The FCA’s 9 December 2025 Policy Statement (PS25/21) allows insurers who jointly manufacture an eligible insurance product to agree – for the first time – that a ‘lead firm’ is solely responsible for complying with FCA Handbook PROD 4.2 on behalf of the other co-manufacturers.
It’s important to stress that this makes no difference to existing subscription agreement arrangements dealing with delegation of underwriting and claims authority to lead insurers.
It does, however, take the idea of a ‘leading insurer’ into new territory.
PROD 4.2 requires firms to have robust systems for designing, monitoring, reviewing and distributing eligible insurance products, inter alia to ensure the products offer fair value, as well as to take corrective action where insurance products are detrimental to customers.
This means firms must maintain, operate and review a proportionate and appropriate approval process, recorded in a “product oversight and governance policy”, for each new insurance product or “significant adaptation” of an existing insurance product (i.e. changes to coverage, costs, exclusions, excesses, limits, conditions or any other significant change).
PROD 4.2 applies to insurance products other than:
In other words, it applies to standard-form insurance products for consumers and SMEs for non-specialist risks.
Under the previous rules, where more than one firm manufactured an eligible insurance contract, each “co-manufacturer” firm was equally responsible for PROD 4.2 compliance.
The rules say co-manufacturing firms must have a written agreement setting out (1) their collaboration to comply with the PROD 4.2 requirements, (2) procedures to identify the target markets, and (3) their respective roles in the product approval process.
This remains the default position.
The change from 9 December 2025 is that, for insurance products manufactured by more than one firm, under PROD 4.2.14-AR the co-manufacturers can select one insurer – the “lead” – to be responsible for complying with the PROD 4.2 rules.
Products manufactured by brokers, coverholders or managing general agents cannot be ‘led’ by a single insurer, however. Furthermore, the “lead manufacturer” cannot be a broker, coverholder or managing general agent.
The lead must be an insurer or Lloyd’s managing agent which:
Where there is a “lead manufacturer”, all co-manufacturing firms must agree unambiguously and in writing that:
If the lead manufacturer agreement does not set out these matters unambiguously then the default rules will apply, and each co-manufacturer retains its own responsibility to comply with PROD 4.2. Since parties entering a lead manufacturer agreement presumably intend it to be effective, it is important that the agreement is “unambiguous”, as PROD 4.2.14 requires.
Compliance with PROD 4.2 is onerous, so assigning one insurer as lead manufacturer may have its attractions. Co-manufacturers should, however, take care to draft unambiguous lead manufacturer agreements, and lead manufacturers may want to consider the terms on which they agree to lead – including any indemnities from fellow manufacturers.
For more guidance and/or drafting advice, please contact our expert team.
Andrew Schütte - Partner
Neema Daniel - Assistant Solicitor
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