The UK Financial Conduct Authority’s CP26/22 consultation, published 26 June 2026 and open for comment until 4 September 2026, reads like a paperwork-reduction exercise but functions as something sharper: a redrawing of the jurisdictional line that decides which policyholders keep UK conduct protections — the same regulator that has since paired this rulebook rewrite with direct letters to firms over conflicts of interest, part of the same agenda as the AI sandbox cohort, paired with a quiet move to take broker professional indemnity insurance off the euro entirely.
Who counts as a UK customer now
Until now, ICOBS and PROD 4 applied to essentially any insurance business a UK-authorised firm wrote, largely irrespective of where the policyholder actually lived. CP26/22 proposes narrowing that scope so the detailed conduct requirements bite only where there is a clear UK connection, based on the customer’s habitual residence and, where relevant, the location of the risk. The regulator defines that residence test tightly: “habitual residence means the policyholder’s residential address or its place of establishment,” according to the draft instrument published alongside the consultation, with British Forces Post Office addresses treated as UK residence regardless of the posting location.
For underwriters and intermediaries running mixed UK/non-UK books, that test replaces a bright-line “UK-authorised means ICOBS applies” rule with a per-policyholder check most will now need to run at renewal. It is a narrower but more granular compliance burden — a shift that follows the same conduct-rulebook logic behind the FCA’s Consumer Duty standards reaching claims handling earlier in its supervisory cycle. CP26/22 is also not a standalone move: it is the second instalment of a programme that began when the FCA published PS25/21 in December 2025, delivering the first phase of its Simplifying the Insurance Rules programme, with further simplification already committed for 2026.
The euro leaves the broker’s balance sheet
The most consequential line item for brokers sits in the small print on professional indemnity. Insurance distribution activity currently carries a minimum PII requirement of EUR 1,300,380 for a single claim and EUR 1,924,560 in aggregate. CP26/22 proposes converting those floors to GBP 1,110,000 for a single claim and GBP 1,650,000 in aggregate. A parallel set of limits covering mortgage-credit intermediation would move from EUR 460,000 and EUR 750,000 to GBP 390,000 and GBP 640,000 respectively, under the same consultation on simplifying the insurance rules.
The regulator did not simply pick a spot rate. It built the conversion from a five-year trimmed-mean rate of 1.1674 euros per pound, drawn from the Bank of England’s XUDLERS series and rounded to the nearest GBP 10,000, an approach meant to insulate the new floors from single-day currency swings — at least until the next reset. Firms get 12 months from the date the amending instrument comes into force to meet the new sterling minimums, with a transitional provision for policies already in force at that point. It is a capital-adjacent recalibration in the same spirit as the FCA’s final crypto capital rules for insurers, which likewise decoupled a regulatory floor from an external reference point insurers do not control. For firms that also benefit from the narrower territorial scope, the FCA’s own modelling puts the combined compliance saving at GBP 35,000 to GBP 120,000 a year — real money, but only for firms currently maintaining UK and non-UK conduct infrastructure they can now retire.
Gibraltar and TP firms get no exemption
Nothing in CP26/22 carves out Gibraltar-based insurers or firms operating under the UK’s Temporary Permissions Regime. The FCA is explicit that where existing rules already apply to Gibraltar-based firms or TP firms, the proposed amendments will apply to them in the same way — there is no grandfathering, no phased carve-out, and no separate territorial test for firms that already sit in an unusual jurisdictional position.
The regulator’s own impact estimates give a sense of scale. The territorial-scope changes alone could touch around 139 underwriters — insurers or Lloyd’s managing agents — and 166 intermediaries. The disclosure and advised-sales proposals reach further still, with the FCA estimating a maximum of 4,205 firms affected and per-firm savings of GBP 1,000 to GBP 10,000 a year from removed disclosure requirements. Firms that also lean into the consultation’s push for digital-first disclosure can add to that figure: the FCA estimates roughly GBP 1.80 to GBP 4.74 saved per document sent electronically rather than on paper, a marginal number that compounds quickly across a full renewal book. It is the same evidence-led cost-benefit habit the regulator applied when scrutinising how opaque AI-driven pricing models could disadvantage policyholders, and it signals firms should expect the final cost-benefit analysis to hold up to scrutiny long after the consultation closes.
Advice rules lose their gray zone
CP26/22 also tidies the advice perimeter, as set out in the FCA’s consultation paper on simplifying insurance rules. The FCA proposes removing references to “advice” that does not amount to a personal recommendation, leaving a clearer line between sales that involve a personal recommendation and those that don’t — a distinction that has generated interpretive disputes for insurance distributors since the retail distribution reforms of the last decade. Firms that have built compliance scripts around the fuzzier version of that boundary will need to revisit them once a final instrument lands.
None of this is guaranteed to survive to a final instrument unchanged, and the conduct baseline is already being tested by a broker agreeing to stop all FCA-regulated activity. The consultation runs until 4 September 2026, and firms with mixed UK/non-UK books — the ones carrying the operational cost of running two conduct regimes in parallel — have the clearest incentive to respond before the window closes and the territorial and currency mechanics harden into rule.
