Authors
The implementation deadline for the Prudential Regulatory Authority’s (PRA’s) supervisory statement (SS11/24) on solvent exit planning for insurers passed on 30 June 2026. Following a period of detailed analysis and report drafting, UK insurers now enter a period of reflection, planning for the next iteration, and (in some cases) receiving feedback from the regulator. We may also see the PRA publishing its views on stronger and weaker practices.
As with many principles-based regulatory implementations, views on what constitutes strong or weak practice will evolve over time. While the PRA has minimum expectations, these will be refined through observations of industry practice and peer comparisons among firms of similar nature, scale and complexity.
The IFoA Task and Finish Group has conducted a survey to identify common practices and areas of divergence from a cross-section of the market. The following article provides a summary of insights and key takeaways based on the results.
Survey participants and approach
The survey includes results from 14 participants (10 life insurers, 2 general insurers, and 2 composites) with technical provisions ranging from just over £100 million to almost £300 billion.
Participants answered a range of multiple-choice questions related to key assumptions and approaches including in relation to:
- Point of non-viability
- Exit strategies
- Starting balance sheet
- Projection
- Definition of ‘solvent’
- Value gained from the exercise
- Assurance
- Embedding
Point of non-viability
Most firms separate the definition of a point of non-viability from the setting of solvent exit indicators. This aligns with the idea that the point of non-viability is a sufficient condition for the triggering of an exit, whereas indicators may be broader to provide management with a general indication of how close to this point the firm may be.
As expected, a defined level of solvency was central to most firms’ point of non-viability definition. However, only 5 participants said that exhaustion of management actions are included in the definition. This implies that most firms would consider solvently exiting even while there are actions available to take. This reinforces the idea that solvent exit is about medium to long term business model failure rather than just extreme capital or liquidity stress.
Some firms indicated that their modelling assumes a defined starting solvency level for the exit projections, rather than aiming to quantify the minimum point from which a solvent exit could be achieved. While this simplifies the exercise, there is a risk that it diminishes SEA as a strategic decision-making tool, especially if there are additional dynamics or sensitivities at lower solvency levels that are not explored.
Exit strategies
All 14 respondents include a run-off of liabilities as one of the exit strategies in their solvent exit analysis (SEA). This aligns with the PRA’s requirements within SS11/24.
9 of 14 firms consider sale of an entity within their SEA and 8 of 14 firms consider a Part VII transfer. Consideration of these options alongside a run-off strategy balances realism (that is, management would aim to sell or transfer a failing business if this was an option and/or to shorten the run-off period) with the prudence of not relying on the actions of third parties, which is a key expectation of the PRA.
Although not explicit from the survey, strong practice – where multiple exit strategies are considered – is to also analyse the interaction between strategies. For example, what would the cost and operational implications be of initially pursuing a sale and then ultimately being required to enter a prolonged run-off and how would this impact the ability to solvently exit (or the starting solvency level from which an exit could likely be achieved).
Starting balance sheet
The survey indicated a range of practices with respect to considering stressed versus non-stressed scenarios in the SEA. Half of the respondents shared that they included both stressed and non-stressed scenarios with separate modelling, whereas several firms only included modelled results on a stressed basis. We are aware that in some cases where firms have only modelled a stressed outcome, they have considered non-stressed outcomes qualitatively. This may be proportionate if the stressed scenario is always likely to be more onerous.
In general, there were many assumptions and adjustments for which there was broad consensus across the market including the need to recalibrate expense assumptions in run-off, the inclusion of various one-off costs, recalibrating the SCR for exit specific assumptions, and the exploration of additional outsourcing opportunities.
However, there was also a broad set of assumptions and adjustments that were only applied by a minority of respondents including adjustments to the contract boundary, changing inflation assumptions, and changing reinsurance coverages.
A few notable findings
One respondent indicated that it would close to new business ahead of solvently exiting (that is, as a pre-emptive management action), which could indicate a strategy of changing business model to focus on closed book consolidation or seek to create time to transform the business before seeking to reopen the book.
There is no consensus on whether operational risk would reduce, increase or remain broadly consistent during solvent exit. This reflects that some believe a simpler business model would lead to reduced risk, whereas others believe the disruption caused by solvent exit would itself be a source of risk.
5 firms said they would change their investment strategy during run-off. While this option offers a lever to reduce capital and de-risk, the lack of use of this option also reflects that many insurers still have a relatively conservative investment strategy in business-as-usual.
4 firms applied higher lapse rates during solvent exit with 3 firms considering lapses dynamically. While the impact on lapses will be product specific, and could be lower in certain circumstances, 4 firms suggested they use business-as-usual assumptions without amendment. This is likely to be a simplifying assumption, as in reality it is likely that lapses would be impacted at least to a degree (even if just because policyholders would receive increased communications).
