The PRA is proposing to introduce a new definition of ‘insurance holding company’ into its rulebook (CP17/21). The change means that some companies that are currently regarded as ‘mixed-activity insurance holding companies’ would probably be reclassified as insurance holding companies for the purposes of group supervision.

Key points include:

  • The test of whether a company is an ‘insurance holding company’ will continue to depend on whether its main business is holding interests in subsidiaries that operate in the insurance sector.
  • Whether a company’s subsidiaries are ‘mainly’ insurance sector firms will be determined by reference to group assets, revenues and capital requirements. This is consistent with past guidance issued by the Financial Services Authority (FSA).
  • For the first time, however, the test will extend to ‘ancillary insurance services undertakings’ within a group.
  • The new rules will only apply to future determinations of insurance holding company status although existing groups are likely to be reassessed on the occurrence of a ‘trigger event’, including an acquisition or disposal.
  • The proposed change to the PRA’s rulebook appears to mean that different definitions will apply under UK legislation and regulation.
  • The UK’s approach will also no longer be aligned to the EU’s Solvency II regime.

The deadline for responses to the consultation is 6 December 2021. The new guidance is expected to come into force on 28 February 2022.

‘Insurance holding company’ vs ‘mixed activity insurance holding company’

Whether the parent company of a UK (re)insurer is an ‘insurance holding company’ or a ‘mixed activity insurance holding company’ determines the nature and extent of supervision of the group in which that (re)insurer sits.

In broad terms, group supervision applies to its fullest extent at the level of the highest insurance holding company in a group. Where a mixed activity insurance holding company sits at the top of a group, on the other hand, only minimal supervision is conducted at that level. Of course, the picture is more complicated where a group contains both types of holding company but the key point is that a mixed activity insurance holding company is subject to considerably less scrutiny than an insurance holding company.

Currently, an ‘insurance holding company’ is defined in both legislation and the PRA rulebook to mean a holding company whose main business is to acquire and hold participations (usually in the form of shares) in subsidiary undertakings that are ‘exclusively or mainly’ UK (re)insurers or non-UK (re)insurers (see regulation 2(1) of the Solvency 2 Regulations 2015, as amended (the Regulations) and the PRA’s Glossary).

A ‘mixed-activity insurance holding company’ is also defined in the Regulations and the PRA’s Glossary, broadly, to mean any company which owns at least one UK (re)insurer (although the definition expressly states that certain types of company, including (re)insurers and insurance holding companies, are not a mixed-activity insurance holding company)1.

It is intended to catch corporate groups that primarily operate outside the insurance sector, such as a supermarket group, but that contain an insurance company which conducts business that is complementary to the group’s main business. Corporate groups with a captive (re)insurer may also fall into this category although as captives are usually incorporated outside the UK, this is likely to happen less often.

Although the meaning of the term ‘mainly’ is important when distinguishing an insurance holding company from a mixed-activity insurance holding company, it is not defined in either the Regulations or the PRA rulebook. Nor is it defined as part of the EU’s Solvency II regime from which the term is derived.

PRA’s proposal

In CP17/21, the PRA proposes to:

  • amend the definition of an ‘insurance holding company’ (to be reflected in its Glossary) by:
    • defining the term ‘mainly’ by reference to the value of a group’s assets, revenues or to its capital requirements; and
    • bringing ancillary insurance services undertakings into the calculation (in addition to (re)insurance subsidiaries);
  • clarify the information needed by the PRA from firms to enable it to distinguish an insurance holding company from a mixed-activity insurance holding company (to be reflected in amendments to Supervisory Statement SS9/15: ‘Solvency II – Group Supervision’).


The PRA proposes that the term ‘mainly’ should be interpreted by reference to the proportion of a group’s assets, revenues, or capital requirements that are derived from its (re)insurer subsidiaries and from ancillary insurance services undertakings in the group. A holding company will be an ‘insurance holding company’ where at least two of these three measures exceeds a 50% threshold.

Clarifying how the term ‘mainly’ should be interpreted is welcome although practitioners in this area tend to have relied on FSA guidance that was issued alongside implementation of the EU’s Insurance Groups Directive in 2002. This guidance was withdrawn some years ago as part of the FSA’s initiative to reduce the size of its rulebook but not because it was no longer relevant. Given this, the PRA’s new definition is broadly consistent with current practice albeit that the application of a 50% threshold and the need to satisfy two out of the three thresholds introduces greater clarity.

‘Ancillary insurance services undertaking’

As stated above, the PRA’s amended definition of an ‘insurance holding company’ will take account of ‘ancillary insurance services undertakings’ for the first time. This represents a departure from the EU’s Solvency II regime, a sign perhaps of the PRA’s willingness to take the UK regime in new directions.

This change is designed to ensure that a parent company cannot avoid the full force of group supervision (by being treated as a mixed-activity insurance holding company instead of an insurance holding company) simply by means of using one or more service companies. The change should ensure that groups with broadly comparable businesses are treated in the same way.

Again, this change appears to be sensible. However, the definition of ‘ancillary insurance services undertaking’ does raise some questions. For example, the definition only catches a group company if the following conditions are satisfied:

  • its principal activity consists of:
    • owning or managing property;
    • managing data-processing services;
    • providing health and care services; or
    • any other similar activity; and
  • that activity is ancillary to the principal activity of one or more (re)insurers.

It is not clear what type of activity should be regarded as a ‘similar activity’ to those specified. In practice, it may be that a decision as to what is a ‘similar activity’ may depend on whether the PRA decides that a particular company should be supervised as an ‘insurance holding company’ or not. This is not an entirely satisfactory outcome for firms.

As the same terminology is used in other contexts (see the definition of ‘ancillary services undertaking’ in the PRA Glossary, which applies to insurers, banks and investment firms), guidance may be drawn from its use elsewhere.

The PRA’s proposed change also appears to mean that the definition of an ‘insurance holding company’ will be different from that applying under the Regulations. The PRA states that its intention is to clarify its approach to the term ‘mainly’, which could be taken to mean that it is not changing the definition itself, merely clarifying how it applies. This is difficult to reconcile, however, with the fact that ancillary insurance services undertakings are being brought into the definition for the first time. It is also clear that the PRA regards the change as resetting the boundary between an insurance holding company and a mixed-activity insurance holding company such as can only be achieved by a change in the definition.

Changes are not retrospective

Notably, the proposed changes are not intended to be retrospective. They will only apply, therefore, to future determinations of insurance holding company status which will include assessments of existing groups on the occasion of a ‘trigger event’. The term ‘trigger event’ is not defined but the PRA expects it to include an acquisition or disposal. Whether this includes any acquisition or disposal within a group, however small, is unclear. If it does, groups may be subject to a reassessment rather sooner than they might hope.

Again, some clarity from the PRA might be helpful.