Shoib Khan, the PRA’s director for insurance supervision, has given a speech on the current risks facing the UK insurance sector. He highlighted that insurers should examine beyond the structure of their models, and:
- know when models are not correctly reflecting prevailing conditions;
- be confident that management actions will be available if needed during times of stress; and
- ensure that firms can achieve a safe and orderly exit.
Mr Khan also noted that the myriad of rapidly developing risks that have developed since the global financial crises. Among the unique combination of challenges contributing to the list are the coronavirus pandemic, Ukraine war, sudden repricing in UK government debt, UK interest rate changes, and exposure of fragilities in the resilience of some international banks. These operating conditions have impacted multiple facets of the insurance industry including credit, underwriting, operational, capital and liquidity.
Mr Khan emphasised the actions the PRA is taking to help insurers face these challenges in the UK, such as supporting innovation and a proportionate approach to prudential regulation.