This article is by Ramesh Indran, Managing Partner, 4most.
2025 was not a year of dramatic transformation for the life insurance sector, but rather one of steady, incremental change. Regulatory developments and evolving market dynamics have set the stage for 2026 and beyond.
The Autumn Budget has so far had only a modest impact on life insurers, but market pressures – particularly within Bulk Purchase Annuities (BPA) – and regulatory changes are beginning to define the outlook for the coming year. Another area to watch closely is artificial intelligence (AI).
Bulk Purchase Annuities: A Chase for Credit
The BPA market remained highly competitive in 2025, marked by the entry – and, to an extent, the exit – of Brookfield’s Blumont Annuity. Brookfield, an alternative asset manager, gained a UK insurance licence, the first since Rothesay in 2007, and subsequently acquired Just Retirement. While this may seem counterintuitive, for an originator of private credit, vertical integration offers a clear advantage – if you have the money to do it.
Others have followed suit: Apollo-Athora’s acquisition of Pensions Insurance Corporation (PIC), the Blackstone-L&G strategic partnership, and, most recently (22/12), JAB’s purchase of Utmost’s UK Life and Pensions (including BPA) business. In a market where high-quality credit is king, further consolidation or acquisition-driven entries are likely in 2026 as firms seek scale and competitive edge.
However, this growth brings increased regulatory scrutiny. With more pension liabilities moving onto insurer balance sheets and greater exposure to long-dated, complex credit assets, it is only natural for regulators to take a closer look.
Increasing Supervisory Expectations
Regulators intensified their focus in 2025, particularly on asset quality, stress testing, and credit risk frameworks – especially where portfolios rely on illiquid, structured assets and offshore reinsurance structures. The growing use of offshore structures, such as those in Bermuda, has drawn further supervisory attention. In response, insurers active in the BPA market are investing in more transparent and defensible credit risk processes to support sustainable growth and maintain regulatory confidence.
Ongoing Solvency II updates have required further refinement of systems, processes, and reporting capabilities, increasing the operational burden on finance and actuarial teams. Tighter liquidity reporting standards have also raised expectations around data accuracy, timeliness, and stress preparedness. The introduction of Provision 29 marked a significant shift, placing clearer accountability on senior finance leaders for the effectiveness of control environments.
Looking ahead, regulatory demands are expected to rise further in 2026. Continued refinements to Solvency II, new liquidity rules, and sustained supervisory attention on BPA-linked credit portfolios
will require ongoing operational focus. Expectations around data and model governance are also increasing, reinforcing the need for strong systems, clear ownership, and effective oversight across finance and risk functions.
AI Exploration and a Foundations-First Year
AI continued to dominate industry discussion in 2025, but large-scale transformation remained limited. Most insurers have taken a cautious approach, focusing on strengthening the foundations required for controlled AI adoption. There were promising examples of AI in front-office customer services, such as chatbots and automated underwriting, alongside growing use cases in back-office finance and risk, including AI-built financial models and results review. However, it still feels like we are only scratching the surface.
With or without AI, life insurers are investing significant effort into improving data quality, refining modelling methodologies, and strengthening operational efficiency. The reward is greater financial robustness, improved risk management, and ultimately, a stronger bottom line. 2026 is likely to see more of the same: investment in fundamentals and careful experimentation with AI. Few insurers are likely to rely on AI for bottom-line improvement without first strengthening their foundations.
Final Thoughts
As life insurers move into 2026, the year will be defined by resilience and precision. Those who prioritise operational strength – through robust credit risk frameworks, enhanced data governance, and disciplined liquidity management – will be best positioned to navigate regulatory tightening and competitive pressures. The BPA market will continue to evolve, with consolidation and private credit strategies shaping the winners. AI will likely remain an enabler rather than a disruptor, rewarding those who invest in foundational capabilities before scaling innovation. In short, success will come not from chasing headlines, but from executing with clarity and foresight, as life insurers have done in 2025.
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