Your guide to this week in regulation

This week’s developments highlight how regulation is adjusting to structural shifts across financial services. The protection gap remains a longstanding concern, with many households still exposed to financial shocks despite stable pricing and strong claims outcomes for those who hold cover.  

Premium finance presents a different picture. Costs have fallen for consumers following regulatory intervention, yet one of the main product manufacturers has now exited the market. The implications are not yet clear, but this raises important questions about competition, access and how firms will continue to meet customer needs under the Consumer Duty while keeping products sustainable. 

Financial crime risks also continue to evolve. The UK has strengthened its cryptosanctions enforcement through a multiagency intelligence approach, underscoring the need for coordinated action as criminals use new technologies to conceal illicit activity. 

We also outline progress towards the National Payments Vision, including improvements in APP fraud reimbursement. Finally, the reopening of the Financial Conduct Authority's (FCA) AI live testing applications signals a shift from experimentation to practical deployment as firms look to embed AI safely and responsibly across the sector testing applications signals a shift from experimentation to practical deployment as firms look to embed AI safely and responsibly across the sector. 

Protection gap review widens focus 

The FCA has issued a press release urging insurers to do more to help people access pure protection products after interim findings showed that 58 percent of adults hold no life, critical illness or income protection cover. The regulator found that the market works well for those who buy cover, with stable pricing, strong product choice and high claims success rates. However, most adults who could benefit remain unprotected. 

The FCA attributes this gap to low consumer awareness regarding their needs, limited triggers to consider protection, affordability pressures and misunderstandings about how these products work. It also identified scope for improvement in the sales process. The regulator plans to work with firms and wider stakeholders to understand how to better support consumers and improve product switching to ensure this is done to achieve a clear benefit for the customer. 

The FCA will update its analysis using full 2025 data ahead of its final report, due in Q3 2026. The FCA invites feedback on the interim findings by 31 March 2026, so firms and advisers may wish to review the report and consider submitting views. 

Read more on the FCA seeking views on how to help close the protection gap 

Read more on pure protection interim report 

Premium finance costs fall under Consumer Duty 

The FCA has reported that premium finance has become better value since the Consumer Duty took effect. With average APRs falling by about 4 percentage points since 2022, customers are saving an estimated £157m a year across motor and home insurance. Typical savings are about £8 a year on motor policies and £3 on home policies. Firms the FCA viewed as higher risk cut APRs by an average of 7 percentage points, saving about £14 on motor policies and £4 on home policies. Nearly half of all motor and home insurance policies in 2023 were paid monthly because customers could not afford annual premiums. 

The FCA notes that both interest‑bearing and 0 percent instalment models can offer fair value. It rejects a price cap or a requirement for interest‑free instalments because these could restrict access to essential insurance. The regulator has already challenged firms that could not show how they assessed value and has required changes to pricing, processes and oversight. It remains concerned about high prices in parts of the market and will continue to monitor APRs and review outliers. 

Senior leaders must ensure their fair value assessments are clear, well evidenced and kept up to date. 

Read more on the falling cost of premium finance  

Read the Premium Finance Market Study

Scrutiny on crypto risks

The Office of Financial Sanctions Implementation (OFSI) is collaborating closely with UK law enforcement and regulatory bodies to address the misuse of cryptoassets as sanctions evaders are increasing using cryptoassets to move and conceal illicit funds including those linked to sanction violations. In response, UK agencies are actively tracing these transactions to identify, investigate and disrupt criminal related activities.  

As part of this effort, OFSI has partnered with the Crypto Cash Fusion Cell (CCFC), a pilot, multi-agency initiative involving the National Crime Agency, the Metropolitan Police, HMRC, the FCA, the City of London Policy, and the OFSI. The initiative aims to strengthen the UK’s ability to detect, understand and respond to criminal exploitation of cryptoassets.  

The overarching message is that using cryptoassets to evade sanctions is to be treated no differently than abusing traditional currencies and the OFSI is ready to investigate and peruse sanction offences involving cryptoassets by working alongside government, law enforcement and industry partners.  

Read more on the OFSI and partners clamp down on the abuse of cryptoassets 

National Payments Vision moves forward 

The FCA and the Payment Systems Regulator (PSR) set out how they will deliver the National Payments Vision, aiming to build a payments system that is secure, reliable and fit for future growth. David Geale used the Payments Regulation and Innovation Summit to stress that payments underpin daily life, with around 1,500 made every second in the UK. He highlighted the need for a system that works for all users, from cash reliant communities to firms adopting open banking, stablecoins and new digital technologies.
 
The FCA explained that its joint work with the Prudential Regulation Authority (PRA) has already driven progress on the APP fraud reimbursement regime, which has returned £112m to victims and reduced claim volumes. It also confirmed that the Payments Forward Plan will be published within months and will outline milestones for retail and wholesale payments and digital assets. 

Read more on the role of the FCA and PSR in delivering the National Payments Vision 

AI testing window reopens 

The FCA has reopened applications for the second cohort of its AI Live Testing programme, giving firms a structured space to test mature AI systems in live but controlled market settings with regulatory support. The initiative aims to help firms move past  pilots and prepare for safe deployment in UK financial markets. 

The FCA stresses that it is not testing foundation models. Instead, it reviews AI systems in context, looking at how the model is deployed, the risks in that environment, governance, human oversight, and input and output controls. The programme runs through discovery, framework validation and system testing, using both quantitative and qualitative evidence to build a rounded assessment. 
For firms, the key benefits are hands on technical and regulatory guidance plus a way to surface challenges in interpreting existing rules. For the FCA, the work strengthens its understanding of safe and responsible AI and highlights real world risks. 

Applications for the second cohort close on 2 March 2026. Firms interested in participating should review the terms of reference and submit an application. 

Read more on AI Live Testing