[ad_1]
UK PRA sets out 2024 priorities for insurance sector
The UK Prudential Regulation Authority (PRA) has written to the CEOs of PRA-regulated insurance firms to set out its supervisory priorities for 2024.
Insurance industry trends: With the projected acceleration of the transfer of liabilities from defined benefit pension schemes to life insurers, the PRA notes the insurance industry is growing in complexity.
Credit risk: The PRA expects firms to understand their credit-risk exposures and that their credit-risk management and internal credit-assessment framework are appropriate.
Throughout 2024, the PRA will continue to focus on the efficacy of firms’ credit-risk management capabilities as firms aim to continue to invest in a wider range of credit-risk assets
The PRA will also seek further assurance that firms’ internal credit assessments appropriately reflect the risk profile of their asset holdings and assess their current and forward-looking validation plans and approaches
Liquidity risk: Events such as the Dash for Cash in March 2020 and the Liability-Driven Investment shock in September 2022 led to derivative-driven liquidity strains for some insurers as well as highlighting gaps in insurers’ liquidity-risk frameworks.
During these events, the PRA sought to receive timely and accurate data on firms’ positions and exposures, and is looking to collect this information on a more consistent and systematic basis in advance of potential future market stresses
During 2024, the PRA will work to develop liquidity reporting requirements that will provide information on liquidity-risk exposures on a consistent and timely basis
Operational resilience: The PRA expects boards and senior management to actively oversee the delivery of their firm’s operational resilience program.
By no later than March 2025, firms should be able to demonstrate that they can remain within impact tolerances for all their important business services (IBS)
Ease of exit: The PRA will consult shortly on requirements for insurers to prepare plans for an orderly solvent exit as part of their business-as-usual activities.
Regulatory reform: The PRA is considering the feedback on the technical details of options for regulatory reform, to create the Solvency UK regime. In 2024 it plans to publish final policy statements to ensure the changes to Solvency UK can be completed by the end of the year.
Stress testing: The next stress test for major life insurers will be in 2025 and the PRA will publish an approach document in 2024. Also in 2025, the PRA looks to run the PRA’s first dynamic stress test, involving simulating a sequential set of adverse events over a short period of time, and the PRA will provide more details of this exercise during the first half of this year.
Climate-related financial risk: As firms embed climate risk within their risk-appetite statements, sources of climate risk should be considered across both sides of an insurer’s balance sheet.
[ad_2]
Source link
