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RAPID SHOCKS IN STORE FOR INSURERS IN NEW BANK OF ENGLAND TESTS

The Bank of England said on Tuesday it will check the health of general insurers in 2025 with a 'stress test' that includes a rapid series of shocks, as sector capital rules are eased. Regulators have introduced stress tests since the global financial crisis of 2008 to check if banks and insurers are holding enough capital, and uncover risks on their books, typically using "shock scenarios" spanning several years.

"The dynamic nature of the 2025 exercise represents a significant change from previous exercises and will involve simulating a sequential set of adverse events over a short period of time," the BoE's Prudential Regulation Authority said. "Consequently, the PRA intends to engage with the industry including trade bodies over the next six months, with a view to providing more details of this exercise, including participation, design, and timelines, during the first half of 2024," the it added in a statement. The results would be disclosed on an aggregate level. The Association of British Insurers said it supported the next test in 2025 which, if designed appropriately, can help to identify any practical issues that might arise from the scenarios. Last month, the BoE said it would use its new powers to publish insurer-by-insurer results in its next test of life insurers in 2025, a major change that provides transparency for that has long been a feature of bank stress tests.


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