PRA Priorities for 2025

The Prudential Regulation Authority (PRA) has outlined several key priorities for 2025, focusing on ensuring the safety and soundness of the financial sector, including insurers. Here we summarise the main priorities and their implications for insurers:

Governance, Risk Management, and Controls: The PRA emphasises the need for robust governance frameworks, effective risk management, and strong internal controls. Insurers are expected to proactively identify, monitor, and manage emerging risks, including those related to geopolitical events and technological changes.

Solvency UK Implementation: Following the Solvency II review, the PRA is prioritising the effective implementation of Solvency UK reforms. This includes ensuring that insurers can take advantage of new investment opportunities and maintain robust capital requirements.

Counterparty Credit Risk Management: Insurers must enhance their counterparty credit risk management practices to meet the PRA's standards. This involves improving the accuracy and timeliness of risk assessments and ensuring adequate capital buffers are in place.

Cyclicality in the General Insurance Market: The PRA advises insurers to maintain underwriting discipline and robust reserving standards, especially in light of recent natural catastrophes and global conflicts. Insurers should validate profitability assumptions in their models to avoid material impacts on Solvency Capital Requirement calculations.

Cyber Underwriting Risk: The PRA continues to focus on the cyber market, urging insurers to effectively manage and monitor these risks. This includes robust scenario-testing that accounts for recent events and emerging factors like AI.

Liquidity Resilience: Insurers are expected to strengthen their liquidity positions to withstand market stresses, such as those experienced during the pandemic and the 2022 mini-budget crisis.