The Lloyd's Market Association (LMA) has published guidance for managing agents on the Financial Conduct Authority's (FCA) policy statement PS25/21: Simplifying the insurance rules.
The guidance sets out how Lloyd's firms can make use of a more proportionate framework for commercial and wholesale insurance while maintaining good customer outcomes.
PS25/21 confirmed changes to simplify parts of the insurance and funeral plan rules in the FCA Handbook, including ICOBS and PROD, and to clarify where retail-style requirements should and should not apply to commercial business. The rules are framed as flexibilities that firms may adopt where appropriate, rather than a relaxation of core conduct standards.
The LMA guidance, aimed specifically at Lloyd's managing agents, explains how PS25/21 can reduce regulatory friction in areas such as product governance, oversight and review processes, particularly for non-retail and complex commercial lines written in the Lloyd's market.
The guidance highlights proportionality based on customer type and size, including a new SME watershed aligned with Financial Ombudsman Service (FOS) eligibility criteria.
Under the FOS framework, a business can generally access the Ombudsman if it has turnover below £6.5 million and fewer than 50 employees, or a balance sheet total below £5 million. By adoptiing the same threshold, the FCA aims to draw a clearer line between smaller commercial customers, who may need protections similar to retail consumers, and larger or more sophisticated insured that can be treated on a more wholesale footing.
The document also underlines the wider use of the bespoke exemption. PS25/21 clarified that contracts may still be treated as bespoke even if they are adapted from an existing product or wording, or later reused for a different client with similar needs, provided they remain individually negotiated.
For Lloyd's, this is particularly relevant to specialist open-market placements, large corporates and complex programmes, including where smaller businesses or individuals are insured under tailored arrangements.
A further focus is accountability in subscription and delegated authority business. The FCA now allows a lead firm to assume responsibility for product design and approval in multi-firm structures. This may streamline governance across syndicates and binder chains, but also raises the bar on the quality and documentation of lead markets’ product and fair value processes.
The guidance also sets out how firms can move to a more risk‑based approach to product review frequency. With the default expectation of annual reviews removed, managing agents are encouraged to tailor review cycles to the nature, scale and complexity of products and the conduct risks they pose, rather than revisiting stable, low‑risk products on a fixed calendar basis.
John Levett (pictured), head of regulatory affairs at the LMA, said PS25/21 is a "first step towards a more proportionate regulatory regime" for the London market, adding that the guidance has been shared with the FCA for comment before publication.
“There are still changes needed to better support our market and deliver on the international competitiveness and growth objective. Trading in 200 territories, all with their own rules and regulators, is highly complex and can lead to differences between UK and local rules," he said.
Alongside PS25/21, the FCA has signalled further simplification work, including proposals on how Consumer Duty and other conduct rules should apply to non‑UK risks and international business written in London. Any future clarity on the interaction between UK and local regimes will be central to how they design governance and oversight for global portfolios.
The LMA guidance also includes practical commentary, worked examples and decision trees to help firms assess how the revised rules apply to bespoke business, specialist risks and group policies. It is intended to support day‑to‑day decisions on when the bespoke exclusion can be used, how to classify mixed customer groups around the SME watershed, and how to document reliance on lead underwriters or coverholders for product governance tasks.
"We will therefore continue to lobby the FCA on developing a regulatory framework appropriate for international business being written in the Lloyd’s market," Levett said.
