The PRA published its insurance supervision priorities for 2026 in a letter to CEOs on 15 January 2026. Its focus remains on responsible risk management and policyholder protection, linking in with its work to advance its secondary objectives on competition, international competitiveness and growth.
The PRA letter highlights a number of challenges including sustained competitive pressure in the bulk purchase annuity (BPA) market, a softening general insurance underwriting cycle, continued need to invest in operational resilience, and heightened geopolitical and sovereign-debt risks.
In this article
What does this mean?
The PRA's key message is that firms' governance, risk management and controls should keep pace with evolving business models and market conditions. The PRA highlights key priorities that will inform and lead its upcoming supervisory work.
Life insurance priorities
The PRA will pay close attention to competitive pressures in the BPA market and the danger that pricing discipline or risk standards weaken. It expects robust controls and risk management frameworks and will revisit firms’ responses on solvency-triggered termination rights during 2026.
Funded reinsurance remains a major focus. The PRA has determined that it needs to take further policy action on funded reinsurance. It is considering a range of approaches and expects to update firms in Q2 2026.
The PRA highlights greater use of structured/synthetic investments which may add liquidity risk. It expects firms to assess cumulative impacts and leverage with appropriate limit frameworks in place. The regulator highlights new liquidity reporting requirements from 30 September 2026 and continued scrutiny of credit risk management as firms move into new asset classes.
The PRA has observed the recent investments in BPA writers by new additional capital providers. Although open to diverse life business models and ownership structures, the PRA stresses the need for strong legal-entity governance and management of conflicts within group structures.
General insurance priorities
The PRA continues to be concerned that underwriting assumptions and model outputs are too optimistic. The PRA emphasises the importance it places on robust challenge and justification of model assumptions, particularly when compared with past experience. The PRA will intensify supervisory engagement where gaps between assumed and actual profitability are most material.
In 2026 the PRA expects to see improved exposure management data and stronger oversight of delegated authority arrangements, including clearer strategy and credible exit thinking for underperforming arrangements across the London Market. The PRA will engage directly with firms where poor exposure monitoring is observed.
In May 2026, the PRA will also run DyGIST - a three-week, semi-live GI market-wide crisis simulation - to assess participating firms’ crisis response capabilities. Firms should refresh crisis playbooks and test communications and coordination ahead of the event.
Cross-sector priorities
The PRA expects firms to: continue embedding operational resilience, including through testing (including with third parties); focus on legacy-tech obsolescence and change management; and focus on strong cyber detection, response and recovery capabilities.
2026 is also the implementation year for solvent exit planning: firms in scope must complete a Solvent Exit Analysis (SEA) by 30 June 2026. Outside of this, the PRA also flags AI as an innovation opportunity but one that can amplify data, third-party and cyber risks if not governed appropriately.
Competitiveness, growth and supervision
PRA priorities include developing a new UK captive regime, with consultation planned for summer 2026 and launch targeted for 2027, reforms to the Insurance Special Purpose Vehicles regime and exploring options for alternative life capital, with the intention to remove barriers to patient capital entering the sector. The PRA also plans to transition those remaining firms on an annual Periodic Summary Meeting (PSM) cycle to a two-year cycle in 2026 to streamline interactions and reduce burden
What do firms need to do?
Continued focus on building risk management capability: demonstrate robust pricing, reserving and internal model governance to mitigate the broad range of risks the sector faces.
Prepare for balance-sheet evolution risks: strengthen oversight of FundedRe, structured/synthetic investment strategies, and liquidity/credit risk.
Embed resilience, exit and technology governance: deepen operational resilience and third-party testing, reinforce cyber response, and govern AI adoption as a material risk change.
Boards and SMFs should anticipate greater supervisory focus on pricing, reserving and model governance in response to changing market conditions. Life insurers should be ready to evidence prudent BPA pricing and strong transaction controls. Firms should also prepare for further engagement from the PRA on solvency triggered termination rights.
Firms using (or planning to use) FundedRe should ready themselves for the action the PRA is intending to take. Firms should engage with the PRA on this issue early and review previous statements the PRA has made in this area.
Firms should continue to focus on operational resilience and see this as central to all business operations. Third parties and improving testing capabilities should be a key area of focus. Principles of operational resilience should be embedded enterprise wide, and firms should ensure robust frameworks exist concerning change management and cloud-based solution adoption.
Next steps
Key 2026 milestones include the DyGIST exercise in May, SEAs due by 30 June (where in scope), and new liquidity reporting from 30 September. The PRA expects to update on FundedRe policy in Q2 and consult on UK captives in summer 2026, with implementation targeted for 2027.
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