Only 5 firms allowed for contract termination fees in one off exit costs. Some firms may have no contracts with exit fees included but, more likely, some of the firms that do not include this are yet to do a detailed contract analysis. This is a focus area of regulators and implies there may still be work for the industry ahead of the next iteration of SEA.
Most firms use the same long term expense inflation assumption as business-as-usual. This may be appropriate, but we recommend that consideration is given to the sensitivity of run-off outcomes to this assumption as for long tailed business even a small increase could be material.
Projection
Firms generally indicated aiming to integrate SEA modelling into existing modelling infrastructure, with most firms using a combination of their regulatory approved capital model and their business-as-usual forecasting model to analyse the financial implications of exit.
Notwithstanding this, 5 firms suggested they needed to build new spreadsheet models to handle SEA projections – either in place of their existing forecasting model or to augment it. This indicates that, although several firms already have strong forecasting capability, it is not universal and over the longer-term some firms will need to consider the scope and functionality of existing models.
Respondents indicated a wide range of run-off projection horizons, implying that there is no consensus on how to think about winding up the tail of the business.
Several respondents indicated that they truncated the projection horizon before the run-off of the last liabilities, perhaps because they see limited value and limited realism in projecting a run-off when policy count gets too low. One respondent suggested they had used the analysis to identify an expense break point, representing a strong use of SEA in risk management.
If a firm can demonstrate that the financial health of the business is such that a sale or transfer could be completed without the need for a specific valuation (that is, uncertainty in the liability and capital coverage has been removed) then it is reasonable to conclude that this assumption contains sufficient prudence to align with the principles in SS11/24.
Definition of ‘solvent’ for SEA
As was the focus of part 2 of this blog series, there are varying interpretations of the definition – and practical application – of the term ‘solvent’ for SEA. While the PRA has been clear that they expect firms to be able to meet all liabilities as they fall due, there remains uncertainty about how much prudence is required to demonstrate a high level of certainty in achieving this.
On the one hand, half of survey respondents indicated that they show a scenario in which they remain above 100% SCR coverage ratio throughout run-off; representing a high level of prudence and a view that normal operating expectations would persist through the exit period.
Whereas, on the other hand, several firms indicated that they have included at least one scenario in which there is a period of operating above MCR but below 100% SCR coverage ratio for more than 3 years. This clearly carries less prudence than maintaining 100% SCR coverage ratio and implies a view that the regulator would see solvent exit as exceptional circumstances (that is, to be granted dispensation to operate below 100%). For firms with such dynamics, it would be advisable to demonstrate how this maintains a very high degree of certainty over solvent outcomes, perhaps through use of sensitivity analysis and a strong understanding of additional downside risks.
With such a diverse set of interpretations, this is an area that we expect the PRA will provide further guidance on in the future.
Value gained from the exercise
The survey results demonstrate clear industry benefits. SEA exercise has produced new insights in areas previously considered well understood, for example expense dynamics, business model vulnerabilities, and governance processes.
Only one respondent noted that the firm already had a well-established run-off plan. Detailed run off planning at an organisational level will be new for most UK insurers.
Assurance
Overall respondents used internal assurance over external assurance. Choice of this will depend on the skillsets internally (for example within internal audit or risk) and the independence of resources to provide an opinion. A few respondents indicated that both internal and external assurance was sought, perhaps limiting the scope of external assurance to specific expert knowledge and market comparisons.
Embedding
Respondents noted several actions to be completed to embed SEA into business-as-usual, indicating there is still work to be done. (most commonly to integrate SEA into risk and capital frameworks through combining with existing deliverables, updating policies, updating terms of reference, and embedding into risk monitoring/MI).
However, only one firm said that ongoing analysis of barriers to exit would become systematic within future decision making – this is perhaps one of the key objectives of the PRA, that is, to reduce barriers to exit across the industry – so we may see the PRA push for more consideration of this over time. An example of how firms can do this is to include a standing section in committee papers to capture any impacts on barriers to exit. This is something some larger firms implemented as part of integrating resolution planning into business-as-usual governance.
Conclusion and suggested next steps
Our survey results show areas where there is broad alignment in SEA assumptions and approaches across respondents but also highlight areas where there is divergence – most notably in the interpretation of ‘solvent’ for solvent exit.
Over time, we expect some convergence and for the regulator to influence this by opining on what it sees as stronger and weaker practices. Either through industry-wide feedback or firm-specific feedback.
For many, although there will be some ongoing monitoring, while the prospect of exit remains remote, it will be three years until the next SEA is required. We recommend that practitioners review the results of this survey and identify different approaches. This should allow firms to plan enhancements, consider proportionality and prepare for future iterations.
As a tool that is here to stay, we also recommend that practitioners think carefully about the value gained from SEA and consider if/how the next iteration can be used to augment existing analysis and support strategic decision making.