Skip to main content

Vertical integration in insurance: the FCA puts ownership structures on notice

The FCA's new insurance director has written to firms whose vertically integrated business models create heightened conflicts of interest, warning that disclosure alone is insufficient. For boards of insurers, brokers and their private equity backers, the letter marks a shift from theoretical concern to active supervisory pressure on ownership design itself.

Chris Knight used his first published intervention as the FCA's insurance director to put vertically integrated business models on notice, warning that firms spanning underwriting, distribution, premium finance and related services can shape consumer journeys in ways that do not serve customers (FCA). The regulator has written directly to firms it believes are creating heightened risks, and told the wider market that the issue is not isolated to a handful of instances (FCA).

The timing is not accidental. Knight's blog landed the same week the FCA published its decision to ban Alec Finch and Robert Finch, the father and son behind AFL Insurance Brokers, following a High Court finding that they misused client money to fund business expenses and falsified records to inflate the firm's sale value (FCA). The FCA said it would have imposed penalties of £121,200 and £169,800 respectively had the pair not evidenced serious financial hardship (FCA). Read together, the two announcements frame a coherent message: where ownership, remuneration or intra-group arrangements distort customer outcomes, the FCA will act at both firm and individual level.

Disclosure is no longer a defence

The most consequential line in Knight's blog is the flat statement that "disclosure alone is not enough" and that telling customers about a conflict does not remove the obligation to manage it (FCA). That closes off a defence many groups have relied on, particularly those where a single parent owns MGAs, brokers and premium finance providers. Knight expects firms to evidence the value added at each link in the chain, and to factor FCA expectations into any new ownership, investment or financing structure from the outset (FCA). For private equity sponsors mid-way through buy-and-build strategies in UK insurance distribution, that is a material change in the diligence burden.

Complexity itself is now a supervisory red flag

Knight goes further, telling firms that where business models are "overly complex or difficult to supervise", they should think seriously about simplifying them (FCA). This is a supervisory posture, not just a conduct rule. It gives the FCA licence to challenge group structures on the grounds of opacity, and to issue ad hoc data requests to firms whose arrangements it cannot easily interrogate (FCA). Boards should expect questions about product design, panel construction, remuneration structures and the commercial substance of intra-group service agreements. The AFL case demonstrates what the FCA does when it concludes those arrangements have been used to conceal rather than illuminate (FCA).

What senior leaders should do now

Three actions follow. First, group boards should commission an evidenced review of value added at each link in the chain, not a conflicts register refresh. Second, remuneration committees should test whether incentive structures inside vertically integrated groups can be defended on customer outcome grounds, given Knight's specific reference to how remuneration is structured (FCA). Third, sponsors contemplating further roll-ups should stress-test target structures against the FCA's simplification expectation before signing, not after completion.

The regulator has moved the conversation from conduct at the point of sale to the architecture of ownership itself. Firms that cannot evidence why their structure benefits the customer should assume they will be asked to.

What this reveals

The FCA's intervention exposes a widespread assumption in vertically integrated financial services groups: that transparent disclosure of conflicts, combined with formal governance artefacts, constitutes adequate management of those conflicts. That assumption has now failed publicly, and the supervisory posture has shifted from testing conduct outputs to challenging ownership design itself. Other leadership teams may wrongly believe that because their conflicts framework was signed off by legal and compliance, and because disclosures are in place, their structure is defensible; the regulator is now saying complexity itself is a red flag, regardless of how well it is papered. This matters beyond insurance because the same logic applies wherever intra-group economics, PE-backed roll-ups or affiliate arrangements shape customer journeys.

Questions accountable leaders should ask

  • 01Can we evidence the specific customer value added at each link in our group's value chain, or do we rely on the fact that each entity is separately authorised and disclosed?
  • 02If a supervisor asked us to justify our current ownership structure on customer outcome grounds rather than commercial ones, what would our answer actually look like?
  • 03Where in our group are intra-group referrals, premium finance arrangements or remuneration flows shaping customer journeys in ways the board has not recently interrogated?
  • 04Would an external reviewer describe our group structure as easy to supervise, and if not, what have we done to reduce that opacity rather than manage around it?
  • 05For PE sponsors and boards mid-way through a buy-and-build: are FCA expectations on conflicts and structure being factored into deal design now, or bolted on at integration?

What accountable leaders should do now

  1. 1Commission a structural conflicts review that starts from the customer journey and works backwards to ownership, remuneration and intra-group flows, rather than starting from the existing disclosures.
  2. 2Require each business unit to produce a written articulation of the value it adds at its link in the chain, tested against what an independent equivalent would charge or deliver, and escalate gaps to the board.
  3. 3Pressure-test the group structure against a 'difficult to supervise' lens: identify the two or three arrangements most likely to attract an ad hoc data request and decide whether to simplify, defend or exit.
  4. 4For PE-backed platforms, revisit the investment thesis and integration plan with the new FCA posture in mind, and adjust diligence checklists for any pipeline transactions before signing.
  5. 5Update the board's conflicts MI so that it reports on managed outcomes and structural simplification, not just disclosure completeness and policy attestations.

Explore the practical guide

This guide sets out how senior leaders at FCA regulated firms should identify, assess and manage stakeholder risk in a way that stands up to supervisory scrutiny. After reading, you will know how to structure a stakeholder risk framework that connects to Consumer Duty, SM&CR accountability and board-level reporting.

Read the guide

Where internal confidence may exceed external evidence

Polar Insight helps leadership teams test critical assumptions against stakeholder, market, regulatory, and operational reality before risk compounds.

Explore Stakeholder Proximity

Stakeholder Signals

Consequential developments in financial services and other regulated markets, with one implication for accountable leaders.