PRA regulatory priorities for general insurers 2026: what to focus on
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The Prudential Regulation Authority (PRA) has set out its regulatory priorities for 2026 in its latest “Dear CEO” letter.
The most relevant points for general insurers relate to, for most firms:
- Operational risk and resilience
- Solvent exit planning
- Artificial intelligence
- Supervisory approach
Primarily London Market firms:
- Exposure management
- Delegated authority underwriting
For largest firms (by premium):
- Dynamic General Insurance Stress Test
For internal model firms:
- Optimistic underwriting assumptions in internal models
There are also a number of other points more specific to life insurers.
Here is our “at a glance” summary of what we see as the most important aspects of the PRA’s letter.
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Relevant to most firms
How should insurers manage operational resilience?
The PRA expects operational resilience to be part of everyday governance. Boards/SMFs should factor resilience into major change, especially where important business services are affected. Firms are expected to make further improvements to testing, including deeper engagement with key third-party providers.
Legacy tech remains a key weakness, but transformation and cloud usage must be tightly managed to avoid new risks.
Cyber risk remains high, and firms must be able to detect, respond and recover critical services within their impact tolerances, not just prevent attacks.
The PRA will continue CBEST/STAR-FS to engage with higher-impact firms and may use CQUEST for others.
How to prepare for Solvent Exit Analysis (SEA) 2026
Insurers in scope must produce a proportionate Solvent Exit Analysis (SEA) by 30 June 2026.
This should:
- be tailored to their key risks
- identify material barriers to a solvent exit
- set out the financial and non-financial resources needed
- include a cost/benefit comparison of exit options
- assess whether the firm writes hard-to-substitute business in the market.
The PRA will contact firms if it wants to review their SEA, and Lloyd’s Managing Agents are not required to produce one.
What changes are coming in PRA supervision?
The PRA is moving all firms to a two-year Periodic Summary Meeting (PSM) cycle from 2026.
This is intended to better match longer-term supervisory plans, focus effort on key risk remediation, and reduce regulatory burden (supporting UK competitiveness and growth).
Supervisors will confirm what this means for the timing of each firm’s next PSM.
AI
Firms should not compromise on safety and soundness when adopting new technology.
While this brings opportunities for innovation, efficiency and effectiveness, it also brings new AI-specific risks and amplifies existing ones eg data quality errors, third-party dependencies and cyber risk.
London Market
Exposure management
The PRA noted that high-quality data remains fundamental to effective risk and exposure management.
Following its review across the London Market, the PRA expects a number of firms to improve data quality and standards, and keep investing in systems, tools and models so exposure management stays fit for an evolving risk landscape.
Delegated authority business
The PRA recognised that delegated authority business is growing across the London Market, increasing the risk of inadequate pricing and reserving.
Firms should strengthen governance and monitoring to protect underwriting standards, including having a credible plan to exit unprofitable arrangements.
Largest firms (by premium)
Dynamic General Insurance Stress Test
The PRA will run the Dynamic General Insurance Stress Test (DyGIST) in May 2026, with a seminar for sponsors in February.
DyGIST is a semi-live crisis exercise simulating the dynamics of a market-wide event over a focused three-week period.
Participating firms should prepare by reviewing and updating their crisis management playbooks and test internal communications and coordination.
They should use the test itself to rehearse crisis response protocols, strengthen coordination and identify areas for improvement.
Internal model firms only
Optimistic underwriting assumptions
The PRA remains concerned some internal models assume future underwriting performance that is overly optimistic compared to their underwriting track record.
This increases the risk that the SCR is understated, especially as the underwriting cycle softens. Boards should therefore challenge these assumptions robustly.
The PRA will engage with those firms with the biggest differences between actual and assumed profitability. Where justification is not appropriately robust the PRA may take further supervisory action to ensure SCRs are not materially understated.
Key actions insurers should take now
- Make operational resilience business as usual: Embed resilience into governance and change decisions, deepen scenario testing with key third parties, tackle legacy tech risks, and ensure cyber plans focus on recovery within impact tolerances, not just on preventing attacks.
- Start solvent exit planning, if you haven’t already: Run a gap analysis against SEA expectations and build a proportionate, board-owned plan to meet the 30 June 2026 deadline, including barriers to exit, resourcing needs and exit options.
- Adopt AI safely, not blindly: Capture the innovation upside, but strengthen controls around data quality, third-party reliance and cyber risk to avoid undermining safety and soundness.
- Tighten exposure management and delegated authority oversight: Invest in exposure data quality, systems and models so management and boards have a clear, current view of risk in an evolving market. With delegated authorities, clarify strategy, strengthen governance and performance monitoring, and ensure you can exit unprofitable arrangements decisively.
- Challenge optimistic underwriting assumptions: Boards should robustly test future profitability assumptions against actual experience, particularly as market conditions soften, to avoid understating the SCR.
