The Financial Conduct Authority (FCA) is seeking to simplify product governance rules in commercial and bespoke insurance through proposals outlined in its CP25/12 consultation, but its decision to restrict lead manufacturer roles to insurers and Lloyd’s managing agents is sparking debate among intermediaries.
The consultation follows concerns that current co-manufacturing rules under PROD 4.2 create duplication and cost inefficiencies, particularly in delegated authority arrangements. Both insurers and intermediaries, including managing general agents (MGAs) and brokers, are presently required to comply with the same obligations, even when responsibilities overlap.
The FCA has proposed allowing firms to appoint a single “lead” manufacturer responsible for compliance. However, it has ruled that only insurers or Lloyd’s managing agents can hold this position, citing their direct role in underwriting and claims handling.
“Most respondents were in favour of allowing intermediaries to be the lead, as broker-owned products are common in the Lloyd’s and London market. However, they agreed
that an insurer should be the lead in default,” the regulator acknowledged. “As such, we propose that only an insurer or a Lloyd’s managing agent may be the lead.”
This restriction has raised concerns that distributors with deep product expertise could be marginalised. Oliver Evans, head of growth UK at Root Platform, said the regulator was right to recognise inefficiencies but warned against overly limiting the models available.
“The FCA’s CP25/12 rightly highlights inefficiencies caused by duplicated compliance in delegated authority arrangements. Currently, MGAs and brokers acting under delegated authority must meet the same obligations as insurers, leading to duplication and inconsistency,” he said.
“The regulator is exploring more pragmatic models, including designating a ‘lead’ firm. But since the FCA indicates that only insurers or Lloyd’s managing agents can take that role, distributors risk being boxed into insurer-led models, even when they may have the best knowledge of the product.”
Evans pointed to technology as a potential solution. “This is where APIs can make a difference. By enabling data sharing, auditability and governance in real time, API-driven frameworks give distributors the technological means to support joint compliance, streamline oversight, and align with the FCA’s intent to reduce friction while fostering innovation.”
The FCA estimates that the proposals could generate long-term cost savings, particularly for commercial insurers, but acknowledges that most intermediary co-manufacturers may see limited benefit as they are unlikely to give up their involvement in product design.
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