On 18 December 2024, the UK’s Prudential Regulation Authority (the “PRA”) published a policy statement (PS20/24) on solvent exit planning for insurers. PS20/24 contains the PRA’s final rules and policy on solvent exit planning, as well as feedback to its January 2024 consultation (CP2/24) in this area. The PRA’s new rules will come into force on 30 June 2026.
Background
In CP2/24, the PRA proposed:
- new rules and expectations that firms must prepare for a solvent exit as part of their business-as-usual (“BAU”) activities and that firms must document those preparations in a Solvent Exit Analysis (“SEA”); and
- new expectations, which would apply only if solvent exit became a reasonable prospect for a firm, on how firms should: (a) prepare a detailed Solvent Exit Execution Plan (“SEEP”), and (b) manage and monitor a solvent exit.
The PRA’s proposals were intended to increase confidence that firms can exit the market with minimal disruption, in an orderly way, and without having to rely on the backstop of an insolvency or resolution process.
For further details of the PRA’s original proposals, as set out in CP2/24, please see our blog post.
New rules and supervisory statement
PS20/24 contains the PRA’s final policy, as follows:
- Preparations for Solvent Exit Part of the PRA Rulebook (Appendix 1); and
- supervisory statement SS11/24 – Solvent exit planning for insurers (Appendix 2).
The PRA’s policy in this area is relevant to UK Solvency II firms, non-Directive firms and the Society of Lloyd’s. It is not relevant to firms in passive run-off and UK branches of overseas insurers.
Feedback to CP2/24
The PRA says that respondents to CP2/24 generally supported the objectives of the PRA’s proposed solvent exit policy to minimise the risks of a disorderly cessation of PRA-regulated activities. Respondents generally supported the distinction between the level of preparations to be made by all firms during BAU (in a SEA) and by firms when there is a reasonable prospect of solvent exit (in a SEEP). Respondents generally welcomed the PRA’s position that solvent exit planning should be proportionate to the nature, scale, and complexity of a firm.
Respondents made a number of observations and requests for clarification. Some respondents expressed concerns that the proposed policy was too burdensome relative to the benefit or that the policy duplicated other requirements.
Changes to policy
Having considered the responses to CP2/24, the PRA has made a number of changes to its final policy and has further clarified its expectations. A summary of the key changes is set out at paragraph 1.11 of PS20/24. Changes include:
- The PRA has decided to exclude Lloyd’s managing agents from the scope of its policy.
- The PRA has clarified that the Insurer Resolution Regime, if introduced, may impact the policy.
- The PRA has removed the timing expectation of one month for a firm to produce a SEEP, and instead the PRA will set a timescale for the firm to provide its SEEP to the PRA.
- The PRA has postponed the implementation date for its new rules and expectations to 30 June 2026 (from its originally proposed implementation date of Q4 2025).
The PRA considers that the changes to its policy will not have a significant impact on firms other than Lloyd’s managing agents, and is only significant in respect of managing agents in so far as they are excluded from the policy.
Implementation and next steps
The PRA’s new rules will come into force on 30 June 2026. Firms are expected to meet the expectations in SS11/24 by that date.
The PRA says that it will continue to engage with relevant industry bodies to support firms’ preparations before the rules and policy come into force. From 30 June 2026, PRA supervisors will communicate with firms should a firm need to submit its SEA.
For further information, please contact:
Duncan Barber, Partner, Linklaters
duncan.barber@linklaters.com
