Introduction

The insurance sector has been asked to formalise solvent exit planning, ensuring firms can wind down in an orderly manner without causing harm to policyholders or markets. While this is relatively new for insurers, the banking sector has over a decade of experience through Recovery and Resolution Planning (RRP) introduced after the Global Financial Crisis.

There are strong parallels between the two industries, and banking provides a valuable blueprint for how insurers can approach solvent exit planning effectively.
 

Key Similarities Between Banking and Insurance

Both sectors are systemically important and subject to enhanced regulatory scrutiny due to the potential impact of failure.

• Focus on financial resilience
   Both banks and insurers are required to demonstrate that they can withstand stress and maintain continuity of critical services.
• Regulatory emphasis on orderly failure
   Regulators (PRA, FCA, BoE) expect firms to plan for failure scenarios, ensuring disruption to customers and the wider system is minimised.
• Governance and senior accountability
   Senior management must oversee contingency planning, with clear roles, escalation frameworks, and decision-making triggers.
•  Scenario analysis and stress testing
   Both industries rely heavily on severe but plausible scenarios to assess viability and trigger recovery or exit actions.
• Operational continuity
   Maintaining continuity of services (payments in banking, claims/policy servicing in insurance) is a key regulatory expectation.

Lessons Learned from Banking Recovery & Resolution Regimes 

The banking experience reviewed in this article represents a decade of regulatory learning — accumulated through thematic reviews, supervisory challenge, and the hard-won experience of firms that have planned for, and in some cases executed, orderly exits. It reveals a number of common themes that contribute to effective exit planning. Despite differences in products, liabilities and regulatory regimes, firms that have developed credible plans tend to focus on early identification of exit risks, robust governance, operational preparedness and realistic execution planning. These lessons are directly relevant to insurers as they implement the PRA's solvent exit requirements and can help firms move beyond regulatory compliance towards genuinely operable exit strategies.
 
 1. Start with Clear Triggers and Early Warning Indicators
 
Points for consideration:

• Define quantitative and qualitative triggers for initiating solvent exit
• Avoid relying on late-stage metrics (e.g. regulatory breach)
• Leverage existing frameworks & metrics where possible and ensure they are being monitored regularly. 
• Qualitative indicators could be linked to Operational Resilience framework and Consumer Duty.

2. Develop Credible, Executable Playbooks
Bank recovery plans are not theoretical, they include detailed execution plans for each recovery option.
 
 Points for consideration:

• Build practical solvent exit playbooks (e.g. run-off, portfolio transfer, business sale)
• Include timelines, dependencies, and key decision points
• Identify potential barriers (legal, operational, financial)

When defining the wind down plan, consider if the actions can be easily operable and not just theoretical. 

3. Focus on Operational Resolvability
Banks have learned that operational complexity is a major barrier to resolution.
 
Points for consideration:

• Map critical services and dependencies (e.g. claims handling, policy admin systems)
• Ensure these can be maintained or transferred during exit

Reduce reliance on fragile or highly interconnected processes
 
4. Pre-position Financial Resources
Banks are required to ensure adequate loss-absorbing capacity (e.g. Minimum Requirement for Own Funds and Eligible Liabilities) to support resolution.

Points for consideration:

• Assess how expenses, claims, and capital requirements will be funded through exit
• Consider liquidity needs during run-off

Ensure funding plans are realistic under stress
 
5. Ensure Strong Governance and Decision-Making
Banks have formal governance frameworks tied to recovery and resolution execution.

Points for consideration:

• Define clear governance for solvent exit decisions
• Align with SM&CR (Senior Managers and Certification Regime) accountability

Ensure Board engagement and regular review throughout the process
 
6. Embed Planning into Business-as-Usual
Recovery planning in banks has evolved from a static exercise into a living process.

Points for consideration:

• Integrate solvent exit planning into:
• ORSA and risk management frameworks
• capital and liquidity planning
• strategic decision-making
• Regularly test and update plans 

7. Prioritise Communication Planning
Banks have detailed communication strategies to manage stakeholders during stress.

Points for consideration: 

• Develop plans for communication with:
• policyholders
• regulators
• distributors and intermediaries
• Align to existing crisis frameworks if possible
• Consider all material third party relationships
• Consider communication plans for employees  

Additional considerations -  

• Focus on liquidity, not just capital – firms can remain solvent while experiencing cashflow timing mismatches that impair their ability to execute an orderly exit.
• Consider group dependencies – financial or operational pressures on other group entities can create significant execution risks, particularly where shared services, funding or governance arrangements exist.
• Build realistic expense assumptions – operational costs such as claims handling, policy administration, governance and regulatory reporting often persist throughout run-off and may not reduce in line with premium income.
• Assess reinsurance-related risks – solvent exit plans should consider potential reinsurance disputes, recovery delays and counterparty default risk, particularly for long-tail liabilities.
• Recognise product-specific complexities – life insurers with with-profits business face additional challenges around terminal bonuses, estate management and equitable treatment of policyholders and shareholders.
• Test plans for operability – firms should consider whether exit plans can be executed in practice through simulations, dry-runs and regular reviews, rather than relying on purely theoretical analysis.

Conclusion 

The experiences of banking firms demonstrate that effective solvent exit planning extends well beyond regulatory compliance. Firms that have developed credible and executable exit plans have typically embedded them within their broader risk management, governance and strategic planning frameworks, ensuring that solvent exit considerations inform business decisions long before an exit scenario arises.

For insurers, the greatest value of the SEA may lie in the insights generated through the planning process itself. Assessing exit options, financial resource requirements, operational dependencies and execution barriers can provide a deeper understanding of the firm's resilience, risk profile and strategic flexibility. The exercise can also expose concentrations of risk, reliance on key third parties and other vulnerabilities that may not be fully apparent through business-as-usual monitoring.

A recurring theme across all sectors is that successful exits are rarely achieved through strong financial resources alone. They depend equally on clear governance, robust operational preparedness, realistic financial and liquidity planning, effective stakeholder communication and a thorough understanding of the practical challenges associated with implementation. Firms that approach solvent exit planning as a living, operable framework rather than a static documentation exercise are likely to be better positioned to respond to both strategic and stressed exit scenarios.

Ultimately, the lessons from other industries suggest that the most effective SEA is one that not only demonstrates how a firm could exit the market in an orderly manner, but also strengthens the quality of ongoing risk management, decision-making and strategic oversight across the organisation.