The Bank of England (BoE), through the Prudential Regulation Authority (PRA), is calling on general and life insurers to provide technical input for its proposed stress test, which it plans to roll out this May.
In a letter signed by PRA technical head of insurance, Stefan Claus, released on Thursday, the regulator asked insurance companies to give feedback on the scenarios that will be used in the stress test, specifically regarding the following:
Read more: Insurers to face stress test
According to the PRA, the stress test aims to assess whether the UK’s general insurance sector can withstand having to make large payouts on policies for cyberattacks and breaches, and natural catastrophe perils, including flooding and hurricanes. Life insurers, meanwhile, will have their resilience examined based on economic risks.
“We expect those firms invited to participate to engage fully and provide comprehensive responses to our requests,” Claus wrote. “As discussed with relevant life insurers, the first IST in which they participated did not deliver sufficiently consistent results to enable us to publish aggregate results. In 2022, we need to publish aggregate results that will enable us and other stakeholders to assess the resilience of the sector to systemic shocks.”
Insurance companies have until March 17 to provide their technical input. The PRA said that it will also hold two roundtable meetings on February 02 and 03 for general and life insurers, respectively. The watchdog added that results of the stress test will be published in December.
The PRA conducts stress tests on insurance providers every two years but decided to push back the 2021 test by a year to allow the industry to concentrate on COVID-19 pandemic efforts.
