The PRA has maintained many of its priorities from 2022, namely operational resilience, climate risk and encouraging Diversity, Equity and Inclusion. Given the market volatility during the year, financial resilience also continues to be a priority with a focus on liquidity management for life insurers and inflationary risks for general insurers, which was perhaps to be expected. Another unsurprising area of focus is on reinsurance risks associated with longevity offshoring, while exit planning and run-off plans is mentioned, in line with the PRA’s 2022/23 business plan. In summary, the PRA’s priorities for 2023 are:

• Financial resilience – with particular focus on internally rated assets and, for non-life insurers in particular, impacts of short term inflation on claims. Ensuring capital adequacy in the current challenging economic climate, specifically in the context of a predicted prolonged recession and elevated inflation in the near term
• Risk management – including a thematic review into Bulk Purchase Annuities (BPA), liquidity risk frameworks, suitability of models in changing market environments and, for non-life insurers, emerging risks.
• Implementing financial reforms – Following on from HM Treasury’s November 2022 announcements to reform Solvency II, the PRA will engage with affected firms on the technical details of the reforms over the course of the year - implying implementation is unlikely to occur until next year.
• Reinsurance risk – focussing on the recapture risk and systemic/concentration risk within longevity and the more complex “funded” reinsurance in the UK life market.
• Operational resilience – ensuring operational resilience in the context of a growing number of operational incidents, including operational resilience to cyber attacks.
• Ease of exit for insurers – ensuring businesses have adequate plans for an orderly exit from the market, if required.
• Other areas of focus – ongoing review of non-natural catastrophe (e.g. cyber) risk, climate change, Diversity, Equity and Inclusion and supervisory frameworks.

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