The PRA has published a statement setting out further information on the dynamic general insurance stress test (DyGIST) that it intends to run in 2025. As a reminder, the objectives of DyGIST are to:
- assess the UK general insurance sector’s solvency and liquidity resilience to a specific adverse scenario;
- assess the effectiveness of insurers’ risk management and management actions following an adverse scenario; and
- inform the PRA’s supervisory response following a market-wide adverse scenario.
The PRA has now confirmed that DyGIST will cover c.80% of the PRA regulated GI market and will comprise three phases:
- The ‘live’ exercise: firms will be presented with a sequential set of adverse events over a three-week period in May 2025 and will be asked to react to these as they would to real events. Firms will be asked to provide initial financial impact assessments following each event, to engage with their supervisory contacts and follow their expected management action plans (in line with their risk management processes);
- Final firm assessment and reflections: by end-July 2025, firms will be asked to submit a final quantitative template with updated estimates of the impact of the events (this acknowledges that during the ‘live’ exercise loss estimates may be based on scaling up exposures or applying other shortcuts to meet the demands of providing early estimates that would be required in a crisis) and a qualitative questionnaire intended to draw out any risk management learnings;
- Analysis, publication and integration into supervisory plans: DyGIST will be a core component of 2025 supervisory activity for firms in scope. The PRA intends to publish the findings of the exercise in Q4 2025, and dependent on conclusions, individual firm findings will also feed into supervisory plans for 2026.