PRA statement on the dynamic general insurance stress test in 2025

The Prudential Regulation Authority (PRA) has published a statement to announce that in 2025, it plans to conduct a dynamic general insurance stress test with the following objectives:
1. Evaluate how well the insurance industry can handle a „specific adverse scenario“ in terms of solvency and liquidity.
2. Assess the effectiveness of insurers‘ risk management and their actions in response to such adverse events.
3. Provide information to the PRA’s as to further supervisory actions that may be needed.
This exercise will differ significantly from previous ones as it will simulate a sequence of „adverse events over a short period of time“. The PRA will collaborate with the insurance industry and trade bodies over the next six months to outline the exercise’s details, such as participation, design, and timelines, which will be available in the first half of 2024. The results will be disclosed at an „aggregate industry level“.