News release
The Prudential Regulation Authority (PRA) is consulting today on a package of reporting reforms that includes introducing new liquidity reporting requirements for large life insurers, and at the same time reducing the expectations for life firms that use internal model to submit Standard Formula reporting to the PRA.
During 2024, the PRA worked with the Association of British Insurers (ABI) and industry stakeholders through the Liquidity Subject Expert Group (L-SEG) meetings and sought their input in the development of the new insurance liquidity reporting requirements.
These proposed liquidity reporting requirements supplement the expectations in SS5/19 Liquidity risk management for insurers, and form part of the PRA’s response to prominent market stress episodes such as the ‘dash for cash’ at the onset of the Covid-19 pandemic in March 2020, and the liability-driven investment (LDI) crisis in September 2022. These episodes highlighted gaps in the UK insurers’ liquidity risk frameworks and in some cases led to strains on liquidity, driven by sharp rises in margin requirements under derivatives contracts.
CP19/24 identifies the need for timely, consistent, and comparable data on the liquidity positions of large UK life insurers. This information would facilitate meaningful analysis and peer comparison by the PRA, both in good times and in stress. The information collected and available internally to the firm through these proposals is also intended to help firms manage their own liquidity positions and decide on appropriate risk management actions. The PRA has developed a proportionate approach to the level of information proposed to be required, taking into account industry input about how to minimise the burden required to meet the PRA’s objectives in this area.
Next steps
The PRA invites feedback on the proposals set out in this consultation. It closes on Monday 31 March 2025. Please address any comments or enquires to CP19_24@bankofengand.co.uk
Notes to editors
- Consultation paper 19/24: Closing liquidity reporting gap and streamlining Standard Formula reporting 11 December 2024
- Getting the balance right: ensuring the Bank’s balance sheet can support financial stability - Dave Ramsden Speech 9 December 2024
- The Bank of England's system-wide exploratory scenario exercise final report
- Liquidity Preparedness for Margin and Collateral Calls: Consultation report - Financial Stability Board
- Late call − speech by Nathanaël Benjamin
- SS5/19 'Liquidity risk management for insurers'
- Supervisory Statement (SS) 15/16: Solvency II: Monitoring model drift and standard formula SCR reporting for firms with an approved internal model
- Solvency UK: PRA/ABI Insurer Engagement