BOE Publishes 2022 Stress Test Feedback to Insurers

The Bank of England, via the Prudential Regulation Authority, has sent a letter to insurers, after stress tesing was carried out in 2022. Generally, the marks are pretty high, although the PRA notes that cyber and Cat losses could be a future problem. Then there’s Solvency II changes, with two notes published on Matching Adjustments and the Transitional Measures which may affect insurers as the new UK rules on capital reserves kick in.

Here’s an extract;

“The results indicate that the UK insurance sector is resilient to the PRA-specified scenarios, subject to a number of mitigating measures, while highlighting and supporting the need for ongoing focus in a number of priority areas. These are consistent with those set out in our recent ‘Insurance supervision: 2023 priorities’ letter, in particular, around financial resilience, risk management, and
reinsurance risk.

In aggregate for IST 2022 participants, the life insurance sector’s solvency capital requirement (SCR) coverage falls from 162% to 123% and the general insurance sector’s SCR coverage remains above 120% in all scenarios.”

The full pdf can be downloaded from the BOE here.