COBS 20 — With-profits

Category: Compliance & AML · Reviewed by Matt Bartlett, Director · Founder · Last reviewed June 2026

The FCA rules governing with-profits long-term insurance business, including the operation of with-profits funds, the Principles and Practices of Financial Management (PPFM), the With-Profits Committee, and the management of conflicts between members and shareholders.

Definition

COBS 20 sets the FCA rules for with-profits insurance. With-profits funds pool policyholder premiums and discretionary bonuses, generating returns that are smoothed over time and partially at the discretion of the fund manager. The rules govern how the firm must manage the with-profits business in the interests of the policyholders.

Legal / Regulatory basis

FCA Handbook, COBS 20. Made under FSMA sections 137A and 138. The PPFM concept implements FCA disclosure expectations; the governance framework reflects the FCA’s discretionary-management oversight role.

How it works in practice

The firm must maintain and publish a Principles and Practices of Financial Management (PPFM) document setting out how it operates the with-profits fund. The firm must appoint a With-Profits Committee or designated independent oversight to ensure policyholders’ interests are properly considered. Bonus and surrender value decisions must be made in a manner consistent with the PPFM. Conflicts between policyholder and shareholder interests must be carefully managed.

Common variations

COBS 20 does not apply to general insurance. It applies to insurers writing with-profits business, not to intermediaries placing such business. A holistic supervision approach combines COBS 20 with the PRA’s Solvency II prudential framework.

Example

A historic with-profits endowment policyholder receives an annual statement explaining bonus rates and projected maturity values, with disclosure aligned to COBS 20 and the PPFM. An insurance broker is not within COBS 20.

See also

• COBS — Conduct of Business Sourcebook
• ICOBS — Insurance: Conduct of Business Sourcebook
• PRIN 2A — The Consumer Duty

References

FCA Handbook, COBS 20. Financial Services and Markets Act 2000, sections 137A and 138. Solvency II Directive (Directive 2009/138/EC) as retained in UK law.

Last reviewed

By Matt Bartlett, Director, on 2026-06-11.

This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-11. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.