PRA: tell us which stress test scenarios are material

The UK’s Prudential Regulation Authority, which is planning a formal launch of its Insurance Stress Test in May, has asked for more technical input from the market.

This request for technical input includes updated scenarios together with the scenario calibration, specifications and guidance; quantitative data templates; as well as a ‘Results and Basis of Preparation’ (RBP) report.

The RBP report sets out additional information required to supplement the quantitative results.

The PRA said it welcomes feedback on any aspects of the stress test, and specifically on:

  • Plausibility of scenario calibration.
  • Clarity of the instructions and completeness of the scenario assumptions to be provided by the PRA. Please provide feedback on any areas of the scenario that require further explanation, clarification, or additional assumptions that will ensure comparability and consistency across participants.
  • The governance and quality assurance requirements for the stress test submissions as set out in RBP report.
  • For general insurers, we are asking the firms to set out which scenarios are material.

The regulator said it will be asking the UK’s largest life and general insurers to take part in this exercise, and expects those firms invited to participate to engage fully and provide comprehensive responses to its requests:

“As discussed with relevant life insurers, the first IST in which they participated did not deliver sufficiently consistent results to enable us to publish aggregate results. In 2022, we need to publish aggregate results that will enable us and other stakeholders to assess the resilience of the sector to systemic shocks.”

This request for technical input will close on Thursday 17 March 2022.

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