The UK’s Prudential Regulation Authority (PRA), part of the Bank of England, has announced that the planned 2019 insurance stress test results will now not be published, as it pauses further work in this area due to the impacts of the Covid-19 pandemic.
The PRA said that its focus is on ensuring that regulated insurance and reinsurance companies can “play their part in supporting the UK economy to respond to the significant impact of Covid-19.”
As a result of this focus, priorities have changed and among them is the stress test process that UK insurance entities are subject to.
“The PRA has decided to pause further work on the Insurance Stress Test, given other pressures on firms and the need to focus on Covid-19 specific stresses,” the regulator explained.
As a result, the PRA said that it will not be publishing the results of last year’s test (IST2019).
Given the new and added stress of the pandemic it seems likely the stress tests are seen as less relevant at this time, especially as the baseline for testing has now changed significantly.
The PRA said that the next Insurance Stress Test has now been postponed until 2022, and it will seek feedback on the proposed design from insurers and reinsurers during Q4 2021.
Also, recognising pressures on the UK’s financial firms, the PRA said that it and the Financial Policy Committee have agreed to postpone the launch of the Climate Biennial Exploratory Scenario exercise until at least mid-2021.
This was to be a climate focused stress test for large banks and insurers and while the Bank of England said today that climate change remains a significant priority, it wants to give firms “enough time to invest sufficiently in their capabilities to allow them to deliver to a high standard,” recognising the pressures they are under right now and the ambitious scope of the climate stress test.