PRA has published a letter sent to CEOs of participating firms providing headline results and feedback to its general insurance stress test 2015. Key findings include:

  • in aggregate, the sample insurers were resilient against specific market-wide stresses;
  • the economic scenario results in the largest adverse impact, which arises mainly from a fall in the value of corporate bonds as credit spreads are assumed to widen;
  • there was a wide range in views on the plausibility of each scenario;
  • results from the complex stress tests (e.g. liability, cyber stresses) indicate that common terminology and a common framework for the assessment of exposure is required before a wider assessment of firm and sector resilience can be determined on a consistent basis; and
  • no systemic risks or common cause of a market-wide catastrophe were identified through firms’ own defined stresses.

PRA notes that PRA’s supervisory attention will be increasingly focused on insurers’ abilities to maintain a robust process for exposure measurement and management in light of rate reductions and the widening of terms and conditions in the London market. (Source: PRA releases general insurance stress test findings)