsurance Act 1993. This allows insurers to continue to offer terrorism cover to businesses, confident that claims can be met even in the event of a very large attack. Over time, Pool Re has expanded its cover to include non-damage business interruption and has built up significant reserves and commercial reinsurance protection. The Office for Budget Responsibility describes it as a long running example of government guaranteed insurance against systemic risk.
Regulation and supervision
Regulatory framework
Financial regulation of insurance in the United Kingdom is based on the Financial Services and Markets Act 2000. Until 2013 most financial services firms, including insurers, were authorised and supervised by the Financial Services Authority. Following the global financial crisis, the government reformed the framework and the FSA was replaced in April 2013 by the Prudential Regulation Authority and the Financial Conduct Authority.The PRA is part of the Bank of England and is responsible for the prudential regulation and supervision of banks, building societies, credit unions, insurers and certain investment firms. It sets prudential standards and supervises firms to promote their safety and soundness and to contribute to an appropriate degree of protection for insurance policyholders. The FCA is a separate body and is responsible for conduct regulation of most retail and wholesale financial markets. Its objectives include securing an appropriate degree of protection for consumers, protecting and enhancing the integrity of the United Kingdom financial system and promoting effective competition in the interests of consumers.
Prudential regulation
The PRA authorises most United Kingdom insurers and reinsurers and supervises them on a risk based basis, focusing on the impact they could have on the stability of the financial system and on policyholders. Its approach includes assessing firms' business models, governance, risk management, capital and liquidity, and intervening where necessary to reduce risks.United Kingdom insurers are subject to prudential requirements that implement the Solvency II Directive and related domestic rules. These include quantitative capital standards based on a risk sensitive solvency capital requirement, rules on the valuation of assets and liabilities and tests of firms' ability to continue to meet their obligations under stressed conditions. The PRA also sets expectations for insurers' risk management and governance, including the responsibilities of boards and senior managers.