PRA Proposes Clearer Rules for Friendly Society Mergers and Transfers

LONDON — The Prudential Regulation Authority has opened a consultation on clearer guidance for friendly societies considering amalgamations or transfers of business.

Friendly societies are member-owned mutual organisations that may provide insurance, savings and other financial services. Their mergers and transfers are governed by Part VIII of the Friendly Societies Act 1992, which includes protections for members and policyholders.

The PRA said feedback from firms and advisers indicated that organisations can find the existing requirements difficult to interpret and may require considerable external legal and actuarial support.

The proposed changes would explain the typical sequence of steps involved in a Part VIII transaction while allowing firms flexibility where a different approach is appropriate.

The guidance would also provide greater transparency about how the PRA exercises its statutory judgement. This includes the circumstances in which it may waive the requirement for members of the receiving organisation to vote and when it may require an independent actuary's report.

The proposals would clarify how the process applies when the organisation receiving transferred business is not itself a friendly society.

The PRA says effective mergers and transfers can support the long-term sustainability of the mutual sector by allowing organisations to increase scale, combine resources or respond to financial and operational pressures. Reducing unnecessary friction could therefore support competition and growth.

However, efficiency must be balanced against member protection. Friendly societies are owned by their members rather than external shareholders, which means changes to ownership, governance or business arrangements can directly affect the people who rely on them.

The consultation would not alter the underlying legislation. Instead, it would formalise and explain the regulator's existing supervisory approach.

Responses are invited until 22 October 2026. The PRA also intends to hold a roundtable with insurers, lawyers, actuaries and trade bodies. A final policy statement is expected before April 2027, subject to the consultation responses.

The outcome will be important for smaller mutual organisations seeking greater certainty while navigating complex transactions.