In its 2026 supervisory priorities, the Prudential Regulation Authority (PRA) has noted that UK insurers face an uncertain environment, with elevated geopolitical tensions and sovereign debt pressures, highlighting the need to assess impacts on business models and ensure robust risk management, governance, and controls, including for downside scenarios.
The PRA’s 2026 priorities outline sector-specific focus areas for banks, building societies, insurers, and other regulated firms.
The regulator also signalled plans to streamline supervisory processes by moving some activities, including Periodic Summary Meetings (PSMs), to a two-year cycle.
Over recent years, the PRA has already transitioned some firms from an annual PSM cycle to a two-year cycle.
The PRA said that this adjustment has proven effective, as it reflects the longer-term nature of supervisory workplans and allows firms and supervisors to focus resources more efficiently on identifying and addressing key risks.
“We are therefore planning in 2026 to commence the transition to a two-year PSM cycle for all firms which remain on an annual cycle. Reducing the number of PSMs, and associated communications and processes, will also reduce the regulatory burden on firms, in line with our secondary objective to facilitate UK competitiveness and growth,” the PRA observed.
In a letter to CEOs of PRA-regulated insurers, the authority also noted that its priorities aim to ensure the sector delivers financial protection and security to policyholders in all conditions, in line with its core objectives.
The PRA added that several priorities are consistent with those highlighted last year, reflecting a continuation of ongoing market trends.
“These trends include continued pressures in the bulk purchase annuity (BPA) market, a softening underwriting cycle in the general insurance market, and a need for firms to continue to invest in their operational resilience,” the PRA said.
In the general insurance market, the regulator has seen a continuing softening underwriting cycle across many lines of business, which may place pressure on pricing, terms and conditions, and reserving levels.
“This trend appears particularly pronounced in some wholesale lines in the London Market, as illustrated by the recent reinsurance renewal seasons,” the PRA continued.
The PRA thus said it expects boards to maintain robust underwriting discipline in this weakening environment and to ensure pricing and reserving adequately reflect market trends.
Focusing on the BPA market in the life insurance priorities section, the PRA noted that the space remains highly competitive, with both established firms and new entrants responding to growing demand from corporate sponsors for pension buy-out solutions.
“We remain concerned that competitive pressures create incentives for firms to weaken pricing discipline or their risk management standards. We continue to engage actively with the sector on these market-wide trends, to understand firms’ perspectives on these issues. Firms should ensure their internal risk management frameworks and controls are sufficiently robust to assess and manage risks that they take on, including as pressures increase on pricing and as more complex transaction features are considered,” the PRA said.
The authority also addressed the increasing use of funded reinsurance (FundedRe), a topic it previously highlighted when tightening its stance on funded and offshore financing by UK life insurers last year.
The move seeks to balance fostering innovation with maintaining financial stability as the BPA market continues to grow rapidly.
“While FundedRe can provide access to additional capital and asset classes, it also introduces material risks that must be carefully managed,” the PRA said.
It continued, “Since September 2025, we have engaged with firms in a series of roundtables to develop a common understanding of these issues and to allow us to consider whether further policy action is needed.
“This engagement has proved helpful to confirm the need for policy action in this area and to discuss a range of approaches to achieve this. We are actively reflecting on the views provided by firms during the roundtables and will use this input to help formulate our policy proposals. We expect to provide a further update in the second quarter.”
