Dear CEO PRA letter priorities are well judged as market conditions soften and technology adoption accelerates
Insurance consulting Risk Policy & regulation
Yesterday, 15 January 2026, the PRA issued its annual letter setting out priorities for supervising UK insurers in 2026.
Building on a number of emerging themes for non-life insurers, the PRA confirms:
- It may take further supervisory action where internal model firms assume overly-optimistic future profits. This is continuation of the message from last year’s Dear CEO letter, and is increasingly relevant in a softer market.
- There are a number of London Market firms with inadequate exposure management and delegated authority frameworks. Firms will need to improve their exposure data, management tools and delegated authority oversight to maintain underwriting discipline and demonstrate good risk management in a changing market.
- AI can amplify risks as well as bring opportunities. LCP expects further investment in AI and automation across the market, and firms will need to ensure risks – such as data quality, third party dependencies and cyber risks, as well as new AI-specific risks, are appropriately managed.
- Operational risk and resilience continues to be a key focus. Insurers are expected to make further improvements to testing, including deeper engagement with key third party providers to ensure appropriate resilience across the market.
The PRA also highlights the upcoming Dynamic General Insurance Stress Test (DyGIST) in May, the June deadline for firms’ Solvent Exit Analysis and changes to its supervisory approach.
Commenting on the letter, Cat Drummond, Partner at LCP, said:
“There’s little in the PRA’s letter that will surprise insurers; it largely reinforces themes we’ve seen building for some time. The continued focus on realistic profitability assumptions, stronger exposure and delegated authority oversight, and operational resilience is well-judged as market conditions soften and technology adoption accelerates. As competition increases, the challenge is to move faster, without weakening control or governance.”
