The Prudential Regulation Authority (PRA) is conducting a real-time stress test on London company market insurers throughout May, with the International Underwriting Association (IUA) noting the participation of its members.
The Dynamic General Insurance Stress Test (DyGIST) is designed to assess how insurers respond to fast-moving, complex, and evolving events. It examines crisis management arrangements, with a focus on both balance sheet impacts and decision-making protocols.
The current exercise involves five scenarios: a systemic cyberattack, a severe global financial downturn, major earthquake and hurricane events in the United States, a large UK windstorm, and scenarios designed to test reinsurance resilience.
In a statement, Nafisah Hussain (pictured), director of public policy at the IUA, said the exercise stands apart from conventional stress tests because of its real-time nature.
“What makes the DyGIST exercise different is that it is a genuinely live test,” Hussain said. “Both the PRA team and the London market firms taking part were not aware of the test scenarios in advance and are responding in real time. It is a rare and valuable way to test the whole insurance system.”
Hussain described the scenarios as deliberately stretching.
“The scenarios themselves are deliberately stretching – a combination of cyber and natural catastrophes that are unlikely to occur simultaneously but are still within the bounds of possibility,” she said. “Stress tests are designed to examine the extreme boundaries of probability, and this one does exactly that.”
The IUA official also noted that the exercise serves a dual purpose, placing the regulator itself under scrutiny alongside the market.
“As well as putting IUA members on the spot, an important benefit of the exercise is to see the regulatory authority’s own operational processes tested under pressure,” Hussain said. “The PRA’s responsiveness so far has been helpful to companies working through a demanding operation.”
The IUA said it will work with members and the PRA to assess lessons learned from the exercise after its conclusion.
In December 2024, the PRA announced a postponement of the DyGIST launch, citing the burden on general insurers preparing to report on new Solvency UK regulatory returns and a desire for more efficient use of PRA resources. The exercise was pushed back to May 2026.
