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15 April 2019

Bank of England: Insurance stress test 2019: Request for technical input

The PRA will be conducting an insurance stress test for the largest UK regulated life and general insurers from July to September 2019.

General insurers will be most familiar with this exercise, as it represents an evolution of the stress testing exercises conducted in 2015 and 20171. For life insurers, this exercise captures potential risks that were not fully covered under last year’s EIOPA stress test. Alongside these market-wide stress tests, PRA will also be requesting a climate scenario designed to provide additional market impetus in this area, and to inform the Bank’s development of a consistent and effective approach to climate focused scenario analysis.

The purpose of this letter is to seek industry feedback on any aspects of this exercise ahead of PRA’s formal announcement to request participation on Monday 1 July 2019. Participating firms will then be requested to complete this exercise by Monday 30 September 2019.

For general insurers, PRA will be running a number of scenarios jointly with the Bermuda Monetary Authority (the BMA), reflecting commitment to transparency, supervisory cooperation and information sharing by both Authorities, in line with the Insurance Core Principles (ICP) of the International Association of Insurance Supervisors (IAIS). 

Many London Market insurers are exposed to risks similar to those based in Bermuda. Furthermore, UK-based insurers cede a significant proportion of risks to Bermuda-based reinsurers. This joint exercise will allow PRA to understand the interdependencies between London Market and Bermuda-based reinsurers in more depth. 

PRA welcomes feedback on any aspects of the stress test (eg detailed instructions, the excel template), and specifically on:

  • Clarity of the instructions and feasibility of the timetable; and specifically whether there are any areas that require further explanation / clarification?
  • Availability of information: are there any concerns on the availability of the information to complete the outputs required in the template?
  • For Scenario 1 (‘Downturn in the economic environment’): what are the pros and cons of the two options outlined for the credit downgrade event?
  • For general insurers only: do you have any specific comments relating to the joint exercise with the BMA?

The PRA is seeking feedback on any aspects of this exercise from firms and other industry participants by Friday 31 May 2019.

Full letter

Full information

© Bank of England

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