Insurance outlook mid-year 2025: themes and priorities

Trends dominating the insurance landscape in 2025 include transformation to adapt to new regulatory requirements, and insurers positioning themselves for both the opportunities and risks presented by technological advancements and digitalisation such as AI and cloud computing. The year has already been marked by evolving risks and opportunities, particularly the accelerated adoption of AI, and this trend will continue.

The insurance industry stands on the brink of a technological revolution. The provision, analysis and protection of data are now industries in themselves. Insurtech is at the forefront of this change, creating unprecedented opportunities to leverage both internal and external data. The ability to harness insights effectively will be a key differentiator in a competitive market.

At the same time, insurers must navigate an unpredictable geopolitical climate, increasing fiscal uncertainty and the impact of climate volatility. There is continued pressure to deliver more with less, while still meeting customer, commercial and regulatory expectations. This creates a challenging environment, but also one with opportunity for those who adopt innovation early while managing risk.

How firms respond to the following themes and challenges will be central to staying ahead and being best positioned for the future.

Consumer Duty and vulnerable customers

A vulnerable customer is someone who, due to their personal circumstances, is especially susceptible to harm — particularly when a firm is not acting with appropriate levels of care. The Gibraltar Financial Services Commission (GFSC) published guidance on the Fair Treatment of Vulnerable Customers in September 2024, applicable to firms subject to the Core Principles within the CPCD Regulations. It also provided feedback in a thematic review on Consumer Duty Board Reporting in March 2025.

In the UK, the cost of premium finance is under particular scrutiny. At the end of 2024, the FCA began a market study into the use of credit for car and home insurance payments, examining whether this represents fair value. The review covers consumers using credit to pay via monthly instalments and whether they understood the cost difference compared with upfront payment. This is a concern because such customers are often financially vulnerable or less resilient.

Vulnerability, however, extends beyond financial difficulty. It includes health conditions, significant life events (often the subject of claims), low financial or emotional resilience and limited financial capability. Customers with communication difficulties, reduced physical or mental capacity, long-term health issues, or circumstances such as bereavement, caring responsibilities or redundancy are also considered vulnerable. These factors can impact customer outcomes throughout their relationship with an insurer.  They should be considered within a firms mapping of customer outcomes, not just assessed at price and value.

In 2025, Consumer Duty requirements should become further embedded within insurer operations, with greater emphasis on demonstrating improved outcomes and a clearer understanding of vulnerability.

Consumer Duty: what should insurers consider next?

• Documenting APR justification for premium finance.
• Demonstrating pricing transparency for premium options across the entire customer journey.
• Ensuring clear, accessible and tailored communication.
• Proactively identifying vulnerable customers and offering tailored support.
• Training staff to recognise and respond to vulnerable customers effectively.
• Collaborating with external agencies where additional support is needed. 

Operational resilience

Operational resilience has been a regulatory focus for several years and remains a key priority. A resilient firm should be able to prevent disruption where practicable, adapt to continue critical services in the event of incidents, return to normal quickly, and learn from both incidents and near misses. The GFSC published guidance on operational resilience in March 2025, covering important business services, impact tolerances, scenario testing, self-assessments and governance.

The Prudential Regulation Authority (PRA) has also prioritised resilience in 2025, with particular focus on smooth market entry and exit to support competitiveness. Firms are under increasing pressure to demonstrate robust recovery planning and resolution frameworks.

Operational resilience: what should insurers consider next?

• Conducting scenario testing to ensure impact tolerance levels are realistic.
• Completing self-assessments for board review and approval.
• Reviewing important business services and impact tolerances to ensure continued alignment with business profile.
• Updating vulnerabilities and tolerances as conditions evolve.

Solvent exit planning

The GFSC is consulting on draft guidance for solvent exit planning. The PRA published SS11/24 in January 2024, setting out requirements for insurers to prepare solvent exit planning as part of BAU. The expectation is that firms will meet the supervisory statement requirement by 30 June 2026, meaning 2025 is a critical year for preparation.

Activities should include establishing and monitoring solvent exit triggers, conducting financial modelling, and identification of, and planning for, the operational activities that will be required. Firms should produce a Solvent Exit Analysis (SEA) and update it every three years (or sooner if risk profile changes). When solvent exit becomes a reasonable prospect, a Solvent Exit Execution Plan (SEEP) should be prepared.

Solvent exit planning: what should insurers consider next?

• Establishing clear governance and accountability for solvent exit planning.
• Ensuring assurance processes are in place over SEA preparation.
• Identifying a single owner for the SEA, supported by a senior and diverse steering group.
• Leveraging existing frameworks, such as risk and operational resilience, to inform decisions on triggers.
• Embedding monitoring of solvent exit triggers into existing oversight structures. 

Solvency UK

The UK’s amendments to Solvency II — now known as Solvency UK — were finalised in November 2024, with most changes effective from 31 December 2024. The reforms aim to streamline the regime, increase flexibility, facilitate market entry, support increased competition and encourage investment.

Changes include updates to the risk margin and matching adjustment (primarily impacting life insurers), reporting requirements, third-country branch rules, internal model applications, and thresholds for applicability. There are also provisions for mobilisation regimes for new entrants and transitional group capital requirements.

