PRA sets 2021 insurance supervision priorities

Regulatory reporting and technical instructions

The Dear CEO letter also confirms a concrete change to regulatory reporting mechanics from the end of 2020. From 11:00pm on Thursday 31 December, firms were required to use the Technical Instructions (TI) published by the PRA on its website for regulatory reporting.

LIBOR transition

LIBOR transition is identified in the letter as one of the PRA’s supervisory priorities for 2021, alongside financial resilience, operational resilience and climate‑related financial risks. By naming LIBOR transition explicitly, the PRA places benchmark reform on the same supervisory agenda as macro‑prudential and structural risk themes, rather than treating it as a narrow technical exercise.

The priority status for LIBOR transition in 2021 reflects the PRA’s expectation that insurers address legacy exposures and ensure that products, assets and liabilities referencing LIBOR are appropriately transitioned. By listing operational resilience alongside financial resilience, LIBOR transition and climate‑related financial risks, the PRA frames it as a structural capability rather than a narrow technology or business continuity concern.

The explicit naming of operational resilience in the priority list indicates that the PRA expects firms to continue strengthening their ability to prevent, adapt to, respond to, recover and learn from operational disruptions. This positions operational resilience as a standing supervisory theme for 2021, rather than a temporary response to Covid‑19‑related remote working or market volatility.

Climate‑related financial risks

Financial risks arising from climate change are identified in the Dear CEO letter as a supervisory priority for 2021. The PRA groups climate‑related financial risks with financial resilience, LIBOR transition and operational resilience as the main focus areas for its insurance supervision in 2021.

By defining climate‑related risks in explicitly financial terms, the PRA reinforces that it expects firms to treat climate change as a source of underwriting, market, credit and operational risk rather than solely as a corporate responsibility issue. The inclusion of climate‑related financial risks in the small set of headline priorities confirms that the PRA intends to maintain supervisory pressure on firms’ climate risk management frameworks through 2021.

Governance expectations beyond stated priorities

In addition to the specific priorities set out in the letter, the PRA states that it continues to see strong governance at firms as important. This statement is framed as applying “in addition to” the 2021 priorities, making clear that governance expectations are not limited to the named focus areas of financial resilience, LIBOR transition, operational resilience and climate‑related financial risks.

By separating governance from the list of priorities yet reaffirming its importance, the PRA clarifies that boards and senior management remain accountable for firm‑wide oversight and control, even where topics are not explicitly named in the annual supervisory agenda. This positions governance as an enduring baseline expectation that underpins, rather than competes with, the 2021 thematic priorities. The next decision points will arise as the PRA develops and communicates its detailed approach to recovery and resolution planning through 2021, and as firms implement the required Technical Instructions for regulatory reporting from 31 December onwards.