Prudence in a Softening Market: 2026 Supervision Priorities for the UK Insurance Sector
Ahmer Khan · Posted on: February 12th 2026 · read
Ahmer Khan, Partner at MHA and Baker Tilly - Ireland, the UK member firm of the global Baker Tilly accountancy and consulting network discusses the key points of the Bank of England/Prudential Regulation Authority supervision priorities for the Insurance Sector in 2026:
The PRA’s enduring aim is to ensure the insurance sector provides financial security to policyholders. In 2026, this is set against a softening underwriting cycle in general insurance and continued pressures in the bulk purchase annuity (BPA) market.
Life Insurance and Investment Strategies
BPA (Bulk Purchase Annuities) Market Pressures: Competitive incentives must not lead to weakened pricing discipline or risk management standards. The PRA will revisit solvency-triggered termination rights in 2026.
Funded Reinsurance (FundedRe): The PRA is considering explicit regulatory restrictions on FundedRe to address potential risk underestimation or regulatory arbitrage.
Liquidity Risk: As corporate bond spreads remain narrow, the use of strategic structured investments introduces liquidity risks that require robust aggregate cashflow management. New liquidity reporting requirements take effect on 30 September 2026.
General Insurance and Stress Testing
- Underwriting Discipline Boards are expected to challenge management assumptions that appear overly optimistic compared to historical track records, particularly in the London Market.
- Dynamic Stress Testing In May 2026, the PRA will conduct the Dynamic General Insurance Stress Test (DyGIST), a three-week live crisis simulation. Firms must update crisis playbooks in preparation.
Cross-Sectoral Requirements
Solvent Exit Planning: By 30 June 2026, all firms in scope must prepare a Solvent Exit Analysis (SEA) to identify material barriers and resources required for an orderly market exit.
Regulatory Innovation: The PRA intends to consult on a new UK captive regime in the summer of 2026 and explore alternative life capital options to support patient capital.