The GFSC is consulting on draft guidance covering Own Funds, Reinsurance Counterparty Credit Risk, and Quality of Capital Instruments, important for alignment within the forthcoming Gibraltar Authorisation Regime (GAR).

The changes are intended to reduce the burden for insurers, particularly smaller insurers and third-country branches.

Solvency UK: what should insurers consider next?

• Identifying implementation challenges early and planning accordingly.
• Embedding reforms already in effect.
• Exploring opportunities from changes to the matching adjustment.

Governance, internal controls and director obligations

There is growing emphasis on governance and internal control environments, reinforced by the UK FRC’s updated Corporate Governance Code and wider regulatory developments. Firms are increasingly investing in combined assurance frameworks to give directors confidence in fulfilling their obligations.

Many insurers are exploring governance, risk and compliance (GRC) solutions to create a consolidated view of risks and controls, while also enhancing their approach to risk prediction and risk management, including emerging and forward-looking risk processes.

Governance: what should insurers consider next?

• Reviewing assurance frameworks to ensure they are adequate for directors to confidently execute their obligations

Mergers and acquisitions (M&A)

After a quieter period, M&A activity is increasing, with consolidation among major players. This trend is driven by the desire to release capital and focus on core business, stable interest rates and the need for growth opportunities. For insurers, implications go beyond finance — customer trust, talent retention and the impact on legacy systems and operational efficiency are equally critical.

M&A: what should insurers consider next?

• Managing merger, demerger or policy consolidation risk carefully.
• Ensuring policyholders experience no disruption.
• Approaching legacy system consolidation and digital transformation in phased, controlled steps. 

Financial crime

Although Gibraltar was removed from the FATF ‘grey list’, financial crime risk remains a key regulatory priority. For general insurers, brokers and managing agents, complex value chains and differing due diligence standards can create data challenges, making it more difficult to have an accurate view of sanctions risk exposure.

For life insurers, the cost and effectiveness of financial crime compliance continues to be a concern. Adoption of Artificial intelligence (AI) for transaction monitoring and dynamic risk assessment has been slower than in the banking sector, despite potential long-term benefits.

In the UK, the Economic Crime and Corporate Transparency Act 2023 brings new obligations in 2025, including the Failure to Prevent Fraud offence from 1 September 2025 and new identification and verification (ID&V) requirements at Companies House.

Financial crime: what should insurers consider next?

• Ensuring due diligence and monitoring activities are robust and timely.
• General insurers to consider whether there is adequate information on ultimate beneficial ownership included as part of sanctions screening.
• Conducting fraud risk assessments aligned with the new Failure to Prevent Fraud offence.
• Preparing for responsible adoption of AI and machine learning (ML) in financial crime controls.

Digital transformation and data

Digital transformation in insurance depends on reliable, high-quality data to lay the foundations for innovation. Many firms will need to modernise legacy systems and invest in stronger data management, capabilities, including data analytics, to support digital transormation.

Data analytics is essential for meeting customer expectations of a frictionless digital journey while achieving operational efficiencies and meeting regulatory demands. One of the key challenges will be finding the most cost-efficient ways to gather trustworthy data. At the same time, ensuring data quality and suitability is critical to making good decisions.

We expect technologies such as regtech and blockchain to be increasingly used in transformations. Blockchain in particular has gained traction for its stability, security, and use cases such as smart contracts and automation.

Digital transformation: what should insurers consider next?

• Developing a clear strategy for digital transformation.
• Defining data quality and sustainability benchmarks.
• Embedding regtech into compliance processes.

Artificial intelligence

AI and ML are now integral to many insurance processes such as customer engagement, fraud detection, claims handling and document verification. The emergence of customer journey analytics is also giving firms deeper insights into outcomes and behaviours.

Governments are moving to regulate AI, with the EU AI Act representing the first comprehensive legal framework. Insurers must therefore balance innovation with compliance and ethical considerations.

Artificial intelligence: what should insurers consider next?

• Implementing robust risk management processes around AI adoption.
• Addressing privacy, bias and cyber risks.
• Ensuring AI usage supports Consumer Duty and good outcomes, with a particular focus on vulnerable customers.

Finance and operational transformation

Transformation across finance and operations continues at pace, driven by evolving regulation, M&A activity and a focus on cost optimisation. Firms are turning to automation and AI to enhance efficiency, particularly for routine tasks such as reconciliations, data entry, fraud detections and real-time reporting.

Chatbots, AI assistants and machine learning are becoming more widespread in customer service and analytics. APIs are increasingly critical to connecting core systems with third-party applications, supporting agility and flexibility in operations.

Finance and operational transformation: what should insurers consider next?

• Aligning business and technology strategy.
• Prioritising change programmes that deliver measurable value.
• Designing transformation with data capture and analysis in mind.
• Ensuring operational models can flex with market demands.

Next steps

The insurance sector in 2025 is navigating a complex mix of regulatory change, technological disruption and market uncertainty. While the pressures are significant, so too are the opportunities — particularly for firms that adapt early, invest in data and embrace innovation responsibly.

Key priorities such as Consumer Duty, Operational Resilience, Solvency UK, AI and financial crime prevention all point to the same underlying requirement: stronger governance, forward-looking risk management and strategic clarity.

Firms that approach these challenges not just as compliance exercises, but as opportunities to sharpen competitiveness and resilience, will be best positioned for the future.