Context
The PRA has published a statement which provides an early indication to the insurance industry of the PRA’s intent to run a dynamic general insurance stress test in 2025.
Key points to note
The objectives of the exercise will be to:
- assess the industry’s solvency and liquidity resilience to a specific adverse scenario;
- assess the effectiveness of insurers’ risk management and management actions following an adverse scenario; and
- inform the Prudential Regulator Authority’s (PRA) supervisory response following a market-wide adverse scenario.
The dynamic nature of the 2025 exercise represents a significant change from previous exercises and will involve simulating a sequential set of adverse events over a short period of time. The PRA intends to engage with the industry including trade bodies over the next six months, with a view to providing more details of this exercise (including participation, design, and timelines) during the first half of 2024. The results of this exercise will be disclosed at an aggregate industry level.
Next actions
None – for information and awareness.