PRA Priorities for the UK Insurance Sector in 2026

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On 15 January, the PRA published its priorities for supervision of the UK insurance sector in 2026. The PRA will continue with its focus on key market trends such as pressures in the bulk purchase annuity market, softening underwriting cycles, and investment in operational resilience. Firms will be expected to consider the current heightened geopolitical risk and pressure on the sovereign debt market within their risk management frameworks to understand impact on business models and strategies.

Bulk Purchase Annuities

The PRA will continue to support firms to diversify into UK productive assets through the Matching Adjustment Investment Accelerator. Besides this, increased competition has raised concerns over pricing discipline and the quality of risk management. The PRA will revisit “Dear CRO” guidance on solvency-triggered termination rights. Monitoring of how firms are managing material risks associated with funded reinsurance, including potential regulatory arbitrage, will continue into 2026. The PRA will update on expected additional policy action in quarter two, following roundtable interaction with firms since September 2025.


Investment Strategies

Evolving investment strategies may increase liquidity and credit risks. Liquidity risk management should consider potential leveraging through consideration of appropriate stresses. The PRA expects appropriate risk appetite frameworks and credit assessment frameworks, including robustness of internal ratings, where relevant, with particular attention to exposures to private credit assets. Further insights will be sought post the implementation of new liquidity reporting requirements in September 2026 and system-wide exploratory scenario (SWES).


New Capital & Ownership Structures

The PRA recognises there are diverse ownership structures and will be looking to ensure that entities exhibit appropriate independent governance and conflict management.


Life Insurance Stress

Insights from the 2025 exercise will inform supervision and future disclosure designs. The PRA will gather feedback from both firms and from those using the disclosures.

Internal model assumptions

With a softening underwriting cycle, the PRA is concerned about internal model assumptions being optimistic. Boards are expected to robustly challenge management’s assumptions. The PRA will intensify scrutiny of internal models and underwriting assumptions where material differences in actual and assumed profitability have been observed.


Exposure Management & Delegated Authority Underwriting

Emphasis on improvements in data quality and investment in exposure management systems. Strong oversight arrangements including clear exit strategies for delegated authority business are expected. The PRA plans to engage with relevant firms on these.


Dynamic General Insurance Stress Test (DyGIST)

A three-week crisis exercise simulating a market wide event will be held in May 2026. Participants should update crisis management playbooks, test internal communication and attend a preparatory seminar on February 24, 2026.

Operational Resilience

Building on SS1/21, firms are expected to improve operational resilience testing and Boards to embed resilience strategies in decision-making — especially the impact of new products, IT upgrades (including large scale transformations and adoption of cloud-based services) and outsourcing (particularly in respect to important business services). Cyber defence is a key focus area due to the elevated geopolitical risk levels. Robust capabilities are required to be strong across detection, response, and continuity. CBEST and STAR-FS engagement for higher impact firms will continue and CQUEST may be used for others.


Solvent Exit Planning

Firms must prepare a proportionate Solvent Exit Analysis (SEA) by 30 June 2026, addressing key risks, barriers, required resources, cost/benefit of options, and whether their business is hard to substitute, with the PRA reviewing selectively on a proportionate basis.


Artificial Intelligence

Insurers should innovate with AI while mitigating associated risks such as data accuracy, third party dependency and cyber risk.

Captive Insurance Regime

Consultation on a new UK captive framework to be held in summer 2026, targeting 2027 implementation.


Insurance-linked Securities (ILS)

Reforms implemented to widen UK’s ILS offerings and streamline authorisation.


PSMs

All firms will be transitioned to a two-year PSM cycle.


Other growth initiatives

The PRA seeks to accelerate timelines for new firm authorisations and improve support for small/medium insurers on regulatory matters. It is seeking views on alternative life capital options to remove barriers for capital supporting the sector. The PRA is working with the Financial Conduct Authority (FCA) on supporting the mutuals landscape to drive inclusive growth in the UK.

For further detail on the PRA’s 2026 priorities for supervision of the UK insurance sector underpinning this report, please read the publication from the PRA here: Insurance Supervision: 2026 priorities.

If you would like to further discuss any of the areas mentioned above and find out how we can help your firm develop in any of these areas please get in touch with Graham Handy.