The Financial Conduct Authority (FCA) has proposed removing business with non-UK customers from the scope of the Consumer Duty, part of a package of changes set out in Consultation Paper 26/23, published on June 29, 2026, and open for responses until September 18.
Under the proposal, the Duty would apply only to retail market business where the customer is ordinarily resident in the UK, based on their residential address or place of establishment, subject to a small number of targeted exceptions.
The consultation responds to a government commitment made following the 2025 Mansion House speech and reinforced through the Leeds Reforms, under which ministers asked the FCA to examine how the Duty applies to wholesale firms after concerns that its requirements had become disproportionately burdensome for that part of the market and were affecting competitiveness.
Alongside the scope change, the FCA is proposing clearer rules on which activities fall within the Duty at all, new worked examples to help firms determine their obligations, clarification on when and how firms can rely on each other within distribution chains, and guidance on how the Duty interacts with other product governance rules.
The International Underwriting Association has welcomed the proposed restriction of the Duty's international scope, but has questioned how much its own members will actually benefit from the wider reform package.
Chris Jones, the IUA's chief executive, said the consultation proposals are overall a positive step forward, with the move to restrict the Duty's international scope particularly welcome.
"If it is supported by a proportionate, and practical approach to implementation, it will boost UK insurers' competitiveness in our most important markets," he said.
The IUA has argued for several years that FCA rules should not apply to non-UK business, and views the scope restriction as putting London insurers on a level footing with competitors based outside the UK.
In practice, IUA members would be able to apply local regulation in the markets where their products are distributed, rather than having to satisfy both detailed FCA rules and local requirements simultaneously.
The consultation also sets out proportionality clarifications for the Consumer Duty more broadly, but the IUA says it isn't clear how much these will actually help its members, since there has been no equivalent change to insurance-specific product governance rules.
Jones said the trade body would like to see further rationalisation of those insurance-specific product governance rules specifically, arguing this would reduce duplicated effort across different parties in the distribution chain by allocating accountability according to the activities each firm actually performs under the Duty.
The IUA's central concern is about reliance within the distribution chain. The main benefit to insurers, the association argues, would have been the ability to rely on the work of others further down that chain, particularly managing general agents and brokers, who are often best placed to carry out fair value assessments given their direct proximity to the end customer.
Without a parallel change to product governance rules, insurers may still need to duplicate assessment work MGAs and brokers have already completed, even as the international scope of the Duty itself narrows.
The IUA has also pushed back on a distinct element of the FCA's proposals: a plan to remove remuneration disclosure obligations. Jones said requiring all parties to disclose the payment they receive is the best way of ensuring transparency to the end customer, warning that reducing that transparency could disadvantage customers and encourage undisclosed commission or fee arrangements.
The IUA's response captures a genuine tension in how this consultation is likely to land across the market: a scope restriction insurers have wanted for years, paired with a proportionality reform whose practical value depends entirely on a second set of rules, product governance, that the FCA hasn't yet touched.
For London-market insurers specifically, the international scope change is close to an unambiguous win, removing a genuine competitive disadvantage against overseas rivals not subject to the Duty at all.
The product governance question is the harder, unresolved half of the story, and the IUA's position, welcoming what's changed while explicitly flagging what hasn't, sets up product governance rationalisation as the next front in this debate rather than one this consultation has settled.
