Dealing with a market turning event in the general insurance sector

Overview

This supervisory statement (SS) is addressed to all UK general insurance firms regulated by the Prudential Regulation Authority (PRA) within the scope of the Solvency II Directive (the Directive), including the Society of Lloyd’s (Lloyd’s) and managing agents (‘Solvency II firms’). The SS is aimed particularly at those firms operating in the global specialty insurance and reinsurance market known as the London Market, whose business models are exposed to low-probability, high-severity catastrophe risks. It sets out the PRA’s expectations of how such firms might prepare for and respond to a major general insurance loss event, which might affect their solvency and future business plans, and explains how the PRA expects firms to interact with the PRA on these issues. The PRA expects the level of consideration given to these issues by firms to be proportionate to the nature and scale of their business, and the impact that an MTE is likely to have on its operations.

The paper also responds to the recommendation in the industry ‘London Market looks ahead’ White Paper for greater clarity on the PRA’s expectations of firms following a market turning event.

This SS should be read in conjunction with the PRA’s rules in the Solvency II sector of the PRA Rulebook, and the PRA’s insurance approach document.