PRA tells GI firms of focus areas

The PRA has published a ‘Dear CEO’ letter detailing the PRA’s priority areas of supervisory focus for general insurance firms.  These include:

  • Reserve adequacy and associated reserving governance and controls, particularly in light of emerging risk developments including in the US – PRA has also written to firms’ chief actuaries setting out its concerns on key aspects of reserving. It is also worried that pressure from management can have an adverse effect on reserving practices;
  • The extent to which firms are demonstrating discipline in underwriting strategies, remediation activity and controls, notwithstanding recent rate rises in some speciality lines: PRA is concerned that there have not been significant improvements in controls since it wrote to firms twice in 2018;
  • Emerging risk trends and experience in firms’ exposure management practices, including both natural catastrophe and man-made accumulations;
  • Understanding UK retail general insurers’ responses to the FCA’s pricing practices review;
  • Ensuring firms develop and maintain a culture where staff feel able to speak up and raise concerns, with effective mechanisms in place to support them in doing so (including mechanisms to ensure access for control functions to non-executive board members). PRA is particularly concerned at the continuing allegations of bullying and harrassment within the sector.

Having assessed these focus points, the PRA expects firms to identify actions they believe should take.  These action points will form the focus of the PRA’s supervisory interactions with firms in the coming months.  In these areas, PRA may use s166 reports to reinforce its expectations and understanding.

Emma Radmore