PRA publishes insurance supervision priorities for 2020
The Prudential Regulation Authority has set out its supervisory priorities for insurers for 2020/21, anchoring them in its wider business plan and Covid-19 response.
Implications for insurance CIOs, ALM and capital teams
Investment strategies must support financial resilience under stressed Covid-19 conditions, with boards able to evidence how portfolios perform under severe but plausible scenarios.
For insurance CIOs and ALM teams, the messaging crystallises how the PRA expects firms to manage financial resilience, credit risk and structural change while maintaining strong governance and risk management.
Supervisory focus and prudential objectives
The PRA's business plan for 2020/21 sets its strategic goals and workplan, with responding to the coronavirus outbreak as its top priority.
Within that context, the regulator's goal for insurers is to exercise effective prudential supervision so firms can adapt to disruptive change while maintaining governance, risk management and resilience.
This framing signals that the PRA expects boards to treat Covid-19, market stress, climate risk and structural shifts in business models as interconnected prudential issues rather than separate thematic workstreams. For investment functions, that translates into closer scrutiny of how asset choices support sustainable underwriting capacity and policyholder protection over the full balance sheet horizon.
Themed priorities: financial resilience, credit risk and Covid-19 operations
The PRA explicitly highlights financial resilience and credit risk as core supervisory priorities for insurers. This places the quality of capital, earnings resilience and the strength of credit portfolios at the centre of supervisory dialogue with life and non-life firms.
Structural change: transition risks and climate
The PRA identifies risks from the end of the transition period and from climate change as explicit supervisory priorities for insurers. For investment teams, this reinforces the need to understand how legal, regulatory and market-structure changes feed through to asset liquidity, creditworthiness and hedging effectiveness.
The letter is addressed to chief executive officers and co‑authored with Charlotte Gerken, underlining that the expectations are aimed squarely at boards and senior management.
This more explicit articulation of insurance priorities gives CIOs and ALM teams a clearer supervisory roadmap but also reduces room for misalignment between board risk appetite and PRA expectations. The next constraint for firms will be demonstrating, through 2020/21 reviews and engagements, that investment and capital strategies are already aligned with this prudential agenda.
--- Sources: https://www.bankofengland.co.uk/prudential-regulation/letter/2024/pra-insurance-supervision-priorities https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/letter/2020/insurance-supervision-2021-priorities.pdf https://www.bankofengland.co.uk/prudential-regulation/regulatory-digest/2020/december
