The Prudential Regulation Authority has written to chief executive officers of PRA-regulated insurance firms setting out its thematic supervisory priorities for 2025. The programme focuses on embedding the Solvency UK reforms, responding to evolving life and general insurance market risks including bulk purchase annuities and funded reinsurance, and strengthening resilience through stress testing, liquidity, operational resilience, cyber and climate risk management. On Solvency UK, the PRA will prioritise ensuring reforms are embedded, supported by measures including a new Matching Adjustment permissions team, a streamlined approach to internal model assessments (including use of model limitation adjustments), a new mobilisation regime in the New Insurers Start-up Unit, and a consolidated approach to third-country branches that removes branch capital requirements and reduces reporting. In the life sector, supervisors will continue to scrutinise rapid growth in bulk purchase annuities, expecting firms to maintain pricing discipline and update risk management for evolving transaction features, and will press for rapid remediation where funded reinsurance self-assessments show gaps against SS5/24, including more prudent aggregate and single-name exposure limits. For general insurers, the PRA highlights underwriting and reserving discipline amid uncertainty in claims inflation, natural catastrophe losses, geopolitics and cyber risk, and will continue challenging overly optimistic profitability assumptions in internal models that reduce Solvency Capital Requirement outcomes. Next steps include the launch of the 2025 Life Insurance Stress Test later in January 2025, with a funded reinsurance recapture scenario included and publication of individual results for eleven major annuity writers alongside aggregate results expected in 2025 Q4. The PRA will engage on proposed liquidity reporting changes in CP19/24 and encourages eligible insurers to apply early to the Bank of England’s Contingent NBFI Repo Facility, while beginning supervisory work in 2025 to support implementation of solvent exit planning requirements due to take effect from 30 June 2026. Firms are expected to be able to remain within impact tolerances for all important business services by March 2025, and the PRA plans to consult with the Financial Conduct Authority in the second half of 2025 on policy for ICT and cyber risk management and to consult on updates to its climate risk supervisory statement SS3/19.

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