PRA Seeks Input and Issues Specifications for Insurance Stress Tests
PRA announced that it will conduct an insurance stress test for the largest regulated life and general insurers from July to September 2019. PRA has also published scenario specifications, guidelines, instructions, and templates for both life insurance and general insurance stress tests. Feedback is being sought on all aspects of this exercise from firms and other industry participants by May 31, 2019. Following consideration of the technical input, PRA intends to issue a formal announcement to request firms’ participation on July 01, 2019 to complete this exercise by September 30, 2019.
General insurers will be most familiar with this exercise, as it represents an evolution of the stress testing exercises conducted in 2015 and 2017. For general insurers, PRA will be running a number of scenarios jointly with the Bermuda Monetary Authority (BMA), reflecting commitment to transparency, supervisory cooperation, and information-sharing by both Authorities, in line with the Insurance Core Principles (ICP) of IAIS. This joint exercise will allow PRA to understand, in more depth, the interdependencies between London Market and Bermuda-based reinsurers. For life insurers, this exercise captures potential risks that were not fully covered under last year’s EIOPA stress test.
Along with 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 development of a consistent and effective approach to climate-focused scenario analysis. PRA is specifically requesting feedback and technical inputs on the following aspects:
- Clarity of the instructions and feasibility of the timetable—specifically whether there are any areas that require further explanation or clarification
- 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, any specific comments relating to the joint exercise with BMA
Related Links
- Notification
- Request for Technical Input (PDF)
- Life Insurance: Scenarios, Guidelines, and Instructions (PDF)
- Life Insurance Stress Test 2019: Template (XLSX)
- General Insurance: Scenarios, Guidelines, and Instructions (PDF)
- General Insurance: Template (XLSX)
Comment Due Date: May 31, 2019
Keywords: Europe, UK, Insurance, General Insurers, Life Insurers, Stress Testing, Climate Risks, Scenarios, Instructions, Guidelines, PRA
Featured Experts

Emil Lopez
Credit risk modeling advisor; IFRS 9 researcher; data quality and risk reporting manager

James Partridge
Credit analytics expert helping clients understand, develop, and implement credit models for origination, monitoring, and regulatory reporting.

Nihil Patel
Data scientist; SaaS product designer; credit portfolio analyst and product strategist; portfolio modeler; correlation researcher
Previous Article
APRA on Changes to Reporting Obligations for Banks Due to COVID-19Related Articles
FINMA Approves Merger of Credit Suisse and UBS
The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
MFSA Sets Out Supervisory Priorities, Issues Reporting Updates
The Malta Financial Services Authority (MFSA) outlined its supervisory priorities for 2023
German Regulators Issue Multiple Reporting Updates for Banks
Deutsche Bundesbank published the nationally deactivated validation rules for the German Commercial Code (HGB) users on the taxonomy 3.2, which became valid from December 31, 2022
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.